Time To Ditch Chicken Wings And Buffalo Wild Wings Stock?

• Amid significant volatility, Buffalo Wild Wings BWLD shares have lost 26 percent since August 4.
• Longbow’s Alton Stump downgraded the rating for the company from Buy to Neutral.
• The company reported another weak quarter and its deteriorating SSS growth profile is a concern area, Stump stated.

Buffalo Wild Wings reported its 4Q15 EPS at $1.45, excluding special items, significantly short of Longbow’s estimate of $1.58 estimate and the consensus expectation of $1.48. Comparable sales for company-owned stores grew merely 1.9 percent y/y and for franchised stores by 0.1 percent, both falling short of expectations.

Through the first four weeks of 1Q16 Buffalo Wild Wings’ same-store sales grew merely by 0.3 percent at company-owned stores, while declining 1.5 percent at franchised locations. This compares unfavorably with the consensus forecast of comp growth for the full current quarter of 2.8 percent for company-owned stores and 1.7 percent for franchised stores.

Buffalo Wild Wings’ full-year EPS is likely to be between $5.95 and $6.20, significantly short of Longbow’s prior estimate of $6.59 and the consensus expectation of $6.50, analyst Alton Stump noted.

“We are downgrading the shares of BWLD from BUY to NEUTRAL this morning due primarily to concerns related to the company’s decelerating same-store sales growth profile,” Stump wrote. He added that although the company’s SSS growth profile had “accelerated nicely” prior to the last 6-9 months, this positive trend “clearly stalled” in recent quarters, due at least partially to a more competitive landscape within the domestic bar & grill category.

“In addition, traditional wing costs unexpectedly failed to moderate meaningfully over the last 9-12 months and management now expects flattish y/y bone-in wing costs in 2016. Pending evidence BWLD can rejuvenate same-store sales and/or traditional wing costs fall significantly, we now recommend investors remain on the sidelines,” the analyst added.