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Our first look at the BWLD Q1 earnings just released.

Our proactive approach to restaurant sustainability trends led us to write a short thesis Black Book on BWLD In October 2009.  While holding on to a short bias in a raging bull market is painful, the thesis continues to play out as penned late last year. 

We contended that BWLD aggressive growth position is causing unit level performance to deteriorate, which was not fully reflected by the market.  Today, the most telling proof to our thesis is from CEO Sally Smith saying “we are addressing specific unit performance.”  Same-store sales growth has outperformed AWS growth for the last 3 quarters, which is another indication that new unit volumes are declining.

Company same-store sales came in relatively flat (vs. the street’s +1.4% estimate) during the quarter, implying a 30 bp sequential slowdown in 2-year average trends from the prior quarter.  This is the third consecutive quarter that comps have come in light relative to street expectations.

Management’s remarks from the press release include:

“We are experiencing softness in April same-store sales of (3.7%) at company-owned and (2.4%) at franchised locations.  We are addressing unit performance as well as implementing system-wide strategies to drive sales.”

 

“While we expect that our previously-announced net earnings growth goal for 2010 of 20% may be achievable, improvement in same-store sales and moderate wing costs are key to meeting this goal.”

BWLD – ON THE PRECIPICE OF A DEEP HOLE - bwld sm

BWLD – ON THE PRECIPICE OF A DEEP HOLE - BLWD SSS

Howard Penney

Managing Director