Buffalo Wild Wings Inc. has reached a "pivotal time," its chief executive said Wednesday, as it grapples with slower growth and pressure from an activist shareholder to fundamentally change strategy.
The company reported a solid jump in third-quarter profit but, as it has all year, again saw a decline in comparable-store sales. Executives aim to reverse that early next year.
"Getting to positive traffic [growth] and positive same-store sales is a measure of success," Sally Smith, the company's chief executive, told analysts after the results were announced.
"This is a pivotal time in Buffalo Wild Wings history," she said, noting the pending arrival of a new chief financial officer who will help her and other executives set goals for 2017 as well as respond to pressures that slowed the company's momentum and attracted the criticism of an activist shareholder.
This summer, Mick McGuire of Marcato Capital in San Francisco became the company's single largest shareholder and urged Buffalo Wild Wings to diversify its board, change some executives and sell a sizable portion of its company-owned stores to franchisees. In her most extensive comments about McGuire's ideas, Smith said they deserve "thoughtful consideration."
The Golden Valley-based company, with 1,203 locations, is almost evenly split between company-owned and franchised restaurants. McGuire said he would like to see 10 percent company-owned and the rest owned by franchisees, a move that would reduce the costs and risks borne by the company.
Smith said executives constantly look at the trade-offs in various markets. In high-cost states, franchisees might be preferable, but she also noted that the company runs restaurants very well.
"It is a fundamental shift, and we want to make sure we take our time in determining what the right approach is," she said of McGuire's proposal.
"That said, we are open to looking at it," Smith said. "We of course want to continue to drive shareholder value. And we like to think it's not just for today, but three, five and 10 years from now. And I think it deserves thoughtful consideration."
Buffalo Wild Wings, one of the nation's fastest-growing restaurant chains over the past decade, has seen some leveling off this year. Sales still grew as it added 40 outlets in the July-to-September period, and it has been coping with higher prices for chicken wings, its featured item, at a time of leveling traffic.
For the three months ended Sept. 25, Buffalo Wild Wings earned $22.7 million, or $1.23 a share, in line with analysts' forecasts. That's up from $19.2 million, or $1 a share, in the same period a year ago. Revenue was $494.2 million, up 8.5 percent from $455.5 million a year ago.
Same-store sales, or those in locations open at least a year, fell 1.8 percent at its company-owned units and 1.6 percent at franchised ones. In the second quarter, same-store sales dropped 2.1 percent at company units and 2.6 percent at franchised ones.
The company's shares rose about 3 percent in after-hours trading.
Earlier this week, Buffalo Wild Wings announced the appointment of Alex Ware as chief financial officer, effective on Monday. Ware, a former Pohlad Cos. executive, once was executive chairman at MStar Holding Corp., the parent of MicroStar Logistics, a provider of kegs and logistics services to craft brewers.
Evan Ramstad • 612-673-4241
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