Trading to near four-year lows, shares of Buffalo Wild Wings (BWLD 109.05, -13.60) trade about 11.1% lower owing to its Q2 miss and lowered full year earnings guidance from last night.
Specifically, BWLD reported Q2 earnings per share of $0.66 on revenues which rose about 2% compared to last year yet fell short of market expectations at $499.98 million. There was a $4.1 million revenue deferral for the Blazin' Rewards loyalty program in the second quarter. Further, in the period franchise royalties and fees increased 3.1% to $24.3 million, versus $23.6 million in the second quarter of 2016, driven by 28 additional franchised restaurants.
Company-owned restaurant sales were up 1.9% to $475.7 million, compared to growth of 5.2% in Q1. Same-store sales were anther weak point, declining 1.2% at company-owned stores compared to an increase of 0.5% in Q1.
The company highlighted higher wing costs as reasoning behind the tepid quarter. Cost of sales for the second quarter was 32.1% of restaurant sales, compared to 29.7% in the quarter last year, driven by higher traditional chicken wing prices compounded by a change in sales mix from promotional activity compared to the second quarter of 2016. Additionally, cost of labor for Q2 was 32.4% of restaurant sales, 40 basis points higher than second quarter last year.
As these wing costs remain at historically high levels, BWLD is adapting the value day on Tuesday to feature boneless wings at company-owned restaurants. On account of expectations for slowing traffic, the Tuesday promotional change and inflated wing prices BWLD is updating full year guidance. For the year, BWLD now sees EPS of $4.50-5.00 (down from $5.45-5.90 – which was also a lowered expectation from the prior quarter). The company also sees same-store sales declines of about 1-2% for the year (compared to prior guidance of growth of about 1%).
A portion on the miss may have been expected, however, as last period BWLD lowered FY17 guidance. Last night the company lowered guidance further, but some on the street are speculating that said guidance may still be too optimistic. With the NFL season on the horizon, BWLD may soon enjoy some stronger comps, all hinging on a wing cost retreat into 2018.