business

Buffalo Wild Wings Inc. continued to show that wings are recession-proof, posting its 24th quarter of sales gains at restaurants open more than 15 months.

But many of those wings cost more, cutting into the Minneapolis-based chain's profit.

Earnings rose 8 percent in the fourth quarter to $8.3 million, or 46 cents a share, but missed analysts' expectation of 51 cents.

The results, announced after the market closed, sent the stock reeling in after-hours trading -- down more than 13 percent to $42.10.

Fourth-quarter revenue increased nearly 20 percent to $145 million. For the year, earnings rose about 25 percent to $30.7 million, or $1.69 per share, compared with analysts' expectation of $1.75. Revenue for 2009 increased 28 percent to $538.9 million.

"For Buffalo Wild Wings, 2009 was obviously a very successful year, but the fourth quarter slowed down a bit," said Mark Smith, an analyst at Feltl & Co. in Minneapolis. "I think Wall Street expectations for 2010 will come down."

Sally Smith, Buffalo Wild Wings' CEO, was optimistic. "We fared pretty well in the fourth quarter considering the economy and the competition," said Smith. "There was a lot of food price discounting. We don't do significant discounting, and so when consumers are bombarded by discounts from others it's hard for us to combat that."

The company, which owns or franchises 658 sports bar restaurants in 42 states, met its internal fourth quarter earnings target, Wild Wings' Smith said. The company doesn't give analysts quarterly earnings guidance, and as a result Wall Street estimates varied widely, she said. The company continues to project 20 percent earnings growth in 2010.

"When we set 2009 earnings guidance at 20 to 25 percent back in 2008, many people thought we were nuts," she added.

The fourth-quarter slowdown resulted largely from higher costs for food, stock-based compensation and equipment, Feltl's Smith said. While many restaurant chains benefited from lower commodity costs in 2009, Buffalo Wild Wings faced 40 percent higher prices for traditional chicken wings.

"Restaurants are still in a difficult operating environment," Feltl's Smith said. "There is still high unemployment, and there's a lot of price discounting. But Buffalo Wild Wings bucked industry trends in 2009 with same-store sales increases and 25 percent earnings growth."

Steve Alexander • 612-673-4553