Will Increasing Costs Hurt Buffalo Wild Wings' Q4 Earnings?

Buffalo Wild Wings BWLD Consumer Discretionary - Hotels, Restaurants & Leisure | Reports February 3, After Market Closes

Key Takeaways

• The Estimize community is looking for EPS of $1.46 and revenue of $507.06 million, surprisingly lower than the Wall Street consensus
• Buffalo Wild Wings should expect tapered profitability thanks to higher chicken prices, increasing wages and shift in key holidays and sporting events
• BWLD is expected to post robust YoY growth with increase in EPS and revenue of 38% and 24%, respectively.

After a disappointing 2015 which saw rising costs and shares fall over 10%, Buffalo Wild Wings (BWLD) is poised for a comeback in 2016. Investors caution that Q4 2015 results could fall short of expectations, headlined by a shift in the sports and holiday schedule. Halloween and Christmas both fell on Saturdays, days which the casual dining restaurant generates a large volume of ticket traffic. Moreover, sporting events including the World Series and NCAA national championship fell outside fourth quarter confines. That said, the company is still expected to deliver same store sales (sss) growth with company owned stores out pacing franchised owned ones.

The Estimize community is looking for EPS of $1.46 on BWLD or a 38% increase from the same period last year. Revenues have also been trending higher and are projected to increase 24% from Q4 2014 reaching $507.06 million.  Despite a host of headwinds, Buffalo Wild Wings is primed for a favorable 2016.

This past year, the price of chicken and wings, a key ingredient for the company, rose significantly and thereby hurt profitability. Moreover, costs related to the restaurant's operations and efforts to boost comp sales have added to its woes. Buffalo Wild Wings only recently finished increasing wages which required a hike in menu prices. That said, the casual dining chain has maintained positive same store sales over the past few years, driven by strong marketing, a frequently updated menu and increased media exposure. Key advertisements during major sporting events have helped keep customers engaged and build brand awareness. Meanwhile, Buffalo Wild Wings has maintained consistent unit expansion despite an uncertain economy. Its aggressive unit expansion strategy is expected to continue to accelerate same store sales as the company begins to expand internationally. Currently, there are over 500 franchises in America and 13 international locations, which have performed remarkably well.