Buffalo Wild Wings 2Q net income rises nearly 44%

Officials for Buffalo Wild Wings Inc. celebrated a 43.8-percent increase in net income to $23.7 million in the second quarter, thanks in large part to favorable shifts in the sports calendar and the commodities market.

For the June 29-ended period, Buffalo Wild Wings earned $1.25 per share, compared with a net income of $16.5 million, or 88 cents per share, in the second quarter of 2013.

Revenue rose 20 percent to $366 million, reflecting in part same-store sales gains of 7.7 percent at company-owned restaurants and 6.5 percent at franchised locations.

During the Minneapolis-based company’s earnings call, chief executive Sally Smith praised the assist Buffalo Wild Wings’ sales got from a packed sports calendar that stretched from the Final Four of the college basketball championship through the NBA and NHL playoffs to the start of the World Cup.

Smith said during the earnings call that Buffalo Wild Wings had adjusted the brand’s guidance for earnings per share growth to well above 20 percent for the year and possibly more than 30 percent.

Buffalo Wild Wings’ leaders estimated that traffic from the World Cup helped increase same-store sales by 1 percent, which more than offset a 0.4-percent drag from the timing of Easter falling in the second quarter. The World Cup also provided a bump to July same-store sales in the third quarter by an estimated 3.3 percent, they said.

During the quarter, restaurant-level margins improved 2.1 percent, accounting for 20.3 percent of sales. Food costs improved 2.2 percent, falling to 28.2 percent of sales in the quarter due mostly to a 12-percent reduction in the commodity price for traditional chicken wings to $1.42 per pound, from $1.61 per pound a year earlier.

Chicken wing costs are expected to moderately rise from the current low levels over the course of the next few quarters, which will keep Buffalo Wild Wings as vigilant as ever over its food and labor costs. The brand plans to take a 0.6-percent price increase when it launches a new menu in September, Smith said.

Beyond that, pressure on the labor line, not the food cost line, might dictate price increases, she said.

“If wings stay in the historical range, we certainly wouldn’t need pricing to cover that,” Smith said. “But there are minimum-wage increases [coming in California and Minnesota], there is the Affordable Care Act, and a number of things on the labor line that you may end up taking pricing for that aren’t for commodity costs.”
 

Improving the guest experience

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Labor costs inched up 0.1 percent during the second quarter to 31.3 percent of sales.

This rise was mostly associated with higher hourly wages due to expanding the “guest experience captain” role in the dining room to 95 more company-owned units, the company said. The new service style does not run at peak efficiency in the first few weeks of its rollout, but once employees are trained on it, it does tend to produce some positive leverage on higher sales and traffic, officials said.

Chief financial officer Mary Twinem added that the 1,028-unit brand was testing several guest-facing initiatives and rolling them out to more restaurants in Buffalo Wild Wings’ domestic system.

The guest experience captains who are trained to assist other servers were added to 95 company-owned restaurants during the quarter, for a total of 355 corporate restaurants. At another 300 company-owned units and 140 franchise locations, Buffalo Wild Wings has at-table tablets available for guests to play trivia and other games, and in the third quarter, those tablets will test an at-table ordering function in the Minneapolis market.

The company expects to develop a digital loyalty program for the tablets or guests’ smartphones by next year as well.

“A lot of what we’re putting in test now will be rolling throughout 2015 into the restaurants, so I would assume you may start to see some impact from that into 2015,” Twinem said. “As we talk about our philosophy around technology, the possible labor efficiencies are really only one small part of our overall strategy. … It is going to be about how it enhances the guest experience to potentially drive revenue over time.”

Buffalo Wild Wings operates 449 company-owned restaurants and franchises another 579 locations in the United States, Canada and Mexico.

Contact Mark Brandau at [email protected]
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