Buffalo Wild Wings Soars as CEO Welcomes Input From Activist

  • Company also plans to buy $150 million in stock this year
  • CEO says she’s open to ideas from activist investor Marcato

Buffalo Wild Wings Inc. surged the most in more than 18 months after vowing to increase stock buybacks and accept input from activist hedge fund Marcato Capital Management LP, which took a stake in the company earlier this week.

Buffalo Wild Wings shares climbed as much as 14 percent to $167.50 in New York, the biggest intraday increase since October 2014. Through Tuesday, the stock had lost 7.9 percent this year, trailing the 2.2 percent gain for the Standard & Poor’s 500 Restaurants Index.

The restaurant chain posted second-quarter earnings of $1.27 a share on Tuesday, beating the $1.25 estimated by analysts. The company credited disciplined budgeting for helping bolster profit at a time when same-store sales are declining. It also expects to buy back about $150 million in stock this year, rewarding shareholders.

“We controlled costs and expenses well in a challenging sales environment,” Chief Executive Officer Sally Smith said in the statement.

The results follow an announcement by Marcato on Monday that it had acquired a 5.1 percent stake in Buffalo Wild Wings and would push for changes at the beer-and-wings eatery.

Sales Slump

Same-store sales remain a concern for the company. They dropped 1.7 percent at company-owned locations in the first quarter and then declined an additional 2.1 percent in the most recent period. Analysts had predicted a drop of just 0.5 percent, according to Consensus Metrix.

Marcato was founded by Mick McGuire in 2010 with startup capital from Blackstone Group LP after he worked at Bill Ackman’s firm, Pershing Square Capital Management. The firm primarily invests in small- and mid-size public companies and looks for ways to make them more valuable.

On Tuesday, Smith said that Buffalo Wild Wings’ board and management “welcome input from all shareholders and are open to reevaluating and evaluating ideas that can help us achieve our new mutual goal of creating shareholder value.”

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