Is Buffalo Wild Wings Saved?
Buffalo Wild Wings' two-year long chicken nightmare appears to be over. After spiking in the second half of 2011 -- and then climbing each quarter since -- chicken wing costs have finally come down.
Source: Buffalo Wild Wings conference calls.
That moderation helped the company log its first cost drop in 8 quarters, contributing to a 41 % bounce in net earnings. B-Dubs also managed to boost revenue by 28% for the second quarter, thanks to 77 new stores coming online and a solid 4 % rise in sales at existing locations. That comparable sales growth figure isn't as high as B-Dubs saw in the year-ago quarter, but it was high enough that the company can claim increasing market share in its industry.
Small, medium, or large?
The rollout to a new wing ordering system seems to be working, too. Until just recently B-Dubs served its wings to customers on a per-piece basis. That was fine so long as wing prices and average weights stayed constant.
But it created havoc for the company's costs over the last two years. Since it pays for its wings by weight, not by piece, and since the average weight of chickens has been rising, B-Dubs saw its costs spike in some quarters by as much as 90%. That hasn't been good for the company's profitability.
BWLD Gross Profit Margin Quarterly data by YCharts.
In response B-Dubs created a new sales system that has customers order their wings in portions of small, medium, or large rather than by the piece.
Buffalo Wild Wings does risk a customer revolt with such a big change to its menu. However, the company has been careful to test the system out in small trial runs, making any required tweaks before introducing it nationally.
Looking ahead
Assuming customer reaction to the wing ordering change stays as mellow as it was in July, B-Dubs should see strong profit growth as costs trend down. The company expects earnings to rise by 17% for the full year, which implies that the second half of 2013 should be a profitable one.
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The article Is Buffalo Wild Wings Saved? originally appeared on Fool.com.
Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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