Biglari Holdings (BH)

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Buffalo Wild Wings Is No Turkey
By Ryan Fuhrmann, CFA July 30, 2008 Comments (0)

6 Recommendations

Sports bar and wing-joint operator Buffalo Wild Wings (Nasdaq: BWLD) has once again demonstrated that it's more than able to buck current economic malaise. Yesterday, it hit the ball out of the park in terms of operating results.

CEO Sally Smith talked with The Motley Fool on a recent visit to B-dubs’ company headquarters in Minneapolis, providing plenty of insight into the secret sauce that has made the company a resounding success with patrons and investors alike. This success was easily evident in yesterday's second-quarter results, as total sales grew 28.8% to $97.9 million and diluted earnings clucked ahead 41% to $0.31 per share.

While the opening of 24 new company stores and 45 franchised locations over the course of the last year played a major role in the top-line growth, organic growth remained strong. Same-store sales rose 8.3% at company-owned locations and 4.5% at franchised restaurants. The results are particularly impressive in light of the weakened economy, which is causing consumers to eat at home or trade down to more affordable fast-food alternatives such as McDonald's (NYSE: MCD) and Burger King (NYSE: BKC).

B-dubs also kept a tight lid on expenses as chicken-wing prices fell $0.08 per pound from last year. While that helped improve the gross margin, management reported that it is likely to see higher costs in the coming months as suppliers must pass on rising transportation costs.

B-dubs' results are in stark contrast to those being posted by casual-dining rivals such as DineEquity (Nasdaq: DIN), which owns IHOP and Applebee's, P.F. Chang’s (Nasdaq: PFCB), and Red Robin Gourmet Burgers (Nasdaq: RRGB). Most operators are being squeezed by slowing store traffic and rising food and commodity prices. It's gotten quite bad for some -- Steak N Shake (NYSE: SNS) is on its deathbed, while privately held Bennigan's has filed for bankruptcy protection. But B-dubs is standing tall, and it doesn’t even look close to having to stop and catch its breath.

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