Roark Capital Group may quickly have one other venture beneath its wings.
The personal fairness agency reportedly made a $2.three billion bid for Buffalo Wild Wings (BWLD) Monday afternoon, Nov. 13, simply months after CEO Sally Smith introduced she would retire by year-end amid activist pressures. Roark has a historical past of buying struggling informal eating chains and turning them round, as was the case with Arby’s, which it purchased in 2011, and Auntie Anne’s Inc., in 2010.
But some business sources say B-Dubs has sufficient livelihood to fend for itself, particularly as traders have been already optimistic about prospects of a brand new CEO. The Minneapolis-based firm beat Wall Street expectations final month, posting earnings of $1.36 per share within the third quarter to badysts’ predictions of 79 cents.
“We don’t believe the Buffalo Wild Wings brand is dead. It still has good mindshare with consumers,” mentioned Jeremy Hamblin, a senior badyst at Dougherty & Co. “You can argue that most restaurant operators have struggled in recent years because of higher labor costs and lower traffic trends in casual dining.”
Buffalo Wild Wings has seen two years of declining gross sales, Hamblin advised TheStreet. Its inventory misplaced almost 25% of worth up to now this yr. Its struggles come up largely from poultry costs at all-time highs.
As of early October, wing costs have been over $2 per pound, almost double the 10-year common of $1.35, in line with a Stifel report that discovered customers ranked B-Dubs to be the worst chain restaurant in the case of worth. But given the volatility of rooster wing costs, earnings may rebound when costs return down.
In the Stifel report, badyst Chris O’Cull and his colleagues clbadify Buffalo Wild Wings as among the many publicly held eating places in a “growing pains” section of growth as a result of they actively try to enhance their relevance by pandering to new shopper preferences, like digital ordering and supply.
But on this stage, they might go both approach: revitalization or a fade into obscurity, like Applebee’s beneath DineEquity Inc. (DIN) and Subway.
“Six, seven or eight years ago, everyone said Arby’s was dead. But under Roark, it had one of the most incredible comebacks in my 20 years of being in this business,” Hamblin mentioned. “Buffalo Wild Wings is not quite as bad. But Roark has opportunities with this brand.”
Under the nimble operations of personal possession, Buffalo Wild Wings may higher refine its cellular ordering capabilities and minimize down on operational prices, for example. And it helps that the taking part in area is even.
Nearly each established restaurant is grappling with a shift in total shopper eating preferences, pushed by Millennials.
“Restaurant stocks will likely remain volatile as investor sentiment vacillates between a bearish focus on weak sales and traffic performance,” O’Cull wrote.
If Buffalo Wild Wings go the personal takeover route, it might be following the footsteps of various friends. Ruby Tuesday, Inc., for example, is promoting to non-public fairness agency NRD Capital Management LLC, the corporate introduced final month. And Jack within the Box Inc. (JACK) is at the moment purchasing its Qdoba Restaurant Corp. Mexican restaurant idea. BWLD shares are up almost 30% post-trading Monday after experiences of the Roark bid emerged. It has a market cap of $1.eight billion.
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