Buffalo Wild Wings' CEO Discusses Q4 2012 Earnings Results - Earnings Call Transcript
February 12, 2013 11:15 PM ET
Buffalo Wild Wings, Inc (BWLD)
Q4 2012 Earnings Call
February 12, 2013 05:00 pm ET
Mary Twinem – EVP, Chief Financial Officer, Treasurer
Sally Smith – Chief Executive Officer, President
Jeffrey Farmer – Wells Fargo
David Dorfman – Morgan Stanley
David Tarantino – Robert W Baird
Brian Bittner – Oppenheimer & Company
Bryan Elliott – Raymond James
Larry Miller – RBC Capital Markets
Paul Westra – Cowen & Company
Will Slabaugh – Stephens Incorporated
Michael Kelter – Goldman Sachs
Chris O’Cull – KeyBanc
Good afternoon, ladies and gentlemen. Welcome to the Buffalo Wild Wings Fourth Quarter 2012 Conference Call. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today, February 12, 2013.
I would now like to turn the conference over to Mary Twinem, Chief Financial Officer and Executive Vice President of Buffalo Wild Wings. Please go ahead.
Good afternoon and thank you for joining us as we review our fourth quarter 2012 results. I’m Mary Twinem, Chief Financial Officer and Executive Vice President of Buffalo Wild Wings. Joining me today is Sally Smith, our President and Chief Executive Officer.
By now everyone should have access to our fourth quarter earnings release. Before we get started I remind you that during the course of today’s call various remarks we make about future expectations, plans and prospects for the company constitute forward-looking statements.
Actual results may vary materially from those contained in forward-looking statements based on a number of factors including, but not limited to, our ability to achieve and manage our planned expansion, the sales and other growth factors that our company-owned and franchise locations, our ability to successfully operate in new markets including non-U.S. markets, unforeseen obstacles in developing sites including non-traditional and non-U.S. locations, success of acquired restaurants, the cost of commodities, the success of our key initiatives and our advertising and marketing campaigns, our ability to control restaurant labor and other restaurant operating costs, economic conditions including changes in consumer preferences or consumer discretionary spending, and other factors disclosed from time to time in our filings with the U.S. Securities and Exchange Commission.
On today’s call Sally will provide an overview of our performance for the fourth quarter. After that I will provide further detail on the quarter and comment on trends to date in 2013. Finally, Sally will share some additional thoughts about the first quarter and the year ahead. We will then answer questions.
So with that I’ll turn things over to Sally.
Good afternoon, everyone. The fourth quarter competed a year filled with significant revenue growth and our total revenue exceeded $1 billion for the year. In 2012 we increased our presence in North America with 74 additional restaurants, expanding into our 49th state in the United States and adding – and added three new locations in Canada, including our first restaurant in Calgary.
Equally important to unit growth is the performance of our new restaurants. We’re very pleased with our results as we continue to break sales records. Our average unit volumes increased by over 8% at both company-owned and franchise locations and reached average unit volume of nearly $3 million system-wide.
Our teams were focused on engaging our guests and building sales at every opportunity especially on game days. We achieved strong results for the year as company-owned same-store sales grew by 6.6% and franchise same-store sales grew by 6.5%. Withdrawn in sales in new and existing markets we had a sizable increase in revenue with 32.6% for the 53-week fiscal year of 2012.
We faced challenges last year but we maintained a disciplined approach to ensure our long term success. Like many businesses we continued to face rising commodity costs. Even as we dealt with higher than expected cost of sales we continued to invest in our future success and I’ll outline the impact of both of these further.
We remained focused on adapting to the current win market conditions. We had record high win costs throughout the year. Those costs were in sharp contrast to the historically low win costs we experienced in 2011. In addition to higher costs our restaurants have transitioned to larger sized wins in response to the poultry’s industry shift to larger bird production.
In October we began testing new options for serving our wings in six portions, rather than fixed wing quantities. We are evaluating the impact on sales, margins, and our guest perceptions around this core element of our brands and we will continue our testing before rolling changes to additional restaurants.
In spite of these challenges, we felt it was critical to continue to make long-term investments in our infrastructure and our guest experience service model as we believe these efforts will further differentiate our brand. Our new model is established in about 100 company-owned restaurants and it helps create a personal customized experience for our guests. While we are confident this service strategy builds incremental sales, we did experience higher labor costs in the fourth quarter. We’re continuing to refine this model to make it scalable before we proceed with system-wide rollout.
Unit growth and particularly company-owned growth also remains the priority for us. We opened 22 company-owned restaurants and have hired 18 franchise locations in the fourth quarter and incurred short-term increases in labor, training and travel costs related to these locations. We also completed the rollout of a new point-of-sales system in all company-owned restaurants in the fourth quarter. This is one of the ways we’ll improve our business intelligence in the future, but it resulted in some initial costs to implement and train and higher loss and disposals in the fourth quarter than anticipated.
In 2012, we completed several key initiatives. We refreshed our logo and our packaging and we opened the first prototype of our new restaurant design, which has the more stadium-like atmosphere. We also invested in testing new guest spacing technologies that provide fun and social entertainment choices for our guests.
In the fourth quarter, we focused on driving sales and providing a great Game Day experience for our guests. We had strong sales results, particularly on college and NFL game days. Our football promotion engaged our guests and culminated with seven lucky winners attending our first-ever Buffalo Wild Wings Bowl. The Bowl created widespread exposure for us and provided opportunities to connect with sports fans in our restaurants and at the games.
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