Billionaire Ken Griffin of Citadel Advisors now owns over 959 thousand
Buffalo Wild Wings (NASDAQ:BWLD)
shares, an increase of over 275% from the 254 thousand they owned at the end of 2012. That’s 5.1% of Buffalo’s outstanding shares. Should we be following Griffin into Buffalo? I think so.
Why Griffin is buying Buffalo Wild Wings (NASDAQ:BWLD)
Buffalo Wild Wings reported fourth quarter 2012 earnings of $0.89 per share, up 22% year over year, on the back of a 5.8% rise in company operated same store sales, and a 7.4% rise in franchised same store sales. To help drive future performance Buffalo Wild Wings (NASDAQ:BWLD) is undertaking various initiatives, such as menu and restaurant upgrading, and the company also has a multi-year affiliation agreement with the NCAA. Buffalo expects net earnings growth of 25% in 2013, much higher than the 17% growth in 2012. Driving this growth will be restaurant expansion.
Last quarter, Buffalo opened thirty-eight new company-owned restaurants, while shutting down one franchised restaurant. In 2013, the restaurant chain plans to open more than 60 company-owned and 45 franchised restaurants, and also expects to achieve the 1,000 total unit milestone by the end of the year. Long-term plans include opening 1,500 new units in the U.S. over the next five to seven years. As well, it is hard to see the expansion into new markets as a problem, whereas different taste preferences might make diffusion for restaurants, such as Olive Garden and Red Lobster, difficult. Buffalo’s concentration of a diversified menu and beer can appeal to a wide audience.
How the industry stacks up
Brinker International, Inc. (NYSE:EAT) owns and develops the major restaurants of Chili’s and Maggiano’s Little Italy. Unlike Buffalo Wild Wings (NASDAQ:BWLD), which does not pay a dividend, Brinker pays a 2.27% dividend yield. Chili’s has excelled over the past few years thanks to its “lowest per person average check” claim, which has been influential with cost conscious customers amidst a sluggish economy. Brinker International, Inc. (NYSE:EAT) reported last quarter results that were relatively in line with consensus at earnings of $0.50 per share, but the company has robust plans for the future, hoping to double its earnings by 2015. Expansion beyond U.S. should be a key part of this, as the domestic restaurant market is somewhat saturated, Brinker has already established a strong presence in Mexico and the Middle East and hopes to open 420 more Chili’s restaurants globally by 2015.