Weak 3Q, profit view weigh on Buffalo Wild Wings
Buffalo Wild Wings Inc.'s shares plunged Wednesday following a disappointing third-quarter financial report from the restaurant chain, and forecast slower profit growth.
THE SPARK: The Minneapolis-based company announced after the market closed Tuesday that its profit fell 5 percent due to higher costs. Its revenue increased 25 percent, but that was slower growth than a year ago and also fell short of market expectations.
Buffalo Wild Wings said it expects its earnings to increase 15 percent for 2012 and 20 percent in 2013. That's slower than last year, when the company's net income grew 31 percent. On a per-share basis, earnings per grew 30 percent.
THE BIG PICTURE: Buffalo Wild Wings has been rapidly expanding to meet growing demand for its restaurants. It was one of the few chains that thrived coming out of the recession, but that has set expectations high for its future performance.
The company was weighed down by costs for adding new restaurants and higher prices for chicken wings. Buffalo Wild Wing's traffic in its restaurants for the first few weeks of the fourth-quarter was a bit slower than some analysts were hoping for.
THE ANALYSIS: While many investors were spooked by higher costs and the third-quarter miss, some analysts suggested this is only a blip on the radar for the company.
Wedbush analyst Nick Setyan pointed to a delay in closing 9 franchisee acquisitions as another driver for the revenue shortfall that may have been overlooked.
He also said the company's profit prediction for next year may be too cautious. Buffalo Wild Wings could benefit in the future from potentially lower wing costs and buying more franchises.
Setyan lowered his full-year earnings estimates for 2012 and 2013. He dropped his price target to $88 from $100, but kept an "Outperform" rating on its shares.
SHARE ACTION: Shares fell $10.19, or 12 percent, to $73.27 in afternoon trading. The company's stock had previously been on a largely upward swing, gaining 24 percent in 2012.