Saturday, November 03, 2007

A Trade on Buffalo Wild Wings Inc (BWLD)

Dear Fellow Options Trader :

I have shared in a previous post where Buffalo Wild Wings Inc (BWLD), a restaurant operator, gapped down -$7.00 to $36.50 On 1 Aug 2007 when it reported Q2 earnings which fell short of market expectation (after multiple quarters of upside results).

From, I've researched and saw an analyst's comment that BWLD valuation was still being held back by a few lingering concerns: 1) slowing growth rates and difficult back-half comparisons; 2) potential 1Q08 repricing of the fresh chicken wing contract; and 3) any difficulties with franchisees obtaining financing to open their restaurants.

I also checked back the script of Buffalo Wild Wings Inc (BWLD) Q2 Earnings Conference Call held on 31 Jul 2007 and noted that although July 2007 same store sale rebounded to +11%, there would be more difficult comparisons coming in the final 5 months of 2007.

I paper traded a slightly in-the-money Nov 40 Put on 30 Oct 2007 when Buffalo Wild Wings Inc (BWLD) was trading around $39.00.

On 30 Oct 2007 after market closed, Buffalo Wild Wings Inc (BWLD) reported Q3 same-store sales from co restaurants of 8.3% vs 6.5% est and Q3 revs of $82.4 mln (above est of $81.1 mln). Despite better revenue, EPS came in lower than expectaed at $0.24 vs. consensus of $0.26. The miss was mainly attributable to higher costs incurred from cost of goods and pre-opening expenses. The company could be facing a challenging environment ahead.

On 31/10/07 (Wednesday), Buffalo Wild Wings Inc (BWLD) gapped down -$8.00 to $31.33. I sold the put for a $550.00 profit.

Wishing you Profitable in your Options Trading too.

Yours Sincerely,

Tony Chai