BWLD – Betting on Las Vegas

BWLD announced yesterday the completion of a $23 million asset acquisition of nine BWLD franchised restaurants in the Las Vegas area. The company expects the transaction to be neutral to earnings in 4Q08 and accretive to earnings in FY09.

Based on comments from other casual dining operators, now might not be the best time to enter the Las Vegas market as Nevada is often highlighted as a region of relative weakness. On its 2Q earnings call, PFCB said that Arizona, California, Florida and Nevada accounted for 84% of its total comp decline at the Bistro. Also following its 2Q, CAKE said it is “seeing a bit more weakness in the Las Vegas market.” RRGB stated that California, Arizona and Nevada continued to be under a lot of pressure for them in the most recent quarter, and “it’s probably not getting any worse but it’s certainly not getting any better.” Additionally, my partner, Todd Jordan, is bearish on the Las Vegas market.

For reference, BWLD said that average weekly sales of the acquired restaurants declined about 3% in the 12 month period ending June 2008. In 2Q08, BWLD’s franchised restaurants on average experienced a 5.4% increase in average weekly sales, which highlights the below average performance in Las Vegas.

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