Image Source: Kevin Dooley
By Brian Nelson, CFA
Best Ideas Newsletter portfolio Buffalo Wild Wings (BWLD), the bar-and-grill giant that prides itself on serving a delicate balance of “wings, beer, and sports,” is back. Shares have been soaring as of late thanks in part to some strong institutional support–Marcato Capital now owns more than 5% of the company and is pushing for franchising growth—but also due to better visibility into why its operations haven’t been going “gangbusters,” as some may have described it in the past. Well, the answer appears to be rather straightforward, and it all falls squarely on the shoulders of the Windy City. Chicago? – that’s correct. Here is what B-dubs’ CEO Sally Smith said on the conference call (emphasis added):
We’re confident about our long-term opportunities while continuing to focus on the near-term sales environment. Same-store sales at company-owned Buffalo Wild Wings declined 2.1% in the second quarter impacted by industry and company-specific items. On the latter, for the second quarter, match-ups mattered in the NBA and NHL playoffs. The NBA finals between the Cavaliers and Golden State resulted in an incremental and exciting game seven. But it didn’t offset the fact that the Chicago Blackhawks and the Chicago Bulls, who have a national following and reside in a strong Buffalo Wild Wings market, had 28 fewer playoff games compared to the prior year.
If you like Buffalo Wild Wings, you almost have to be a Chicago fan these days. Fine by us – our offices are located just a couple hours northwest of the city. But even as Chicago sports have come up short this year, there are still lots of good things happening at B-dubs these days – takeout sales are gaining momentum, digital orders are growing nicely, and the company is making some nice strides with its Fast Break lunch program, where consumers get their food in 15 minutes or its free. Chicken wing prices are easing, and handhelds at the table are helping to stem rising labor costs. Comparable store sales remain under pressure, but we’re growing more and more confident the company will right the ship in time. Go Blackhawks and Bulls, apparently!
As for smokes, well that reference has to do with Altria (MO), another newsletter holding but one residing in both the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. Altria’s shares have been nothing but “smoking hot,” with the company breaching the $70 mark recently before pulling back of late. We didn’t see too much out of the ordinary in its second-quarter results, released July 27, except for perhaps greater pressure on volume than what might have been expected. First-half adjusted diluted earnings per share advanced more than 10%, and the company raised its full-year earnings guidance for the year, to the range of $3.01-$3.07! Altria is simply a dividend-paying powerhouse, and while we continue to monitor developments related to the SABMiller-AB-Inbev tie-up as a result of Brexit and currency (pound) dislocations, we like shares a lot. Shares still yield an impressive ~3.3% at lofty levels.