For decades, discounts on wings made Tuesday one of the busiest days of the week at Buffalo Wild Wings.
Slipping profits and high wing costs have brought that to an end.
The change, announced Wednesday amid the company’s latest quarterly results, will happen over the next few weeks at the chain’s 626 company-owned restaurants. Executives expect that the franchisees who own the other 624 restaurants in the chain will quickly follow along.
Buffalo Wild Wings’ latest results made clear why bold action was necessary. Profit fell 63 percent to $8.8 million, or 55 cents a share. That was well below the $1.06 a share that was the consensus forecast of analysts who follow the company.
In after-hours trading, Buffalo Wild Wings shares, which have been battered this year amid a proxy fight and broader pressure on the restaurant industry, tumbled 10 percent to around $122 a share, their lowest level since September 2013.
Second-quarter revenue was $500 million, up 2 percent. Comparable sales at its approximately 626 company-owned restaurants were down 1.2 percent. Analysts were expecting a flat performance from those outlets.
In place of the discount on traditional wings, which has taken various forms over the years but since last fall was a half-price deal, Buffalo Wild Wings will offer one on boneless wings, which are less costly and yield a higher margin. Executives said boneless wings are now outselling traditional wings at the company, but even so, they said the move is a risk and is happening with less testing than the Golden Valley-based firm usually does before starting a companywide initiative.
“We’re pleased with what we’re seeing in the markets we’ve converted to the boneless promotion,” Alexander Ware, the company’s chief financial officer, told analysts.
High cost for traditional wings played a key role in eroding profits in the latest quarter. Buffalo Wild Wings said it paid $2.05 a pound for traditional wings during the quarter, up 6 percent from a year ago and 3 cents a pound higher than company had forecast earlier this year.
The price was the same as the first three months of the year, a break from the seasonal decline in wing prices that typically happens during the spring quarter. Traditional wings accounted for 31 percent of the company’s cost of sales in the period, while boneless wings amounted to 13 percent of cost of sales.
“I don’t think we’ll see a sales improvement as a result of the shift to boneless Tuesday but a cost of sales improvement,” Sally Smith, chief executive, told analysts.
Smith announced her retirement at the company’s annual meeting in June, when an activist investor won a proxy battle for seats on its board. She hasn’t set a specific date to leave and said she would remain to assist with a transition. On Wednesday, Smith said an outside firm is proceeding with a search for her successor.
She thanked colleagues for helping her in a tenure that started when the company had 32 restaurants. But she noted the environment is difficult for all restaurants with delivery services growing and more groceries offering to-go meals.
“We have our work cut out for us,” Smith said. She said Buffalo Wild Wings is revamping its website to be able to take orders for delivery or pickup. And the company just this week launched its first small-format outlet in Edina.
“It’s been a difficult environment,” Smith said. “I think we’ve got the right things in place. Everyone is working hard to improve that bottom-line performance.”