Buffalo Wild Wings earnings jump 33% despite rising costs

  • Article by: MIKE HUGHLETT , Star Tribune
  • Updated: February 7, 2012 - 11:40 PM

A big increase in the cost of chicken didn't stop the restaurant chain from beating profit expectations.

Buffalo Wild Wings Inc. on Wednesday posted a 33 percent increase in fourth-quarter earnings, blowing past Wall Street's profit and sales expectations and assuaging fears about a spike in chicken wing costs.

The St. Louis Park-based company's earnings came out after the stock market closed, but shares soared about 16 percent in after-hours trading.

"It was a great quarter," said Larry Miller, a stock analyst with RBC Capital Markets. "They maintained that very high rate of sales."

The fast-growing restaurant chain recorded net earnings of $13.6 million, or 73 cents per share, up from $10.2 million or 55 cents per share a year earlier. Analysts polled by Thomson Reuters were expecting quarterly per-share profits of 67 cents on average.

Buffalo Wild Wings, known for wings, beer and a sports motif, had sales of $220.5 million, up 35 percent from a year earlier and 5 percent higher than analysts expected.

The strong performance came despite a big fourth quarter run-up in prices for chicken wings, one of the company's largest inputs. Traditional wings account for about 20 percent of Buffalo Wild Wings sales.

Wing prices, after dipping to at least four-year lows in 2011, shot up during the last three months of the year. Indeed, Buffalo Wild Wings reported Wednesday that its average wing price during the first two months of its current quarter was $1.89 per pound; last year's first quarter average was $1.22.

Chicken growers, pressed by high feed prices, have been reducing their stocks, putting upward pressure on prices -- a trend not expected to go away soon. With that in mind, two analysts earlier this week downgraded their ratings on Buffalo Wild Wings' stock.

Still, despite rising commodity costs, Buffalo Wild Wings said it still expects to achieve 20 percent earnings growth in the new year. That comforted investors, Miller said. "A lot of people were very nervous about how 2012 guidance would turn out because of the rapid spike in wing prices."

Buffalo Wild Wings' same-store sales, which adjust for newly opened stores, were up 8.9 percent at company-owned restaurants in the fourth quarter, and up 5.9 percent at franchised locations.

"Our strong fourth-quarter performance capped a tremendous year for Buffalo Wild Wings," Chief Executive Sally Smith said in a statement. Smith said Buffalo Wild Wings is "off to a great start" in its current quarter, with same-store sales up 12.9 percent at company outlets in the first six weeks vs, a year ago.

Shares ended the day at $70.19, up $1.31. But in after market trading, they were up $11.16.

Mike Hughlett • 612-673-7003

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