Buffalo Wild Wings reports 38% decrease in Q4 earnings

by MEAT+POULTRY Staff
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Execs are exploring sales of some stores; remain confident that new programs and initiatives will bring positive results in 2017.
 

MINNEAPOLIS – Executives at Buffalo Wild Wings Inc. have lofty goals for the year ahead after reporting a 38.2 percent decrease in net earnings to $15.6 million for the fourth quarter of 2016. Net earnings for fiscal year 2016, ended Dec. 25, 2016, decreased 0.3 percent to $94.7 million, earnings per diluted share increased 3 percent to $5.12 compared to $4.97 in FY15 as a result of the company’s share repurchase activity.

“The challenging restaurant environment continued in the fourth quarter and culminated with a difficult December,” said Sally Smith, president and CEO. “Our focus for the year is to gain momentum on sales, improve our cost structure, grow internationally, optimize our domestic restaurant portfolio, and lower our cost of capital. The Buffalo Wild Wings brand remains differentiated, healthy, and strong and with operating income growing throughout the year.”

The company’s revenue for the fourth quarter reached $494.2 million, increasing 0.8 percent over the same period in 2015. System-wide sales at company-owned and franchise restaurants were $941.1 million for the quarter, which was also an increase of 0.8 percent over Q4 2015. Company-owned restaurant sales for the fourth quarter increased to $470.5 million, a 0.9 percent increase and same-store sales at company-owned BWW restaurants declined 4 percent for the fourth quarter compared to a 1.9 percent increase for the same period last year.

“We know performance needs to improve in 2017,” Smith said in an earnings webcast on Feb. 7. “While we are clearly disappointed to report that same-store sales decreased 2.4 percent at company-owned restaurants and 2.7 percent at franchise locations for the year, we have been aggressively addressing our offerings and our teams have worked incredibly hard.”

The chain added several new programs throughout the year in an attempt to extend day parts and drive customer traffic. Those included Fast Break Lunch, half-price Wing Tuesday and the Blazin' Rewards loyalty program. “Despite a tough December we are pleased with the momentum we're seeing from the various initiatives,” Smith said.

“In 2017 we will continue to refresh several categories of our menu, including salads and appetizers, improving the quality of our ingredients,” she added.

In 2017, the company plans to open 15 new company-owned restaurants in the US and 15 franchised BWW locations. Executives also are exploring the sale of 10 percent of company-owned stores.

“At this stage, we’ve identified about 10 percent of our company-owned restaurants for refranchising and are reviewing advisors to assist us in the potential sales,” CFO Alexander Ware told analysts. “We’ve identified a second set of restaurants where our focus is to quickly improve unit performance. Our performance plans for these restaurants and regions include restaurant specific game plans designed to revive sales and improve margins.

“Again, this improvement process will be dynamic and results focused to boost returns and shareholder value,” Ware added. “This portfolio optimization will be an ongoing process. We will continually evaluate our portfolio and we will pursue the appropriate strategies whether to own units, sell units or intensively improve the performance of units not to reach a predetermined ownership target, but rather to increase shareholder value by taking into account market conditions and performance potential.”

Ware said the locations under consideration for sale are “effectively subscale in their geographies,” and can be better managed by others. Some locations came with acquisitions, they’re in islands that are not contiguous to existing operations or they are in locations where BWW doesn’t have an effective operating model.

Smith added that if same-store sales don’t rebound or the company can’t work toward a 20 percent margin, executives will explore alternatives. “So, this is a dynamic process. It's an ongoing process,” she said. “And we do have a number of things that we think we can pull the trigger on and that will help us really drive same-store sales throughout 2017 and 2018 with that goal of getting to our 20 percent restaurant operating margins.”

Looking beyond the United States, Smith said, the BWW concept has gained international acceptance. “We currently have 25 locations outside the US and Canada, all of which are franchised,” Smith said.

In addition, the chain will bring BWW restaurants to India, Oman and Vietnam and plans to open 20 franchised restaurants internationally.

“In our international locations we’ve modified the concept to be less dependent on sports viewing and focused more on social connection through competition,” Smith said. “All new international Buffalo Wild Wings will feature a gaming wall, and the restaurant in India will be the first with virtual reality.”

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READER COMMENTS (1)

By Karen Davis 2/8/2017 1:23:21 PM
Most of these "wild" wing eaters are couch potatoes, and the "wings" are likely to be chickens' shoulder blades and who knows what else from the lame, incarcerated, sick chickens living in 100% filth. Best "chicken" products are vegan. Far superior in every way to your animal-abuse junk soaked in garbage.