Takeaways From A Troubling Quarter At Buffalo Wild Wings

Buffalo Wild Wings 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 company, with a price target of $195.

Weak Q4

The weaker than anticipated top-line results were marginally worse than recent industry commentary, with the earnings releasing focusing to a large extent on a tough December.

The analyst also believes Wings clearly pressured costs.

“We credit the soft performance to the lack of a clear value message amid a difficult industry backdrop, though we were encouraged to hear that new initiatives in the QTD period have led to positive traffic,” Slabaugh mentioned.

The analyst noted that at first glance, the sharp decline in sales appears to be the main reason for the meaningful EPS miss, along with Cost of Sales, which increased 220 bps sequentially due to higher wing costs.

“We view this as evidence that actions taken weren't enough on the value or experience front to defend against industry discounting amid an already-softening restaurant market,” Slabaugh went on to say.

Positive Initiatives

The analyst expressed optimism regarding Buffalo Wild Wings’ loyalty push, along with Wing Tuesday initiative and Fastbreak Lunch, which have been driving positive traffic, quarter to date.

“Longer term, we believe there remains significant opportunity for this differentiated brand and operating model to outperform peers, despite disappointing near term results,” Slabaugh added.

Buffalo Wild Wings guided to fiscal year 2017 EPS of $5.60–$6.00, below the estimate and the consensus forecast.

At last check in Wednesday's pre-market session, shares of Buffalo Wild Wings were down 4.61 percent at $142.90.