Buffalo Wild Wings' New Pricing Strategy Is Working
Buffalo Wild Wings is the marriage of four things I love in this world: sports, wings, beer, and investing. I mean, talk about a company I can understand; this one's a no-brainer. Yet the simple fact for investors is that restaurant stocks sometimes aren't so simple.
How it did
For its most recent quarter, Buffalo Wild Wings brought some great results. Top-line growth of almost 21% resulted in a 71% boost to earnings and same-store sales in both company-owned stores and franchised stores look healthy.
Top it all off with management revising full-year guidance upward and it's no wonder the market loved the results. And what's not to love? Just check out the growth in average weekly sales over the past five years. Impressive, to say the least:
The most important number
But if there's one figure you want to take away from this most recent quarter, it's this one: $1.36. That was the company's cost per pound for traditional (bone-in) wings and it was 35% lower than what they were paying last year.
The dreaded chicken-wing risk
One of the biggest risks with Buffalo Wild Wings has always been the dreaded "chicken wing risk." It used to be that the company purchased its wings by the pound and sold them to consumers by the quantity. And with the inherent volatility in chicken wing prices quarter in and quarter out, earnings were lumpy at times, sending the stock on some pretty wild swings.
However, management has made the right move with its new pricing structure. Now instead of customers buying wings by the quantity, they pay by volume. Depending on the size of the wings, that would affect the actual number of wings, but the order is still the same weight.
Foolish bottom line
Management has cleared a challenging hurdle with its new pricing strategy, which has helped pave the road to future profitability with less short-term risk from input costs. This gives them the opportunity to focus more on the bigger-picture challenge of growing the company beyond its namesake Buffalo Wild Wings restaurants. And that may prove to be a challenge that makes the dreaded chicken-wing risk look tame in comparison.
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The article Buffalo Wild Wings' New Pricing Strategy Is Working originally appeared on Fool.com.Jason Moser 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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