Buffalo Wild Wings (BWLD)

Q2 2012 Earnings Call

July 24, 2012 5:00 pm ET


Mary J. Twinem - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Sally J. Smith - Chief Executive Officer, President, Director and Member of Executive Committee


Brian J. Bittner - Oppenheimer & Co. Inc., Research Division

Jason West - Deutsche Bank AG, Research Division

David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division

David Dorfman - Morgan Stanley, Research Division

Jeffrey D. Farmer - Wells Fargo Securities, LLC, Research Division

Will Slabaugh - Stephens Inc., Research Division

Jeffrey Andrew Bernstein - Barclays Capital, Research Division

Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division

Larry Miller - RBC Capital Markets, LLC, Research Division



Good afternoon, ladies and gentlemen. Welcome to the Buffalo Wild Wings Second Quarter 2012 Conference Call. [Operator Instructions] I would like to remind everyone that this conference is being recorded.

I would now like to turn the conference over to Ms. Mary Twinem, Chief Financial Officer and Executive Vice President of Buffalo Wild Wings. Please go ahead, ma'am.

Mary J. Twinem

Good afternoon, and thank you for joining us as we review our second quarter 2012 results. I'm Mary Twinem, Chief Financial Officer and Executive Vice President of Buffalo Wild Wings. Joining me today is Sally Smith, our President and Chief Executive Officer. By now, everyone should have access to our second quarter earnings release.

Before we get started, I remind you that during the course of today's call, various remarks we make about future expectations, plans and prospects for the company constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those contained in forward-looking statements based on a number of factors, including, but not limited to, our ability to achieve and manage our planned expansion; the sales at our company-owned and franchise locations; our ability to successfully operate in new markets, including non-U.S. markets; unforeseen obstacles in developing sites, including nontraditional and non-U.S. locations; the cost of commodities; the success of our key initiatives and our advertising and marketing campaigns; our ability to control restaurant labor and other restaurant operating costs; economic conditions, including changes in consumer preferences or consumer discretionary spending; and other factors disclosed from time to time in our filings with the U.S. Securities and Exchange Commission.

On today's call, Sally will provide an overview of our performance for the second quarter. After that, I will provide further detail on the quarter and comment on trends to date in the third quarter. Finally, Sally will share some additional thoughts about the third quarter and remainder of this year. We will then answer questions.

So with that, I'll turn things over to Sally.

Sally J. Smith

Good afternoon, everyone. We're very pleased with our strong sales and our ongoing ability to drive revenue increases. We continue to outpace the casual dining category with second quarter same-store sales increases of 5.3% at company-owned restaurants. Our franchisees also outpaced the industry with a same-store sales increase of 5.5% for the quarter. The combination of strong same-store sales, new restaurant performance and franchised restaurants acquired in 2011 fueled our substantial revenue increase of nearly 30%.

For the second quarter, we managed controllable costs, but the combination of higher price per pound wing cost and the sharply lower wing per pound yield in the second quarter moderated our net earnings to a 9.3% increase over last year, providing earnings per diluted share of $0.62 compared to $0.58 in 2011.

The championship runs for college and pro basketball provided a strong foundation at the start of the quarter, and sports fans continue to gather in our restaurants to enjoy their favorite sporting events throughout the spring. Our new TV spot, called Best Friends, reminded viewers that Buffalo Wild Wings is a fun and social place where you can meet fellow sports fans and share the excitement of any game. It aired through the second quarter, including the NBA playoffs.

In the second quarter, we had 2 menu inserts to highlight the variety of our food and beverage offerings. The first insert featured Sharables, including our burger and pork slammers. Later in the quarter, a second insert showcased our flavorful signature sauces to create a custom burger experience. Both were successful, and same-store sales in our Sharables and burger categories each had double-digit sales increases for the quarter.

Our expanded gift card program continued to generate revenues throughout the second quarter and produced nearly 60 basis points of additional same-store sales. We believe these programs will generate incremental top line growth throughout the remainder of the year. Our operations excellence team remained keenly focused on the fundamentals of providing great service, driving sales and managing controllable costs. Our ongoing commitment to creating a great dining and sports viewing experience for our guests produced another successful quarter for Buffalo Wild Wings.

Mary will now provide additional details on the second quarter as well as third quarter to date. Then I'll talk about the rest of the year when I return.

Mary J. Twinem

Thank you, Sally. Our revenue in the second quarter grew by 29.7%, increasing to $238.7 million. Systemwide, sales at our company-owned and franchised restaurants were $580 million for the quarter, more than 18% higher than the prior year.

Company-owned restaurant sales for the second quarter increased to $220.6 million, a 31.4% increase over the same period in the prior year. Same-store sales was 5.3% for the quarter compared to 5.9% last year. Menu price increases taken during the past 12 months at company-owned restaurants contributed about 1.8%.

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