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Buffalo Wild Wings stock takes flight with boneless wings

Buffalo Wild Wings changed a popular promotion and found profit gains because of it.

After being grounded for much of the year, Buffalo Wild Wings Inc. stock soared in late trading Wednesday after the company showed a big profit boost from a switch to boneless wings for one of its signature promotions.

Buffalo Wild Wings BWLD, -4.12% shares jumped more than 20% in after-hours action following the release of the restaurant chain’s third-quarter earnings report, which showed profit nearly 50% higher than expected. Before that jump, the beleaguered stock had dropped 34.5% in 2017, as the S&P 500 index SPX, -0.47% increased 14.8%.

Buffalo Wild Wings Inc.

Buffalo Wild Wings had been suffering for a number of reasons, but the biggest cause appeared to be an increasing price for its core offering, chicken wings. Chief Financial Officer Alexander Ware noted in Wednesday’s call that chicken wings were selling for $2.16 a pound in the third quarter, 26% higher than a year earlier.

In response to the rising prices, Buffalo Wild Wings in July announced a change to one of its most popular promotions, half-price wings on Tuesdays. The company changed the weekly sale to buy-one, get-one-free boneless wings, which are made by forming chicken meat to resemble wings.

The switch brought down sales overall, but made them much more profitable. Chief Executive Sally Smith said that about half the sales lost on Tuesdays were takeout orders of less than $10, a cheap dinner for customers that was damaging Buffalo Wild Wings’ profit margin, especially as costs for chicken wings increased.

Smith said she hoped that the trend would continue, as the company was still trying to convince franchise owners to make the switch on those Tuesday promotions. Executives increased their profit forecast for the year while releasing the third-quarter numbers.

“The recent Tuesday promotion shift from traditional to boneless wings at company-owned restaurants will continue to improve cost of sales while traditional wing prices remain elevated,” Smith said in the earnings release.

Smith noted in the call that it was her 56th earnings call for Buffalo Wild Wings, and it is expected to be her last after she announced in June that she would retire by the end of the year. As the company’s stock has been hit in the past year, Smith has also dealt with an activist campaign by Marcato Capital Management.

Read also: At these three restaurant companies, the stock is the main course

The switch hurt traffic in stores, as same-store sales fell 2.4% in the quarter, and revenue came in lighter than expected at $496.7 million, but profit soared to $1.36 a share on an adjusted basis, more than double the previous quarter’s total and 10.5% higher than the year-ago period. Analysts on average expected adjusted earnings of 79 cents a share on revenue of $501 million, according to FactSet. The company said full-year adjusted earnings would be $4.85 to $5.15 a share, after previously guiding to $4.50 to $5 a share.


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