Activist investor Marcato Capital Management has fired its latest salvo in its fight with restaurant chain Buffalo Wild Wings, calling for its CEO Sally Smith to be removed, according to an SEC filing.
Marcato, which owns 6.1 percent of Buffalo Wild Wing’s outstanding stock, has sent a letter to shareholders seeking Smith’s resignation and calling for change at the company.
“[U]nder current management, shares of Buffalo Wild Wings’ common stock have underperformed virtually every relevant benchmark on a 1-year, 3-year, and 5-year basis,” Marcato’s founder Mick McGuire wrote in a release. “Despite declining same-store sales, lackluster margins, a deteriorating guest experience and poor capital deployment decisions, management continues to fight tooth-and-nail to maintain the status quo.”
McGuire said that the Buffalo Wild Wings’ board has “blindly stood by management” and that in order to restore “oversight and accountability” Smith should be replaced.
Marcato has been pushing since July for Buffalo Wild Wings to franchise more of its restaurants and even nominated four directors to the company’s board in February. The hedge fund was hoping to get McGuire and three other nominated directors onto the board.
However, in late March, Buffalo Wild Wings nominated only one of Marcato’s suggestions. That person was Sam Rovit, who has 20 years of experience in the food service industry.
The gesture was not enough for Marcato. The firm said last month that B-Dubs did “not go far enough” and had not addressed the firm’s proposed operational improvements and business model modifications, which it says will drive value for shareholders.
McGuire in March also published a presentation for investors that argued the executives’ interests were not closely aligned with the wing chain’s shareholders. McGuire noted that none of the Buffalo Wild Wings executives currently own shares in the company and only one director has ever executed an open-market purchase of the stock.
He also argued that B-Dubs’ management team has been using equity incentive plans to purchase shares at a lower price and then sell them on the market to make cash.
“As shareholders, we deserve a Board and management team with real skin in the game that will take action to strengthen the Buffalo Wild Wings brand, recapture operating margin opportunities, allocate capital intelligently, and employ an efficient franchising plan,” McGuire said Thursday.
Representatives from Buffalo Wild Wings did not immediately respond to CNBC’s request for comment.
Buffalo Wild Wing’s stock rose more than 3.5 percent in early trade following the news.