Lane Cardwell

Wild About Wings

The forces of nature don’t always move in the same direction. If you have ever watched a waterfall, there is usually a mist that floats above the falling water. The same is true with the wind. The currents might be blowing downward, but a bird is almost always able to find an updraft to ride into the sky. Our industry is no different. When most of the casual dining concepts have comp store sales falling at different rates, there is always a concept or two that defy the trend and float above the others, seemingly oblivious to the effects of the economy. The most obvious example of levitation in the fourth quarter of 2008 was Buffalo Wild Wings, a fitting name for a high-flying concept.

Several casual dining concepts reported their fourth quarter earnings results during the week just ended. This was a messy quarter for many of the reporting companies. Many had write-offs associated with store closings or asset impairments. Asset impairment is the accounting world’s way of telling you that some of the restaurants that you own aren’t worth what you invested in them, and you must take a write-down on the income statement to adjust your balance sheet to this new reality. To look at the health of a concept or industry segment I find a quick scan of the comp sales results to be a reliable barometer.

A review of the reported fourth quarter comp sales of casual dining concepts releasing earnings this week shows the following:

• Buffalo Wild Wings              +4.5% company and +2.5% franchise
• BJ’s Restaurants                   (.8%)
• Cheesecake Factory            (7.0%)
• P.F. Chang’s China Bistro    (7.1%)
• California Pizza Kitchen        (7.2%)
• Grand Lux Café                    (8.0%)
• Kona Grill                            (9.4%)

Will someone please call the management team at Buffalo Wild Wings (BWLD) and let them know that we are in a deep recession? In sports terminology this performance would be called a rout. To add insult to injury, during their investor earnings call on Wednesday, BWLD let the investment community know that halfway through the first quarter of 2009 their company comp sales were running +8% and franchise restaurants +7%. Using sports terminology again, this is called running up the score.

BWLD opened 67 locations during 2008, and currently have a system of 567 units in 39 states. They increased their revenues by 33% and their earnings by 29% during the fourth quarter. These are the kind of results that good companies posted in 2005 or 2006, not 2008.

Wall Street, or what is left of it, must have liked what they heard and rewarded BWLD with a 34% increase in their stock price by the end of the day of the earnings call. This was the equivalent of a $134 million increase in the value of the company in one day. Everyone wanted to get in on the action. Normally 300,000 shares of BWLD will trade each day. On the day of the earnings release 3.9 million shares traded.

 

Buffalo Wild Wings has always been a strong performing company. They have done a great job of being what their core customer wants them to be: fun, affordable, and with good quality and value for the money. While other casual dining concepts are still trying to find the silver bullet that will lead to positive comp sales in a challenging environment, these guys are blasting away with an Uzi. This is a well-earned and much deserved victory by one of the industry’s most likeable management teams. Now how about taking a breather during the second quarter and take the heat off the rest of us?

Posted by Lane Cardwell on February 13, 2009 | Comments (4)