Has Buffalo Wild Wings (BWLD) Lost its Kick?

Versus Competitors

Let’s study how those new numbers measure up to Chipotle Mexican Grill, Inc. (NYSE:CMG) and Panera Bread Co (NASDAQ:PNRA), which are also considered younger, high-growth fast food restaurants.

Source: 4Q Annual Reports

Buffalo Wild Wings is still the undisputed growth leader. However, no one is doubting the company’s ability to grow sales. Instead, people are doubting its ability to raise prices to offset rising costs.

The Foolish fundamentals

Like Buffalo Wild Wings, Chipotle and Panera Bread are geared towards customers who frequent non-hamburger and fried chicken establishments. They have experienced tremendous growth over the past five years as customers seek out alternatives to McDonald’s Corporation (NYSE:MCD) or Yum! Brands, Inc. (NYSE:YUM) restaurants (Pizza Hut, Taco Bell, KFC).

Let’s compare Buffalo Wild Wings’ revenue growth to Chipotle and Panera, as well as fast food bellwether McDonald’s.

BWLD Revenue TTM data by YCharts

For top line growth, Buffalo Wild Wings simply has no equal — a true testament to its popularity. However, people are more concerned regarding its bottom line, which is another story altogether.

BWLD EPS Diluted TTM data by YCharts

Despite posting the highest revenue growth among its industry peers, Buffalo Wild Wings only manages to grow earnings per share slightly faster than McDonald’s, a much more mature company. While this may signal slower bottom line growth down the road, Buffalo Wild Wings is still financially fit, with no long-term debt. It has increased its cash and equivalents by 106.7% over the past five years, and finished the fourth quarter with $83.3 million in the bank.

The Bottom Line

Buffalo Wild Wings’ business model is extremely easy to understand — it buys chicken wings at wholesale and sells them again, and it attracts returning customers with its friendly sports motif restaurants. It uses its rapid revenue growth to expand quickly and drive even more sales growth.

However, the company’s singular exposure to the cost of chicken wings could prove to be its downfall. The company’s short-term plan to raise costs will only let it tread water for a few more quarters. If costs continue soaring, then Buffalo Wild Wings will be forced to diversify into other food products and beverages — which may alter the company’s business model drastically and result in lower sales volume.

In 2013, Buffalo Wild Wings’ management must carefully control costs and pricing to convince investors that it can stay profitable with stable margins while steadily growing revenue.

The article Has Buffalo Wild Wings Lost its Kick? originally appeared on Fool.com and is written by Leo Sun.

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