BWLD - GOES INTERNATIONAL THIS QUARTER

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


Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more