If you've visited your local Buffalo Wild Wings (NASDAQ: BWLD) in recent weeks, you may have noticed that one of its primary promotions has changed. Rather than offering half-priced traditional wings every Tuesday -- a massively popular deal that the chain only just launched around this time last year -- B-Dubs pivoted the promotion to feature its boneless wings instead.
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That might seem like a relatively benign change. But Buffalo Wild Wings took a fair amount of risk with its abrupt rollout over the past quarter, all with the aim of reducing costs as the price of traditional wings remains stubbornly high.
Thankfully, according to a recent Securities and Exchange Commission filing from the company, the new promo is proving even more effective than Buffalo Wild Wings had hoped.
More specifically, Buffalo Wild Wings disclosed that all company locations are now featuring the new promotion as of Sept. 19, 2017. And its impact on same-store sales has been "better-than-forecasted" so far.
Buffalo Wild Wings further noted that the mix shift to boneless wings has sequentially improved its cost of goods sold from last quarter, and effectively offset the year-over-year increase in traditional wing prices. Perhaps unsurprisingly, Buffalo Wild Wings has also begun to convert its franchise locations to the new promotion structure.
A risky move
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For perspective, recall that in late July Buffalo Wild Wings stock plunged after the company told investors that earnings per share had declined a harrowing 57% year over year, driven by a perfect storm of weak same-store sales, historically high traditional wing prices, and a shift in mix toward toward its value offerings. It also doesn't help that today's casual-dining environment is particularly challenging with more competition for consumers' attention and disposable income than ever before.
As a result, Buffalo Wild Wings' focus moved toward stabilizing its business and improving margins. Given the aforementioned mix shift toward value items, it made sense to move the Tuesday promotion away from those expensive traditional wings and toward the less expensive breast meat used in boneless wings.
The move wasn't without risk. For one, Buffalo Wild Wings is arguably known best for its traditional wings, so could have alienated its biggest fans with the shift. Thus, in an ideal world, it would have thoroughly tested the new program before rolling it out on a wider scale.
But that wasn't the case. According to CFO Andrew Ware during last quarter's call:
Under normal circumstances, we would have a meaningful level of testing and learning on this shift to boneless. Our very early learnings from two Tuesdays and 50 restaurants are encouraging, and we will be monitoring closely to ensure that the sales and margins achieve our intended results. Given the uncertainty, we are creating a wider-than-normal range of outcomes in our guidance for the next six months.
In other words, Buffalo Wild Wings effectively dove in headfirst with a companywide rollout based on just two weeks of testing at only a handful of its more than 1,200 locations.
Of course, the company was fully aware of that risk, and the resulting uncertainty is one of the reasons shares currently trade within spitting distance of 52-week lows. But it seems this calculated bet has paid off. And Buffalo Wild Wings investors can breathe a sigh of relief for now.
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