With a month to go before Buffalo Wild Wings shareholders vote on the direction of the company, its newest directors and the activist investor seeking change hit them on Tuesday with competing visions for the future.
The three new directors, who were appointed last fall, urged shareholders to support the company's slate of board nominees at the June 2 annual meeting.
The activist investor, Marcato Capital Management principal Mick McGuire, launched a new argument in pressing for support of his nominees: that the company's first-quarter results were a disappointment.
Golden Valley-based Buffalo Wild Wings last Wednesday reported a 34 percent drop in profit for the first three months of the year and lowered its guidance on some other financial measures for the rest.
In his letter, McGuire said, "If nothing else, these results revealed that the management team and incumbent directors have no long-term strategic plan to create value for you."
That's the argument Buffalo Wild Wings' executives and directors have previously made about McGuire's strategy, which is focused on selling nearly all of the company-owned restaurants to franchisees.
The new letter signed by directors Andre Fernandez, Harry Lawton III and Harmit Singh concentrates on the plans of current executives and the board. It countered Marcato chiefly on the issue of the length of service of board members.
Buffalo Wild Wings began to remake its board when Marcato first criticized the company last August. The company's slate for the annual meeting would leave a board with five people who have served less than a year and three who have been on it for longer.
Marcato's slate would mean all the directors have served for less than a year, removing the three longer-serving incumbents, including board Chairman Jerry Rose. Marcato has also suggested that Chief Executive Sally Smith, who has led the company since 1996, resign.
"If Marcato had its way, there would be no one in the board room after the annual meeting who has more than nine months of history with Buffalo Wild Wings," the three directors wrote. They added, "As the newest members of the Buffalo Wild Wings board, we believe Marcato's attempt is ill-founded and would leave our board without essential institutional knowledge."
Marcato, in its new letter, rounded up some comments from Wall Street analysts who were critical of the company's results.
Many noted that executives appeared to boost same-store revenue by lowering prices, which cut into profits.
Higher costs for chicken wings dented profits, also.
Credit Suisse analysts Jason West and Jordy Winslow wrote that the weaker performance may increase prospects for leadership changes at the firm. But they added, "We don't see an easy fix, even for an activist."
They noted several difficulties that are beyond Buffalo Wild Wings control, including declining traffic at casual dining restaurants, oversupply of competitors, growing competition in the sports bar category and newer options for viewing sports.
"We'd prefer to see better visibility on sales trends or a better entry point in the stock before becoming more constructive," they wrote.
Evan Ramstad • 612-673-4241
