Buffalo Wild Wings Inc. shares surged more than 20 percent in after-hours trading on Wednesday after the company reported better-than-expected earnings, despite higher chicken wing prices.
The Minneapolis-based chain said that net income adjusted for one-time events declined 10.7 percent in the third quarter ended Sept. 24 to $21.2 million, or $1.36 per share. That easily bested analysts’ expectation for earnings in the period.
The higher-than-expected earnings came even though the company is paying 25.6 percent more for its chicken wings than it did a year ago.
The company said it paid $2.16 per pound for wings, a 44-cent increase over last year. Traditional wings remain a big cost for the 1,271-unit chain, representing 28.8 percent of the company’s cost of sales.
Yet the company shifted to boneless wings for its popular Wings Tuesday promotion, which increased profitability, executives said on Buffalo Wild Wings’ third-quarter earnings call. Boneless wings are cheaper than traditional, bone-in wings.
While that shift hurt same-store sales, mostly through lower traffic, CEO Sally Smith said, it improved profits. And executives said that the improvements should continue into the fourth quarter. Executives increased their expectations for earnings for the full year, to between $4.85 and $5.15 per share.
Smith said that half of the traffic decline for its Wings Tuesday promotion came from takeout orders, which are less profitable.
The wing price spike comes as same-store sales at the chain continue to be weak, down 2.3 percent at company-operated restaurants and 3.2 percent at franchise units. Buffalo Wild Wings’ unit count is about equally divided between company and franchised units.
Revenue increased $2.5 million in the quarter, to $496.7 million from $494.2 million.
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