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Buffalo Wild Wings needs a Super Bowl boost

Sports fans love their wings, just ask Buffalo Wild Wings. Big games can make or break a quarter.

Take this Super Bowl. Americans are forecast to eat a whopping 1.3 billion chicken wings — essentially four per person — from Saturday festivities to Super Bowl Sunday, according to the National Chicken Council, a trade association for companies that raise broiler chickens and make chicken products.

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The group's estimate assumes demand will be up 3 percent, or 37.5 million wings, from last year's big game. It said its projection is calculated using industry, government and market research data and is not based on actual sales numbers.

On Super Bowl Sunday 2015, Buffalo Wild Wings said, it sold more than 11 million traditional and boneless wings. (For comparison, rival chain Wingstop said it sold over 8 million that day. Yum Brands' WingStreet chain, meanwhile, expects to serve more than 5 million wings on Sunday, which it says is about 80 to 90 percent higher than a regular day.)

Analysts say recent changes may help B-Dubs better handle the Super Bowl rush. The chain has added shift captains in all company locations, but it's also added to labor costs. The company has seen labor cost pressures as it expands into California and other states with higher wage rates.

"They are testing hand-held devices that enable the server to input your order faster, which will save some labor," said Sterne Agee CRT analyst Lynne Collier. "They also are in the early stages of testing tablets where consumers can order their food and pay at the table, which eventually can help their labor as well."

But right now, labor costs are seen as just one of several headwinds the company is experiencing.

In the latest period, Minneapolis-based B-Dubs had to contend with two fewer World Series games in the October-December span compared with the prior year. The company also warned in late October that it anticipated the timing shift of the Halloween and Christmas holidays would be "a negative for its same-store sales."

Even with these tempered expectations, the restaurant chain could fall short when it reports fourth-quarter earnings after the close Wednesday, reflecting a slow start to the quarter and labor-cost pressures. And while the Super Bowl should help current quarter results at the sports-bar chain, some analysts are downbeat on the stock's outlook and expect full-year 2016 estimates may be too high.

"They've had a couple of bad quarters in a row," said Collier. "Our estimates are below the Street for this coming quarter. They frankly started out the quarter a little bit weak for sales in October."

On average, 27 analysts polled by Thomson Reuters are looking for B-Dubs to report fourth-quarter earnings of $1.48 per share, a 39 percent increase compared with $1.07 per share a year ago. Revenue is expected to grow 24 percent to $507 million.

"Heading into Q4, expectations were quite low," said Wedbush Securities analyst Nick Setyan. "More important than Q4, investors will be paying attention to the quarter-to-date trends in Q1. And that's a very tough comparison."

CLSA analyst Diane Geissler on Monday reiterated an "underperform" rating on the stock and cut her full-year 2015 and 2016 earnings per share estimates below consensus expectations, citing "the potential for weaker-than-expected 4Q comps" and potential headwinds from job cuts in "high risk" oil-producing states, which accounts for 15 percent of its store base.

Last week, BTIG Research downgraded the stock to a "neutral" from "buy," stating in a note to clients that "domestic unit growth is slowing, sports calendar shifts could impact reported same-store sales growth in coming quarters and consensus expectations for 2016 appear too high."

Fortunately, chicken prices appear to be in line with expectations for this time of year. Chicken wings represent about 20 percent of the Buffalo Wild Wing's overall food cost basket.

An 8 percent increase year to date for chicken wings "is in-line with seasonal patterns into the Super Bowl," Oppenheimer analyst Brian Bittner said in a note last week. "Over the past 10 years, wings have moved 11 percent on average from Jan. 1 into the game. Over the past decade, wings have declined an average of 9 percent one month and 16 percent after three months following the Super Bowl."

While sporting events such as the Super Bowl are obviously key for B-Dubs, sometimes there are hiccups in the service and workflow from these big game days.

"You could call them for Super Bowl and nobody would answer the phone because they were so busy answering other calls. Hopefully now, the online ordering, etc. can take care of those bottlenecks," Setyan said.