NEW YORK (TheStreet) - Consumers love chicken wings. Add in beer and watching football, basketball or any sporting event, and it's a combination that Buffalo Wild Wings
(BWLD - Get Report) has created its restaurant concept on.
As the restaurant sector begins to polarize -- fast-casual and fine dining eateries are winning, while quick-service and full-service casual eateries struggle, Buffalo Wild Wings seems to be bucking the trend. Last night, the Minneapolis-based company reported above-consensus earnings of $1.10 a share for the fourth quarter. The company also surpassed expectations for same-store sales growth for both its company-owned and franchised locations. Still the 1000-location casual eatery fell short of expectations for overall revenue.
Shares were plunging 9.7% to $127.07 on Wednesday on concerns that perhaps growth is slowing at the wing chain, particularly in new units. Recently surpassing its one thousandth location, B-Dubs, as its known, reaffirmed its earnings growth expectations of 20% for 2014.
"We remain Neutral rated on BWLD shares, as we see several current positives, but limited visibility towards future growth," Goldman Sachs analyst Michael Kelter wrote in a note to clients. "To the upside: (1) SSS remain firmly in the mid-single digits despite the impact of weather. (2) The installation of tabletop tablets in 2H14 could provide a boost to future sales. (3) Wing costs are down significantly and may aid restaurant margins by 150-200bp. All told, we are solidly above BWLD's guidance and consensus forecasting 33% EPS growth in 2014.
"This said, BWLD is at 1,000 units, and guidance of a 1,700 total opportunity suggests it will be 80% to full maturity in just 3-5 years," he penned. "It is unclear if second concepts or international expansion can ramp quickly enough to offset the impending P&L impacts of this dynamic. As is, BWLD's new unit productivity, while robust, is already starting to decelerate. We generally see this as a cautionary sign with respect to growth concepts."
|Buffalo Wild Wings CEO Sally Smith|