Wings, Sports And Declining Sales

When the American-classic Buffalo Wild Wings Inc. (BWLD) chain reports after the market closes tomorrow, they are poised to announce a third straight quarter of declining year-over-year EPS.

The street is looking for profits of $1.01, while the Estimize consensus checks in at $1.03. Meanwhile the revenue numbers are similar. What is most worrisome about the popular chain is a medium to long term decline in same store sales. Revenue is increasing only as a result of new locations, and not increasing profitability in existing stores. Furthermore, our Estimize consensus percent change points to severe negative revisions which reflects a negative sentiment about the stock. In the 22 quarters we’ve covered this name, BWLD has only beaten our estimates 41% of the time. These indicators together paint a dangerous picture, and it would be wise to decrease exposure to this name around its earnings.

Now, although our technical indicators point towards a disappointing quarter, there are some reasons to believe in a turnaround. The company is opening a series of small-format restaurants called B-Dubs Express which focuses on quick service and take-out as fast food trends towards this model. The new stores will seat less people and have a less expensive menu, but will reduce service time and collaborate with food delivery services. A C-Suite management shakeup has investors nervous, but if new leadership can put the company on a new path, then investors may have reason to believe.

Disclosure: There can be no assurance that the information we considered is accurate or complete, nor can there be any assurance that our assumptions are correct.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.