Why Buffalo Wild Wings Doesn't Need Marcato Capital To Succeed

Following a recent pullback in stock price, Maxim Group upgraded Buffalo Wild Wings BWLD from Hold to Buy, raising their price target to $180. The firm estimates earnings of just over $2 million and non-GAAP EPS of $5.71 for fiscal 2017.

Marcato's 'Unneeded' Stake Raise

Activist investor Marcato Capital Management, L.P. increased its position in Buffalo Wild Wings from 6.6 percent to 9.9 percent, as revealed in an SEC filing Thursday.

Marcato has pushed for an aggressive new strategy, including measures such as selling 500+ stores and replacing four board members with their own nominees.

In a press release on Monday, Buffalo Wild Wings responded to Marcato’s proposals — calling them “unprecedented,” “reckless” and “based on flawed assumptions” — urging shareholders to support all current board members.

“Although activist investor Marcato Capital Management increased its stake in BWLD, we do not believe his direct involvement is necessary for BWLD to succeed,” said Maxim Group analyst Stephen Anderson in a note.

B-Dubs Quest For Value

The analyst believes Buffalo Wild Wings is taking steps on its own to boost shareholder value, citing a few reasons:

• Management recently highlighted a potential annualized cost savings of $40 million.
• Increased digital sales are an opportunity both for margin expansion in the long-run and increased comps.
• The company plans to sell 80 restaurant-owned locations to franchisees, expected to be done by Q1 fiscal 2018.

The cost of chicken wings, the core of the company’s menu, is also expected to pull back beginning in the second half of fiscal 2017 — wing costs have risen 15 percent year to date.

Buffalo Wild Wings will be looking to shore up optimism among shareholders at the upcoming annual meeting, to be held on June 2.