Buffalo Wild Wings, long a growth stock darling, has hit a sour note with investors after its most feeble financial performance in years.
The company's shares Wednesday sank 11 percent and hit a low not seen in 18 months, as surprised Wall Street analysts wondered when the go-go restaurant chain will regain its lost momentum.
Golden Valley-based Buffalo Wild Wings released its first-quarter earnings after the market closed Tuesday, reporting sales and profits that fell well short of Wall Street's forecasts.
Investors reacted by pushing down Wild Wings' stock to as low as $122.25 Wednesday morning, before it rallied to close at $129, down $15.62.
The stock had traded as high as $205 in October. But Wild Wings has now posted three consecutive disappointing quarters. And some analysts have effectively hit pause on the company, which has been one of the fastest-growing U.S. restaurant chains.
"We do not see any evidence of a near-term turnaround," Brett Levy, a stock analyst for Deutsche Bank, wrote in research note.
Wild Wings reported first-quarter profits of $1.73 per share, up 13 percent from a year ago, but below stock analysts' estimates of $1.78. Profits were off largely because Wild Wings' first-quarter sales of $508 million fell short of the $530 million expected by Wall Street.
To make matters worse, Wild Wings' same-store sales — sales for stores open at least a year — were down 1.7 percent at company-owned outlets and 2.4 percent at franchised restaurants compared to a year ago. It's the first time since 2010's fourth quarter that Buffalo Wild Wings has posted a negative year-over-year swing in same-stores sales.
Wild Wings executives said Tuesday they don't expect to see positive same-store sales until the fourth quarter, with a flat performance in between.
Buffalo Wild Wings "is facing a crisis of confidence reflecting same-store sales trends that remain under pressure and uncertainty as to whether its pipeline of initiatives can reverse its recent poor performance," wrote Andrew Strelzik, a stock analyst at BMO Capital Markets.
The company's executives Tuesday talked up a number of marketing initiatives aimed at getting sales on track, including for the chain's takeout service and lunch and happy- hour occasions. Takeout accounts for about 16 percent of Buffalo Wild Wings' business.
Weakness in the overall casual-dining sector — along with price promotions by some of Wild Wings' competitors — hurt the chicken-wing chain during the quarter. The company also didn't get as big a boost as it usually does from the NCAA college basketball tournament.
"March Madness was very soft, featuring less-compelling matchups relative to the prior year," Jeffrey Bernstein, a stock analyst at Barclays, wrote in a report.
Despite Buffalo Wild Wings' swoon, analysts didn't seem to be souring on its long-term prospects. The company's wings, beer and sports concept stands out in the chain restaurant business, and Buffalo Wild Wings still has a "compelling long-term growth outlook," Strelzik wrote. It "is not a fundamentally challenged concept."
Will Slabaugh, an analyst at Stephens Inc., wrote that Buffalo Wild Wings beaten-down stock is now at a "compelling" value.
"We believe that the market has effectively priced out the brand's potential growth and placed it in the category of the troubled bar and grill segment," which Wild Wings "has consistently outperformed over the years," he wrote.