Buffalo Wild Wings (BWLD) Results Excellent; Panera Bread (PNRA) Decent

As I proposed in the Monday-Tuesday Earnings Preview

Buffalo Wild Wings (BWLD) - their results last quarter set off 90 days of victory; frankly at this point the casual dining group is so overheated we should start seeing "sell the news reactions" - imperative word being "should".

And in yesterday's update [Bookkeeping: Some Selective Purchases]

Traders continue to pile into restaurants as if they are internet stocks circa 99... Buffalo Wild Wings (BWLD) surging ahead of earnings tonight. Again, we are almost at the point where we will soon see "sell the news" reaction as expectations are beginning to get out of hand in casual dining - not sure how many times the same old stocks can rally on the same "surprise". [Apr 23: America's Hottest Sector - Casual Dining]

We are indeed getting "sell the news" reactions in a sector traders have run up relentlessly. As always Wall Street is a game of expectations - we are seeing many "beats" across the universe as the bar was set extremely low; so pundits in TV land are cheering horrific year over year results that are "beating" analysts. But as a flurry of reports "beat", expectations ratchet up... and by the time you get later into this earnings season the bar is not quite so low... hence my reasoning "sell the news" is going to be an appropriate reaction. Even on a strong day for the market... remember -6.1% GDP is a good thing; green shoots throughout.

Last night both Buffalo Wild Wings (BWLD) and Panera Bread (PNRA) reported; even the former with an excellent result was down 10% after hours as "momo" traders piled in; but this morning is only down 6%... Panera likewise is down 7%. My concern with these guys, is as with many stocks in the market after this big run - valuation. I appear to be the only one as people continue to pile into stocks no matter the price. Buffalo Wild Wings at 26x FORWARD estimates and Panera Bread at 24x FORWARD estimates - thats not out one quarter, but out 3 full quarters on year end 2009. I just can't dig that as much - even with companies executing. The only case for bulls at this point is a massive consumer rebound in Q3, Q4 this year which causes earnings estimates to jump 10-30%... I can't get behind that thought process with unemployment ramping; no matter how cheap Uncle Ben makes money.

But let's take a gander at results from each - again BWLD being the favored son in my eyes (and former fund holding) - I much prefer the younger, high growth story [Feb 23, 2009: Buffalo Wild Wings with Saucy Report] [Aug 11, 2008: Starting Buffalo Wild Wings Position]

BWLD results via AP here and here

• Bar and chicken wing chain Buffalo Wild Wings Inc. said Wednesday its first-quarter profit jumped 30 percent on strong sales at established locations to top Wall Street expectations. For the quarter ended March 29, net income climbed to $8.5 million, or 47 cents per share, from $6.5 million, or 36 cents per share, a year ago. Revenue jumped 35 percent to $131.6 million from $97.3 million
• Analysts polled by Thomson Reuters expected profit of 46 cents per share on revenue of $129.1 million.
• The company said its revenue was helped by the addition of 33 more restaurants than in the prior year's first quarter. Buffalo Wild Wings is one of the few restaurant chains still opening new locations. The slowdown in sales plaguing most chains has led many to drastically cut back on new restaurant openings.
• Same-store sales, or sales at locations open at least a year, rose 6.4 percent at company-owned restaurants and 6 percent at franchise-owned locations. (that's the key; to have that level of SSS in this environment is frankly - awesome)
• The company reiterated its profit growth target, which implies earnings of $1.63 to $1.70 per share, up from $1.36 per share in 2008. Analysts polled by Thomson Reuters expect profit of $1.68 per share for the year, slightly above the midpoint of the company's guidance.

But one bad sign... Q2 thus far is trending not quite as well as Q1

• Buffalo Wild Wings said its second-quarter same-store sales, or sales at locations open at least a year, are up about 1.8 percent at company-owned restaurants and 3.6 percent at franchised restaurants so far in the quarter. The company said a shift in the Easter calendar into April had hurt same-store sales by about 2.5 percent. (I can't buy that Easter sales hurt THAT much - do people really go to a chicken joint for Easter?)
• "We will, however, have additional expense in the second quarter as a result of this accelerated opening schedule and a shift in stock-based compensation," Chief Executive Sally Smith said in a statement.

So with this valuation, and with a "shift in stock based compensation" if the stock keeps running into next quarter, I could see one of the "results did not meet expectations" type moments in 90 days which gives you that nice 25% haircuts overnight. But between now and late July I expect people to buy dips. Just hard to chase it at this valuation. (for me, but not for the hordes) Full report here. If indeed we get a dip in summer, this will be a good buy for the upcoming football season and strong Q3, Q4 results. Even in the Great Recession people gots to have their football.

Buffalo Wild Wings, Inc., founded in 1982 and headquartered in Minneapolis, Minnesota, is a growing owner, operator and franchisor of restaurants featuring a variety of boldly-flavored, made-to-order menu items including Buffalo-style chicken wings spun in one of 14 signature sauces

On to Panera Bread ... via AP here and here

• Bakery-cafe chain Panera Bread Co. said Tuesday its first-quarter profit jumped 41 percent to meet Wall Street expectations, helped by rising sales. For the quarter ended March 31, net income rose to $17.4 million, or 57 cents per share, from $12.4 million, or 41 cents per share, a year ago. The result matched the expectations of Wall Street analysts, according to a poll by Thomson Reuters. Revenue climbed 5 percent to $320.7 million from $305 million, topping analysts' average estimate of $317.7 million.
• Same-store sales, or sales at locations open at least a year, rose 0.7 percent systemwide. (remember, many peers which are flying up 20-30-40% shocking short sellers are reporting same store sales of -5, -6% - so this is still relatively a good result)
• The company said a promotion in January helped drive breakfast sales during the quarter and offset weakness in its catering division.
• Panera also reaffirmed its 2009 guidance for profit between $2.55 and $2.71 per share, the midpoint of which matches Wall Street's $2.63 per share average estimate. The company said it expects to earn between 62 cents and 66 cents per share for the quarter versus 52 cents per share in the second quarter last year. Panera also said it expects same-store sales, or sales at locations open at least a year, to be flat to down 1 percent in the period.

Some analyst views via Reuters and AP

• The company also said Panera restaurants experienced "essentially flat" same-restaurant sales for the first several weeks of the current second quarter.
• "While 1Q results demonstrate the company's ability to drive predictable earnings growth with multiple levers...., we believe the results are not enough to drive the stock higher in the near term," Thomas Weisel analyst Fitzhugh Taylor said in a Tuesday research note. "As with most restaurant companies, we believe sales and traffic trends at Panera remain the major uncertainty with regard to upside and 2Q will be a challenge."
• Stifel Nicolaus analyst Steve West said the share decline was likely due to Panera's results being "'just in line' versus a home run ... though I'd say up 40 percent is a home run."
• Deutsche Bank analyst Jason West said Panera's first-quarter results and outlook met Wall Street's general expectations. "However," he added, "given the recent run-up in the stock, we believe the market was looking for a beat."
• Jefferies & Co. analyst Jeff Farmer also said that investors expected Panera to beat earnings expectations in the first quarter, after booking a strong performance in 2008. "We think this takes some of the lustre off of the (Panera) story," he said.

This was one interesting take away, although judging by the stocks in commercial real estate you'd be hard pressed to believe anything is wrong...

• The company added that the weak commercial real estate market had "disrupted several planned openings for fiscal 2009 and placed others at risk." As a result, Panera said it now expects to be at or below the low end of its prior target of 80 to 90 new unit openings in fiscal 2009.

Full report here.

• In the first quarter of fiscal 2009, the Company generated operating margin improvement of approximately 200 basis points compared to the first quarter of fiscal 2008. This was primarily a result of the year-over-year benefits in wheat costs and franchise dough price increases implemented in fiscal 2008, the Company's continuing category management initiatives, and favorable comparisons against one-time charges in the first quarter of fiscal 2008.

So one must hope food costs which spiked in latter 2007, early 2008 (hence easy comparisons) don't start ramping up again due to money printing throughout the Western world.

Panera Bread Company owns and franchises 1,264 bakery-cafes under the Panera Bread® and Saint Louis Bread Co.® names as of March 31, 2009.

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