Buffalo Wild Wings Not So Hot After Earnings Shortfall

Shares of Buffalo Wild Wings (BWLD), which hit an all-time high of $48.73 last Thursday leading into it’s quarterly report, fell hard during after-hours trading as the company was unable to live up to the Street’s expectations.  The company came in with Q4 profits of $8.3 million, or $0.46/share, up from $7.7 million, or $0.43/share, for the same period a year earlier.  Revenue came in at $145 million, good for a 20% sequential increase.  Still, these year-over-year increases did little to appease investors, as the Street’s consensus called for profit of $0.51/share on revenue of $149 million.

Generally speaking, it was a decent report.  Same store sales rose 2.6% at company-owned locations and 2% at franchised locations.  Total locations grew 16% to 652 restaurants. All pretty impressive considering BWLD’s exposure to the much maligned US consumer.

Nonetheless, shares fell more than 12% during after-hours trading, gapping down from the aforementioned all-time highs that were hit earlier that day.  It was rare to see a stock experience as much strength as BWLD during the recent correction, and the fact that it held up so well while the market sold off was likely an important factor behind the severity of BWLD’s post-report slide.  Shares sank as low as $41.28 before wrapping up the day at $42.94, good for an 11.28% decline.

BWLD had just recently broken through resistance at $44, a point at which shares were turned back 4 times over the last year.  The breakout came on high volume on 1/14.  Holders of the shares hoped that the breakout signaled the start of a new leg up, and for almost a month, they got what they wanted.  Shares rallied more than 10% in the month following the breakout, but Thursday night’s report changes everything, at least as far as the trading opportunity is concerned.  The 1/14 breakout is now a failed breakout.  Shares closed below their 50-day moving average.  In short, that trade is over.

If you were looking to get behind BWLD long-term, but didn’t want to pile on top of a fresh all-time high, then you may not be all that upset about the selloff.  Still, I wouldn’t jump right in here.  Judging by the volume of Friday’s selloff, it’s not crazy to think that there still may be some sellers left.  Not to mention that the market is still yet to offer any clear evidence that it is ready to resume an uptrend.  So, wait for some signs of stabilization before you toe the water in BWLD.

Disclosure: No position in BWLD.