Buffalo Wild Wings' New Price Structure Pays Off | Investor Beat - July 31 | The Motley Fool

TL;DR

The economy grew at 1.7% in the second quarter, exceeding expectations, while Buffalo Wild Wings saw a 41% increase in profits due to lower chicken wing prices.

Transcript

we're talking chicken wings and beverages so grab a plate investor beat starts now thanks for watching I'm Chris Hill the old saying is that slow and steady wins the race and that's how it was looking on Wall Street today the new GDP numbers show an economy growing at 1.7% for the second quarter nearly double what was expected but still in that slo... Read More

Key Insights

• ☠️ The economy grew at a higher rate than expected in the second quarter.
• 😘 Buffalo Wild Wings implemented a successful new pricing model for chicken wing sales.
• 😘 Buffalo Wild Wings' profits increased due to lower wholesale chicken wing prices.
• 🏆 Soda Stream had a strong quarter, beating expectations and winning the war for kitchen counter space.
• 💳 MasterCard experienced higher profits due to increased consumer spending on its credit and debit cards.
• 😘 Facebook's stock has made a significant turnaround, reaching its IPO price after being as low as $17 a few months ago.
• ❓ Investor interest in Herbalife continues to create controversy and uncertainty in the market.

Questions & Answers

Q: How did the economy perform in the second quarter?

The economy grew at a rate of 1.7% in the second quarter, which was higher than expected.

Q: What factors contributed to Buffalo Wild Wings' increase in profits?

Buffalo Wild Wings was able to increase its profits by 41% due to a 15% decrease in wholesale chicken wing prices.

Q: How did Buffalo Wild Wings address the risks associated with buying and selling chicken wings?

Buffalo Wild Wings implemented a new pricing model where they buy and sell chicken wings by the pound, instead of by quantity, to mitigate the risks and lumpiness associated with fluctuating prices.

Q: Is the stock price of Buffalo Wild Wings overvalued?

While the stock has had an impressive performance in 2013, with a 40% increase year-to-date, some caution may be warranted as the valuation is around 35-36 times earnings.

Summary & Key Takeaways

• The economy grew at a rate of 1.7% in the second quarter, nearly double what was expected.

• Buffalo Wild Wings reported a 41% increase in profits for the quarter, benefiting from a 15% decrease in wholesale chicken wing prices.

• The company implemented a new pricing model to mitigate the risks associated with buying and selling chicken wings and the success of this strategy has surpassed expectations.