The battle between Buffalo Wild Wings and Marcato Capital Management raged on Thursday after the chicken wing company wrote a letter to shareholders accusing the hedge fund of making misleading claims about the company's performance.
"Marcato Capital Management continues to make misleading claims regarding Buffalo Wild Wings' performance based on flawed analysis, in particular that the company has not generated superior returns for shareholders," the company said.
Buffalo Wild Wings said that Marcato is incorrectly comparing the chicken chain to much larger companies in the S&P 500, to broad market indices and to retailers and restaurants that the company says are "meaningfully different" from how B-Dubs operates.
"Buffalo Wild Wings should instead be compared to its casual dining peers — companies that are similar in service delivery and business model and that compete for similar consumers," the company said. "The casual dining peer group utilized by Buffalo Wild Wings properly excludes companies that are quick-serve, fast-food or delivery restaurants as well as companies outside the restaurant industry."
The company included the following chart to demonstrate Buffalo Wild Wings' shareholder returns compared to that of its casual dining peer group on a one-, three- and five-year basis.
Source: Buffalo Wild Wings
Marcato, however, took issue with the peer group that Buffalo Wild Wings' has been comparing itself to.
"The peer group Buffalo Wild Wings management used today is the third different one presented by the Company in recent months," Mick McGuire, Marcato's founder, said in a statement Thursday. "This desperate manipulation of the facts cannot mask Buffalo Wild Wings' persistent underperformance and clear lack of any strategic plan to create long-term shareholder value."
This isn't the first time that Buffalo Wild Wings has provided details about how it calculates its performance as compared to other restaurants.
Last month, B-Dubs stated in a chart that the company's shares had outperformed the S&P 600 Restaurant Index over a five-year period ended Dec 25, 2016. According to Marcato, the shares had actually underperformed the index by more than 60 percent during the period.
Buffalo Wild Wings stood by the methodology used by Research Data Group, the third party it hired to run the numbers, offering up a convoluted explanation for how the data was calculated.
Marcato and Buffalo Wild Wings have been sending letters to shareholders for months touting their competing slates of directors ahead of a proxy vote next month.
Most recently, Buffalo Wild Wings called Marcato's proposed shakeup, which would add McGuire and three others directors to the board, "risky and unnecessary." The chicken wing chain asked shareholders Tuesday to vote their yellow proxy card before the company's annual shareholders meeting on June 2.
In Marcato's most recent letter to shareholders, also published Tuesday, McGuire argued that B-Dubs' weaker-than-expected earnings report was proof that the company needs new leadership. The hedge fund also urged shareholders to vote a white proxy card to support their slate.
Marcato has been pushing for Buffalo Wild Wings to refranchise more of its restaurants since last July. However, tensions continued to rise in 2017 and worsened after Marcato called for CEO Sally Smith's resignation.