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One day before managements holds their earnings call, the NFL and the players have come to an agreement, thereby eliminating a whole host of questions.   The sales trends this quarter are supportive of an improvement in fundamentals.  Although, I thinking we are nearing the end of the run, but I don’t want to pull the plug just yet.  I think that BWLD can report a comp that is between 3-4%.

Below are some of the more important forward looking statement from the 1Q earnings call. 

BWLD - GOES INTERNATIONAL THIS QUARTER - bwld pod1

 

THE BIG MACRO

“Our 2011 annual goal is to remain at 13% unit growth and over 18% net earnings growth. We anticipate opening 50 to 55 company-owned locations including several in Canada and expect that about 8 of our older locations will relocate or closed during the year. In addition, our franchisees should open about 60 new restaurants.”

“We're excited that our first international location will open next month in Oshawa, Ontario, a suburb of Toronto, and we've signed leases for three additional locations in the Greater Toronto Area. Our international team is also actively exploring other countries for future expansion.”

“Our second quarter is a 1.9% menu price increase. If we don't take any additional price increase, that will roll down to 1.3% in third quarter and for the fourth quarter as well. So we will be looking at that this summer and making a decidion on whether we take any menu price increase.”

SALES TRENDS

“We expect a combined potential menu price benefit for the second quarter for food and alcohol price increases taken in prior quarters to be about 1.9% for the company-owned restaurants. We expect to open 16 company-owned restaurants in the second quarter with 6 opened to date and 4 older locations were closed.”

“And I would expect that throughout the second and third quarter, we'll see some of our franchisees adopt some of the sales building programs that we've put in place. In addition, it's very hard for us tell when they're taking pricing. They have certainly a bigger base. But we believe that our pricing is probably a little stronger, that we took more pricing recently then they have.”

“I believe we are finding pent up demand as we're entering new markets, particularly when I think of California and the high volumes that we've opened up out there.”

“We're coming into the summer months where we'll have our Unlimited Wing promotion going on during the lunch hour in company stores and in select franchise locations. So I don't think we're seeing a day part shift. Just continued focus, I think, on optimizing or taking advantage of some of our slower times.”

“Well, on happy hour is in most of the stores that are in it, it represents about 65% or 75% of our company stores, if we're legally allowed. And most of the promotions – we tested it and saw some very nice results. We tested it with advertising and without advertising. We're offering a certain dollar, the stores or the market can choose what dollar beer to offer as well as – not $1, but at what price level, and then pairing that with $3 appetizers during our happy hour in the – and during the 2:00 to 7:00 timeframe and I believe late night, that's only in the bar.”

MARGIN TRENDS

“We will continue to focus on providing a great guest experience and deliver on our initiative of speed of services at lunch, which may cause hourly labor to be slightly higher in Q2. Our management labor should continue to leverage if our current same-store sales trends continue. Overall, labor costs as a percentage of sales are expected to be similar to second quarter last year.”

“Overall, labor costs as a percentage of sales are expected to be similar to second quarter last year”

"For cost of sales, the traditional wing market continues to be favorable and the price of chicken wings for the first two months of the second quarter is averaging about a $1.02 per pound, which is lower than any quarterly price since 2003.”  It compares to last year's average price for the second quarter of $1.51. Our Boneless Wings contract is extended through March of 2012 at flat pricing to 2010. And the remainder of our commodity basket is contracted at an increase of about 3% to prior year."

"We expect operating expenses to leverage slightly compared to second quarter last year. We anticipate that our G&A expenses in the second quarter exclusive of stock-based compensation will be approximately $13.6 million. Second quarter stock-based compensation expense will fluctuate based on the level of net earnings achieved year-to-date and assumptions based on net earnings expectations in future years."

"Currently, the second quarter expense is estimated at $2.8 million to $3 million. In second quarter of 2010, stock-based compensation expense was $1.3 million. For the full year of 2011, we estimate stock-based compensation could increase from our previous estimate to approximately $10 million depending on the continued strength of same-store sales and low wing costs."

“With 16 company-owned openings scheduled for the second quarter and a preliminary estimate of 15 openings in the third quarter, our pre-opening expenses will be heavily weighted in the second and third quarters. Please remember that our net earnings growth goal is an annual goal and we would not expect that all quarters will individually achieve this goal.”

“For the year of 2011, we anticipate total capital expenditures to be between $120 million and $125 million, which include about $100 million for new company-owned restaurants, $17 million for our ongoing remodel and facility projects and technology improvements, and $6 million from maintenance capital expenditures.”

Howard Penney

Managing Director

Rory Green

Analyst