Lioness Associates, Inc.

Economic & Corporate Risk/Yield Reports

July 25, 2012  -- Buffalo Wild Wings for 2012

Buffalo Wild Wings released disappointing earnings (see article) missing the expected numbers on earnings per share but posting increases in revenue year-over-year. The referenced article makes some good points on the reasons for the earnings per share miss. For example, the expansion plans and the increased cost of chicken are some of the factors weighing on costs. There is also some information that this company is redesigning it's logo and making changes to the interior decor of the restaurants (see article).

While the reasons for the miss seem logical, the BWLD 2012 Risk/Yield 2012 graph paints a slightly different outlook.  The graph displays a momentum into yield at approximately the March to April 2012 period which in fact, corresponds with the stock high of 94.81 which occurred on March 27. From the July to September 2012 period, the trend is reversing and the momentum moves into risk.

The BWLD Delta Core/Transient 2012 graph depicts that the core drops into risk starting in July and stays there for most of the rest of the year.  Note though, the transient line does have some Yield peaks during that time.  In addition, the USA economy should perk up later this year and that may the effect of "rising all boats".

Examining the astrological data points in detail provides information that some of the planned changes in logos, menus, interior design, and menus may not be as well-received as expected based on the original polls of customers that were done.  In this case, the end result may not be what customers want.

In addition, costs for ingredients like chicken are likely to be impacted by the further drought.


Disclosure as of 7/25/2012 - Buffalow Wild Wings (BWLD) is not part of our portfolio at this time.