These 5 Major Fast Food Restaurants Are About to Be Whacked by Soaring Chicken Prices

As if Buffalo Wild Wings  (BWLD)  needed another headache to add to its growing list of woes.

In a research note released Monday, BMO Capital Markets analysts Andrew Strelzik and Ryan Royce said they found that the price of chicken wings increased nearly 11 percent last week to $1.91 each, compared to the same time a year ago.

"The level of wing price inflation accelerated sequentially and marks the largest magnitude of inflation in nearly four months," Strelzik and Royce wrote.

Over the past few weeks, the price of wings have ticked up three cents, compared to the typical seasonal declines of 10 cents to 15 cents seen at the end of March through the beginning of May due to the end of March Madness, according to BMO.

"In fact, wing prices this week reached the highest level since early-to-mid February around the Superbowl and marks the highest April wing prices in at least the past 15 [to] 20 years, based on our data," Strelzik and Royce said.

READ MORE: Top 3 Reasons Why This Vocal Activist Investor Wants to Push Buffalo Wild Wings CEO Out the Door

The analysts said that if wing prices continue to rise -- which BMO predicts they will over the next several weeks -- "the magnitude of inflation" will likely expand by 400 to 500 basis points.

Wing prices are on the rise.
Wing prices are on the rise.

"The recently stronger wing price trends coupled with a more challenging [second quarter] set up likely drove the increase in [Buffalo Wild Wings' full year] wing price guidance to 8%-10% inflation relative to its previous guidance of 3.5%-4.5% inflation," Strelzik and Royce said in the note.

The spike in wing prices can be attributed to the increase in the cost of poultry in the U.S. due mostly to rising numbers of consumers shifting to healthier diets. Further, more fast food restaurants have introduced new chicken sandwiches to their menus to capitalize on the trend.

In March, the price of chicken soared 8.39 percent from February, and is up 12.53 percent since October, according to IndexMundi stats.

It's crucial for Buffalo Wild Wings to have a strong second quarter, as it continues to fight activist investor Marcato Capital Management's push to have CEO Sally Smith and certain board members ousted. Marcato, led by Mick McGuire, has provided some damning evidence that shows a deterioration in same-store sales, foot traffic and margins at the restaurant chain, while comparable store sales growth is, according to the firm, at its "lowest levels in over a decade."

Buffalo Wild Wings only fueled the fire by reporting tepid first-quarter results last week. The company reported that earnings plunged 19.1 percent to $1.44 a share, far off from analysts' estimations for $1.69 a share, and meager same-store sales growth of 0.5 percent.

While surging wing prices may have the most adverse effect on Buffalo Wild Wings due to its wing-focused menu, some of its competitors could be challenged, too. Here's a look at just a few.

Wingstop
Wingstop

Wingstop (WING) operates more than 1,000 chicken-wing selling restaurants across the U.S. Chicken is Wingstop's largest product cost item and represented 67 percent of all purchases for 2016, according to the chain's most recent annual report.

KFC
KFC

Yum! Brands' (YUM) Kentucky Fried Chicken isn't known for buffalo wings, but its wide array of chicken menu options amid the spike in the price of poultry puts profits at the global chain -- with 4,491 locations in the U.S. -- at risk.

Chick-fil-A
Chick-fil-A

The privately held chain of nearly 2,000 Chick-fil-A restaurants is focused solely on chicken, as it features no beef items on its menu.

Bojangles
Bojangles

Bojangles (BOJA) sells various menu items dedicated to its "famous chicken and biscuits" at roughly 600 locations in the U.S. Chicken costs represented about 45 percent of Bojangles' total product costs in 2016, according to the chain's latest annual report. 

"Material increases in the cost of chicken and other proteins could materially adversely affect our business, operating results and financial condition," the company cautions investors. 

Popeyes Louisiana Kitchen
Popeyes Louisiana Kitchen

Popeyes Louisiana Kitchen (PLKI) operates 2,688 restaurants, known for their fried chicken, worldwide. The company points out in its annual report that fresh chicken is its primary raw material.

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