Costs ease, profits rise for Buffalo Wild Wings

Wing trends are finally flying in the right direction for Buffalo Wild Wings.

The sky-high cost of wholesale chicken wings has come down appreciably, helping Wild Wings post a strong second quarter Tuesday with profits up 41 percent over a year ago. And the restaurant chain's new store-level wing pricing scheme was rolled out this month without any hitches.

Golden Valley-based Buffalo Wild Wings has been one of the fastest-growing U.S. restaurant companies in recent years with one of the industry's hottest stocks. Still, it's been vexed by high wing costs over the past year. And it's been stymied by increasingly bulked-up chickens, which have left the firm getting fewer wholesale wings per pound.

During its second quarter, Wild Wings' average wholesale chicken wing cost was $1.61 per pound, down 15 percent from a year ago, Chief Financial Officer Mary Twinem told stock analysts in a conference call.

Traditional wings accounted for 19 percent of sales, surpassed for the first time by boneless wings at 20 percent of sales. Boneless wings are not actually wings, of course, but they sport higher profit margins than the real deal.

With all this good wing news, the restaurant chain, known for its beer and sports motif, posted second-quarter earnings of $16.5 million, or 88 cents per share, up from $11.7 million, or 62 cents per share a year earlier — better than expected.

Analysts polled by Thomson Reuters were forecasting a per-share profit of 79 cents for the latest period. Buffalo Wild Wings revenue grew 28 percent over a year ago to $305 million, slightly ahead of analysts' expectations of $304.2 million.

She noted the company completed the rollout of its new wing portions in July. Instead of selling wings by numbers — 6, 12, 18 — the company is now selling them by weight under the portion names "snack, small, medium, and large."

The change stems from an increase in bird weight. Wild Wings buys wings by the pound, and thus gets fewer wings with today's bigger chickens.

"We've received minimal comments from customers about this change," Smith told analysts. "Feedback from the stores and from managers has been that it's really not been an issue."

Buffalo Wild Wings' same-store sales — which exclude newly opened restaurants — rose 3.8 percent at company-owned outlets compared with a year ago and 4.1 percent at franchisee-owned stores. Same-store sales growth, however, has slowed in the first four weeks of the company's third quarter to 1.5 percent and 1.2 percent, respectively.

Wild Wings said that partly stems from tough comparisons to last year, as well as one fewer pay-per-view UFC fight — a big customer draw — compared with last year.