Shares of the restaurant chain had a poor run in 2015 and have declined 9% so far this year. Misses on several fronts, falling sales and an overconfident management led by CEO Sally Smith are to blame.
From a fundamental perspective, Buffalo Wild Wings is not in good shape. It lacks key differentiators and competitive advantages. Avoid this stock till it shows sustainable growth in comparable-store sales and margins. Buffalo Wild Wings shares dropped 1.4% in Friday trading.
In the third quarter, Buffalo Wild Wings said that same-store sales declined 1.8% year over year. Average weekly sales at company-owned stores dropped 3.5%.
Clearly, the unfriendly business environment is hitting restaurants with low brand power such as Buffalo Wild Wings, Sonic, and Brinker International.
To be sure, its strategy to offer half-priced wings and become a bigger force in the fast-casual space is admirable. And it achieved impressive annual revenue growth from 2006 through 2015, from $278 million to $1.81 billion.
In addition, analysts continue to expect good things from Buffalo Wild Wings. They project it will average nearly 22% annual EPS growth for the next five years, which is a faster pace than the 17% average annual growth of the past five years. This is one of the highest earnings growth prospects around. Only such chains as Kona Grill, Habit Restaurants and fast-casual competitor Wingstop can match it in this regard.