Marcato Capital Seeks Multiple Changes At Buffalo Wild Wings

Buffalo Wild Wings Inc. (NASDAQ:BWLD) has received a notice from activist investor Marcato Capital Management who holds a 5.2% stake in the company. In the letter, the firm has asked the company to bring about changes at the board and management levels and also improve food quality and service.

Notably, in second-quarter 2016, the company witnessed a decline in company-owned comps for the second consecutive quarter.

Charges Levied

The activist investor condemned the restaurant company’s decisions pertaining to capital deployment, taking impulsive decisions and supporting thematic proclamations that lack concrete facts or proper analytical base.

Notably, Marcato has particularly criticized Buffalo Wild Wings’ plan to raise its share buyback program by $300 million along with its franchise acquisitions in 2015.

Meanwhile, the firm stated that it is disclosing its views after the company’s dreary analyst day presentation and apparent dissatisfaction among shareholders and research analysts. It also pointed out that despite holding private discussions with the company, it has failed to find any substantial responses.

Changes Recommended

Marcato stated that it is optimistic about the future of the restaurant chain but it needs to make sizeable changes to its business practices.

Along with injecting fresh talent to its board and management, the firm has suggested the restaurant operator to place a greater impetus on operational excellence within its core market including food quality, pricing and value perception, speed of service and technology implementation.

Moreover, it has urged the company to remain focused on its chief business rather than placing wild bets on other fast food concepts. It has also asked for improvement in execution and accountability; and overhaul of its capital allocation strategy.

The firm even stated that it is of the view that Buffalo Wild Wings’ share price could almost triple if a few changes were implemented.

Bottom Line

Notably, Buffalo Wild Wings stated that the company is open to productive input and would watchfully consider Marcato’s letter and shareholders’ opinion.

Zacks Rank & Stocks to Consider

Buffalo Wild Wings currently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Papa John's International Inc. (NASDAQ:PZZA) , Del Taco Restaurants, Inc. (NASDAQ:TACO) and Restaurant Brands International Inc. (NYSE:QSR) . All the three stocks carry a Zacks Rank #2 (Buy).

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