The last time we spoke, I named Buffalo Wild Wings (BWLD) as my pick in the InvestorPlace “Best Stocks for 2016” contest. While the stock hasn’t gotten off to the best start, I am very confident that this is a name more than ready to outperform the rest of the year.
As a brief refresher, BWLD is an owner, operator and franchisor of sports-themed restaurants that feature exactly what you’d expect: wings, beer and sports on more than 50 televisions at each location. There’s no way you haven’t seen their commercials, especially now that March Madness is in full swing. It’s one of the greatest times of the year for sports fans.
But obviously the March Madness crowd is not the only reason I like BWLD stock. This company has grown rapidly since its humble beginning as a single restaurant in Columbus, Ohio in 1982. Today, there are more than 1,080 stores spread across the United States (at least one in every single state), Canada, Mexico and the Philippines.
Buffalo Wild Wings has been a runaway success over the last half dozen years, rallying 786% from its January 1, 2009 open to its high point in July 2015. While it’s been on a wild (pun intended) ride since the start of the year, the recent weakness has really been the result of two things: poor execution and food illnesses.
Let’s start with execution. Based on the performance I just mentioned, it seems that BWLD has become a victim of its own success. The restaurants are a household name and the place to watch sports in America, but the company still manages to come up short on earnings each quarter.
The good news is that the company seems to be getting closer. BWLD soared after fourth-quarter earnings were reported in early February, with earnings up 23% to $1.32 a share and sales increasing 20% to $480.2 million. Still, both numbers were short of estimates. Management said part of the shortfall was due to “holiday shifts” in both Halloween and Christmas as both fell on Fridays this year – one of the company’s biggest revenue days.
Still, execution is an issue that current CEO Sally Smith has to solve sooner rather than later. I believe she will, and if she doesn’t there could be calls for her removal.
Then there are the infamous food illnesses that have dogged Chipotle Mexican Grill (CMG), shaving nearly $300 off its share price. Buffalo Wild Wings had one location with a similar problem, which thankfully was resolved quickly, but it continues to be a concern for the company.
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