Can A New Promo Program Be The Wind Beneath Buffalo Wild Wings?

Buffalo Wild Wings, Inc. BWLD’s second-quarter results were served cold Wednesday, and Credit Suisse is lowering its target price as a result.

The restaurant chain’s second-quarter adjusted EPS came in at $0.66 against a $1.05 estimate, while sales were $500 million versus expectations of $513.27 million. Comps were down 1.2 percent.

The chain is being hurt by higher wing prices — up 30 percent year-over-year — as well as weak sales and higher labor costs, analyst Jason West said in a Thursday note.

B-Dubs is replacing its 30-year-old “Wing Tuesday” promotion with a buy one-get-one-free offer, West said. The change to the promo could ding sales, but should help margins, the analyst said.

Credit Suisse maintains a Neutral on Buffalo Wild Wings and lowered its target price from $150 to $120.

A recent proxy war with activist investor Marcato Capital Management ended with three of four Marcato's nominees being elected to the company's board and CEO Sally Smith announcing her retirement.

Searching For Positives

B-Dubs is searching for a new CEO and chief operations officer, West said.

“Given limited visibility on the future game plan to stop the bleeding on sales/margins, as well as a sharp slowdown in domestic unit growth ... we do not view the current valuation as compelling.”

New management and lower wing costs could be positive catalysts “down the road,” West said. 

At last check, shares of Buffalo Wild Wings were down 10.42 percent at $109.88.

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Image Credit: By Michael Rivera - Own work, CC BY-SA 4.0, via Wikimedia Commons