3 Reasons Buffalo Wild Wings Can Keep Soaring in 2015

By Markets Fool.com

Buffalo Wild Wings has 21 sauce choices for its wings that run the gamut of heat levels. At one end of the spice spectrum are options like "Teriyaki" and "Honey BBQ," which aren't likely to burn anyone's tongue. But the hottest wing coating available comes with a warning to B-Dubs' customers: "keep away from eyes, pets, and children." The sauce is called "Blazin'."

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That term also happens to be a good description of the stock's performance lately. B-Dubs' shares trounced the market in 2014 after doubling the prior year. Buffalo Wild Wings is up an astounding 355% since 2010.

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Blazin' indeed.

Today I'm looking at a few ways that the stock could continue its winning streak and end up with strong price appreciation in 2015.

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Better store experiences

Image source: Buffalo Wild Wings.

That outperformance would begin with impressive comparable store sales gains. B-Dubs logged strong comps of 6%, 8%, and 7% at company-owned locations in the first three quarters of 2014, respectively. And one key driver behind that growth was the introduction of a new position that the company created, which management calls "guest experience captains." The role of these employees is to help customize diners' sporting and entertainment experiences and keep them engaged in the brand. According to CEO Sally Smith, they also "help promote the new technology in our restaurants, which we believe encourages guests to stay longer, visit more frequently, and order more."

After adding the position to 84 more locations in the third quarter, B-Dubs expects to cover all the remaining company restaurants by the end of the fourth quarter. And while that will boost labor costs, the trade-off in higher comps and more engaged customers should easily cover that investment.

More locations
Meanwhile, Buffalo Wild Wings has plenty of room to keep expanding its store base and padding the top line in the process. The company added 44 company locations in the past year and 47 franchised restaurants, bringing its base to just over 1,000. Even at that quick pace, investors can expect years of growth toward management's goal of 1,700 restaurants in the U.S. and Canada.

Image source: Buffalo Wild Wings investor presentation.

A fast-growing store base can help sales keep growing at the 20% pace we've seen over the past few years even with modest revenue gains at existing locations.

Higher profits
Finally, a key reason why B-Dubs' was able to book its incredible 28% profit gain last year was the plunge in chicken wing prices. That swing helped push costs down from 31% of sales a year ago to 29% this past quarter. However, investors can't count on the same tailwind boosting 2015's earnings. Chicken wing prices are heading back up.

But the difference this year is that B-Dubs is in a stronger position to enact menu price changes to offset any rising costs. Chief Operating Officer James Schmidt said as much in a recent conference call with analysts: "We do think we can sustain [customer] traffic pretty well, even with this price increase. I mean, we've seen some very strong same-store sales, our guest satisfaction, our guest loyalty index is high right now."

In November the company implemented an average 3% menu price boost, which should help keep profits marching higher this year toward a targeted 18% earnings growth to roughly $5 per share. If comps hold up in the fourth quarter through that price increase, as management expects, then shareholders can have more confidence that B-Dubs will book yet another year of strong profit growth in 2015.

The article 3 Reasons Buffalo Wild Wings Can Keep Soaring in 2015 originally appeared on Fool.com.

Demitrios Kalogeropoulos owns shares of Buffalo Wild Wings. The Motley Fool recommends Buffalo Wild Wings. The Motley Fool owns shares of Buffalo Wild Wings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.