Buffalo Wild Wings Inc. BWLD received a letter from activist investor Marcato Capital Management, who holds a 5.2% stake in the company. Marcato has sent the letter to the company’s board of directors, citing management’s failure to provide shareholder information on time, per Minnesota state law.
The activist investor has particularly criticized the company's disclosures to investors and recent board appointments.
Per the letter, Marcato states that on Aug 22, the firm requested the company to provide it with basic shareholder information materials. However, after several rounds of discussion with the company, the shareholder information that was ultimately sent over was limited, out-of-date and practically useless.
Marcato has also condemned Buffalo Wild Wings’ recent appointment of three new Board members unilaterally, without taking shareholder input.
Thus, taking into account Buffalo Wild Wings’ actions, the activist investor expressed its concerns over the negligence of shareholders’ interests.
Earlier, Marcato had asked the restaurant company to bring about changes at the board and management levels, and also improve food quality and service.
The firm particularly disapproved the company’s actions pertaining to capital deployment, taking impulsive decisions and supporting thematic proclamations that lack concrete facts or proper analytical base.
At that time, it also criticized Buffalo Wild Wings’ plan to raise its share buyback program by $300 million, along with its franchise acquisitions in 2015.
Marcato has thus asked Buffalo Wild Wings to promptly provide it with all the required materials so that the firm does not have to engage in legal action in order to sort out the issues outlined in the letter.
However, Buffalo Wild Wings stated that the company has provided Marcato with all the information required under Minnesota law.
Buffalo Wild Wings’ has already been struggling with weak comps growth over the past two quarters. A legal battle with Marcato would further compound woes for this restaurant company. Thus, in the current situation, what course of action the company is going to take, remains the biggest question.
Zacks Rank & Stocks to Consider
Buffalo Wild Wings currently has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Wingstop Inc. WING, The Cheesecake Factory Incorporated CAKE and Darden Restaurants, Inc. DRI. While Wingstop sports a Zacks Rank #1 (Strong Buy), Cheesecake Factory and Darden carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Wingstop has posted positive earnings surprise in all of the last four quarters, with an average beat of 15.46%. Further, for full-year 2016, EPS is expected to grow 17.6%.
Cheesecake Factory’s earnings have surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 8.49%. Further, for full-year 2016, EPS is expected to grow 15.5%.
The Zacks Consensus Estimate for Darden’s 2016 earnings climbed 1.3% over the last 60 days. The company’s earnings have surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 9.32%.
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