Photographer: David Paul Morris/Bloomberg

Buffalo Wild Wings Cuts Jobs Amid Rising Labor, Wing Prices

  • Chain sees chicken-wing prices up about 10% this year
  • Company says number of employees let go is ‘immaterial’

It’s tough times at B-Dubs.

Buffalo Wild Wings Inc. is laying off workers amid higher labor and chicken-wing costs. At the same time, the company is trying to fend off activist investor Marcato Capital Management LP, which earlier this month called for Chief Executive Officer Sally Smith to step down.

“We have eliminated the director of operations position and redeployed some of those team members in other positions,” Heather Leiferman, a spokeswoman for the Minneapolis-based company, said in an email. “We haven’t disclosed the total number of employees let go as it’s immaterial.”

The chain on Wednesday cut its annual sales forecast and laid out a plan to rein in costs, which includes the layoffs, as well as promoting food deals that aren’t wings. Last year, amid weaker results, Marcato took a stake in Buffalo Wild Wings and began pushing for changes. Marcato owned about 6 percent of Buffalo Wild Wings as of February.

Meanwhile, a tighter supply of chicken wings is pressuring the chain’s margin. Prices may be up 10 percent this year, Chief Financial Officer Alexander Ware said on a conference call.

The company is “faced with the challenge of rising labor costs and we have the unique headwind of chicken wing price inflation,” Smith said. As a result, Buffalo Wild Wings is planning $40 million to $50 million in cost cuts over the next two years, she said.

The shares dropped as much as 5.9 percent to $152.80 on Thursday in New York, the biggest intraday decline in more than two months. Buffalo Wild Wings has gained 5.2 percent this year through Wednesday.

Buffalo Wild Wings says its efforts to draw customers with faster lunches and a new rewards program are working. The chain also is working to expand delivery services. Same-store sales rose 0.5 percent in the most recent quarter at company-owned locations.

Still, the higher costs are hurting. Profit fell to $1.25 a share in the three months ended March 26. That trailed analysts’ estimates for earnings of $1.69. The company also cut its full-year same-store sales and profit forecasts.

“The concept is becoming more mature and less of a differentiated concept,” Peter Saleh, analyst at BTIG LLC, said in a research note. “We are also increasingly confounded by the seemingly endless stream of issues that downwardly pressure earnings.”

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