QUOTE AND NEWS
Benzinga  Feb 14  Comment 
Following an advisor call on Buffalo Wild Wings (NASDAQ: BWLD) Monday, Wedbush’s Nick Setyan mentioned that there was a feeling that the company’s “value proposition has been lost, particularly on value days.” Setyan continued, "While...
Motley Fool  Feb 8  Comment 
After another tough quarter, B-Dubs is anxious to return to positive same-store sales growth this year.
Benzinga  Feb 8  Comment 
Deutsche Bank reiterated its Hold rating on Buffalo Wild Wings (NASDAQ: BWLD) after the restaurant operator ended a tough 2016 on soft note as fourth quarter comps declined about 4 percent across its company- and franchise-operated units. The...
Benzinga  Feb 8  Comment 
Tyson Foods, Inc. (NYSE: TSN) and Buffalo Wild Wings (NASDAQ: BWLD) reported over the last couple of days financial results for their fourth quarter. Tyson Foods managed to hold itself above the waters despite a regulatory probe overhang. That...
Benzinga  Feb 8  Comment 
Susquehanna lowered the price target for Mondelez International Inc (NASDAQ: MDLZ) from $53 to $46. Mondelez shares closed at $43.93 on Tuesday. Wedbush cut the price target on Buffalo Wild Wings (NASDAQ: BWLD) from $155 to $150. Buffalo...
Benzinga  Feb 8  Comment 
After Buffalo Wild Wings (NASDAQ: BWLD) issued “disappointing” fourth-quarter results and below-estimate guidance for 2017, Baird Equity Research said its “patience on BWLD is running thin.” Significant deceleration of comps in December...
Benzinga  Feb 8  Comment 
Buffalo Wild Wings (NASDAQ: BWLD) reported weak fourth-quarter results, including a 4 percent decline in company-owned same store sales and EPS of $0.87 missing the expectations. Stephens’ Will Slabaugh maintains an Overweight rating on the...




 

Buffalo Wild Wings, Inc. (NASDAQ:BWLD) operates a series of sports bar restaurants across the U.S., but with heavy concentration in Ohio. The company is best known for its chicken wings, which customers can customize with 14 different flavors to choose from. In 2009, the company generated $539 million in revenue and $30.7 million in net income.[1]

Chicken prices are rising because corn, which is a major ingredient in chicken feed, has become more expensive. Buffalo Wild Wings is sensitive to the price of chicken feed - in 2009, the price for chicken wings increased from $1.22 per pound to $1.70 per pound, leading to a 30.4% increase in cost of sales for the year.

Additionally as a sports bar, Buffalo Wild Wing's sales are tied to professional athletics' calendar - the company's earnings have generally been lower during the second quarter, when there are few big sports events.

Company Overview

Buffalo Wild Wings operates 232 company owned restaurants and 420 franchised restaurants in 42 states. The firm's principal business is the casual restaurant business. The bulk of their revenues come from restaurant sales at their company-owned restaurants (91%). Food and nonalcoholic beverages accounted for 76% of restaurant sales, with the remaining 24% coming from alcoholic beverages. The menu item with the highest sales volume is chicken wings at 21% of total restaurant sales. Franchise fees and royalties are 9.3% of revenues.[2]

Business Growth

FY 2009 (ended December 27, 2009)[1]

  • Total revenue increased 27.6% to $539 million. $97.9 million was generated from the opening of 36 new company-owned franchises and 52 restaurants that did not meet the criteria for same-store sales. Same-store sales for the period increased 3.4%.
  • Net income grew 25.5% to $30.7 million. Cost of sales grew 30.4% primarily due to more restaurants being open. Chicken wing costs rose to $1.70 per pound, up from $1.22 per pound in the prior year.

Trends and Factors

Chicken Wing Prices Are Highly Volatile Which Leads To Uncertain Operating Earnings

Since chicken wings are the largest selling item on Buffalo Wild Wing's menu, accounting for 21% of restaurant sales, any changes in chicken wing prices have dramatic implications for the company's cost of goods sold. In 2009, the price of chicken wings increased to $1.70 per pound, up from $1.22 per pound in the previous year.[1] This 48 cent increase multiplied by the hundreds of thousands of pounds of chicken wings the company needs to operates means substantially higher costs and reduced profits. As a result, cost of sales increased 30.4% in 2009.

With Low Market Penetration, Growth Opportunities Are Abundant

The company operates 652 Buffalo Wild Wings restaurants in 42 states, 88 of which are located in Ohio. This leaves the opportunity for nationwide growth. The company hopes to expand its operations to over 1,000 restaurants nationwide. The company also wants to increase the number of company-owned restaurants -- in 2009 just over 30% of the restaurants were company owned. The company opened 36 restaurants in 2009 and plans to open 88 in 2010.

Seasonality of the Business Affects Revenues

Operating as a sports bar, Buffalo Wild Wings is largely sensitive to seasonal factors, most notably, the number of big sports events. It is for this reason that second quarter sales have generally been lower than other quarters'. In addition, this sensitivity to sports seasons leaves them susceptible to slower business when, for example, the teams in the Super Bowl are of little interest to the customers of Buffalo Wild Wings restaurants.

Competition

Buffalo Wild Wings competes primarily with local and regional sports bars and casual dining and quick casual establishments, as well as with quick service restaurants such as wing-based take-out concepts. Many of the company's direct and indirect competitors are well-established national, regional or local chains.

Main competitors include:

  • Brinker International (EAT)- Operates casual dining restaurants such as, Chili's Grill & Bar, Romano's Macaroni Grill, On The Border Mexican Grill & Cantina, and Maggiano's Little Italy, in 49 US states and several countries.
  • Ruby Tuesday (RT)- Operates casual dining restaurants under the Ruby Tuesday brand name in the U.S. and internationally.
  • BJ's Restaurants (BJRI)- Operates casual dining restaurants in the U.S. under the names, BJ's Restaurant and Brewery, BJ's Restaurant and Brewhouse, and BJ's Pizza and Grill.
  • Cheesecake Factory (CAKE)- Operates full service and casual dining restaurants in the U.S. under the names, The Cheesecake Factory, Grand Lux Cafe, and The Cheesecake Factory Express.
  • California Pizza Kitchen (CPKI)- Operates casual dining restaurants in the U.S. and internationally under the names, California Pizza Kitchen, California Pizza Kitchen ASAP, and L.A. Food Show.
  • Applebee's International (APPB)- Operates the largest casual dining restaurant chain under the name Applebee's Neighborhood Bar and Grill in the U.S. and internationally.
  • Darden Restaurants (DRI)- Operates restaurants under the names Red Lobster, Olive Garden, Bahama Breeze, Smokey Bones, and Seasons 52 in the U.S. and Canada.
  • Hooters Restaurants (privately-held) - Operates casual dining restaurants in the U.S. and internationally. It is known by many for it's chicken wings.

References

  1. 1.0 1.1 1.2 BWLD 2009 10-K "Selected Financial Data" pg. 22
  2. BWLD 2009 10-K "Overview" pg. 23--24
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