Sally Smith, president and chief executive of Buffalo Wild Wings, Inc. accepts the International Foodservice Manufacturers Association Gold Plate Award.
Courtesy of IFMA

Hedge fund Marcato wants CEO Sally Smith to retire.

By John Kell
April 20, 2017

An activist investor unhappy with Buffalo Wild Wings’ sales trends and stock performance is pressuring the restaurant chain to oust CEO Sally Smith, who has served in that role for nearly 21 years.

On Thursday, hedge fund Marcato Capital Management—which acquired a stake in Buffalo Wild Wings last summer—called on Buffalo Wild Wings to seek the resignation of Smith, saying “oversight and accountability must be restored and CEO Sally Smith must be replaced.” Buffalo Wild Wings has found itself playing defense for several months as Marcato has pushed the company to hire fresh management talent, and kill its new fast-casual pizza and taco concepts to focus on restoring sales growth at Buffalo Wild Wings. It also wants the restaurant chain to franchise more locations and look to accelerated international expansion via franchising.

Shares of Buffalo Wild Wings bwld were up 4.1% in recent trading on Marcato’s most recent demands.

Once a star performer in the restaurant world, Buffalo Wild Wings has posted softer sales of late, citing a challenging operating environment for restaurants as traffic across the industry falls. Marcato, however, contends that the issues stem from execution and management woes.

But Thursday’s move is the first time Marcato specifically called for the ouster of Smith. She joined Buffalo Wild Wings in 1994 as chief financial officer role and became president and CEO in July 1996. In response to Marcato’s latest demands, Buffalo Wild Wings touted its performance under Smith. “Under CEO Sally Smith’s leadership since its IPO in 2003, the Company has generated total returns for shareholders of 1697%. In fact, $10,000 invested in Buffalo Wild Wings stock at the IPO was worth more than $175,000 on March 31, 2017.”

In a detailed presentation unveiled Thursday, Marcato argued that Smith hasn’t done an effective job steering Buffalo Wild Wings of late, as evidenced by the firm’s claims that the restaurant chain’s shares have underperformed “every relevant benchmark” in recent years. The hedge fund has proposed four board members for election at Buffalo Wild Wings’ annual shareholder meeting in an effort to shakeup the company’s direction. A date hasn’t yet been set for shareholders to vote on the composition of the company’s board.

In an effort to appease Marcato, last month Buffalo Wild Wings announced two of its board members would retire and be replaced by former McDonald’s mcd executive Janice Fields and CTI Foods CEO Sam Rovit. While Rovit was one of four nominees that Marcato floated, the activist investor felt the board moves weren’t bold enough.

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