Buffalo Wild Wings reiterates 2008 outlook

Submitted By David Kretzmann
Buffalo Wild Wings reiterates 2008 outlook

Tue Jul 8, 2008 4:05pm EDT

BANGALORE, July 8 (Reuters) - Restaurant operator Buffalo Wild Wings Inc (BWLD.O: Quote, Profile, Research, Stock Buzz) reiterated its estimate of a 25 percent net income growth in 2008 at the Oppenheimer consumer growth conference on Tuesday, as it sees lower spending on new restaurants for the remainder of the year.

The company said it had taken most expenses related to opening new restaurants and the conversion of eight Don Pablo restaurants in the first two quarters of the year. Buffalo Wild Wings expects more of the year-over-year net income growth to be realised in the second-half of the year, excluding one-time costs related to an acquisition of Las Vegas restaurants, CEO Sally Smith said.

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The Minneapolis-based company does not plan to raise menu prices in the third quarter when it will be bringing out a new menu design.

Buffalo Wild Wings, which intends to open 75 restaurants in 2008, also reaffirmed its view for a 20 percent revenue growth during the year. It currently operates 515 restaurants in 37 states.

I've been somewhat worried lately at how restaurants were going to handle the slowdown (especially Chipotle and Buffalo Wild Wings), and this is very reassuring. Chipotle and Buffalo Wild Wings have stellar, debt free balance sheets as well as strong cash flow production, so I did expect them to get through a slowdown without too much damage. What I didn't want to see was lowered guidance like what we've seen with Panera Bread oh-so-often. Knowing that management has confidence in previous expectations is a comforting thing for investors.

I've been paying increased attention to Chipotle recently. The B shares have been hit close to $70 on no news at all, and the P/E now sits below 32, a very reasonable number for a company with consistently strong earnings, sales, and cash flow growth. Expectations are pretty darn low right now for the company. Currently the EPS is $2.27, so assuming that the company can expand the EPS at 30% annually over the next two years and the market pegs the stock with a P/E of 30, the B shares would be trading in the $115 range. Needless to say, when it comes down to Hansen and Chipotle, I'm torn with which one to buy more of next. Long-term, I believe both stocks are trading at bargain levels and five years from now we will look back on today and see what opportunities were presented with many companies. Even in tough times, people will pay a few bucks to get a quality burrito at Chipotle or another Monster energy drink from Hansen. Still, it doesn't help me decide which one to buy more of next.

Eenie meenie miney moe...

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