Buffalo Wild Wings (BWLD): Slowly Losing its Edge

A bigger worry for investors could be the direction of Buffalo Wild Wings same-store sales at the beginning of 2013. In the first six weeks of the year, same-store sales were down 2.8% at company-owned restaurants, and 1.7% at franchised locations. Given that Chipotle is forecasting “flat to low single-digit growth,” Brinker is calling for low single-digit comp growth, and Panera is forecasting same-store sales growth of about 5%, you can see that Buffalo Wild Wings is starting off at a disadvantage.

Should You Sell?
Investors looking for growth and income would do well to consider Brinker International. The company pays a 2.5% yield, is expected to grow earnings by 13.84% in the next few years, and is furiously buying back shares.

While the Chipotle story has some challenges, they may benefit more than Buffalo Wild Wings if chicken and beef prices moderate, because of their more efficient operation.

My favorite growth stock of the group is Panera Bread. Panera sells for a forward P/E ratio (22) just slightly higher than Buffalo Wild Wings, and has almost the same expected growth rate (19%). The difference is, Panera’s more diversified menu, better operating margin, and better same-store sales growth, seems to offer assurances the company will perform as expected.

With Buffalo Wild Wings selling for 21.8 times projected EPS for 2013, and analysts calling for over 19% EPS growth, the shares look like a decent value. The problem is, Buffalo Wild Wings‘ margins are declining, and same-store sales may not live up to expectations. When you combine these issues with a slowly growing share count, the company may not deliver on this 19% growth. Given the alternatives, I would suggest investors look elsewhere for better growth, margins, and potential stock performance.

The article Slowly Losing its Edge originally appeared on Fool.com and is written by Chad Henage.

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