Buffalo Wild Wings On Thin Ice With Some Investors After An Ugly Finish To 2016

After Buffalo Wild Wings 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 yielded a quarterly EPS 28 percent below the firm’s estimate and 31 percent below consensus. With traffic falling 5.4 percent across locations, revenue rose only 0.8 percent compared to a projected 4.5 percent and restaurant sales missed Baird Equity estimates by 4 percent.

Guidance for 2017 was also “softer than expected,” with Buffalo Wild Wings anticipating EPS between $5.60 and $6 against consensus estimates of $6.46.

Still, Baird Equity analysts maintain a cautious optimism justified by first-quarter comps stabilization and new financial strategies bolstering shareholder value. Investors peering a year down the road can reasonably hope for potential payoff, the firm reported.

Reason For Hope

Early first-quarter performance has positioned Buffalo Wild Wings ahead of the industry. Baird Equity attributed the success to the company’s new promotional strategies, Fast Break Lunch, loyalty program, and takeout and delivery options — each of which are suspected to be gaining traction to yield future gains.

Management also announced its plan to refranchise 10 percent of locations and improve operations for another 10 percent of underperforming restaurants.

“While not the transformational approach that activist investor Marcato Capital has proposed, we sense the refranchising of below-average units can be nicely accretive to EPS and company-wide ROIC (starting in 2018),” the Baird Equity note read.

The firm maintains an Outperform rating, lowered its price target to $170 and its 2017 EPS estimate to $5.80, and introduced a 2018 estimate of $6.95.

Shares closed at $149.80 Tuesday and were trading down 4 percent pre-market Wednesday. At last check, shares of Buffalo Wild Wing were up 1.27 percent at $151.70.