Buffalo Wild Wings Inc. was downgraded to underperform from neutral at Wedbush based on the belief that the upcoming proxy vote is a "lose-lose" for shareholders. Wedbush cut the price target to $115 from $150. "We view the outcome... as irrelevant given our view that neither alternative offers a viable solution to the company's ongoing deterioration in fundamentals," the Tuesday note said. Analysts believe same-store sales growth from management's strategy will be driven by promotions, which will hurt the average check size and drive margin deleverage. And there is additional risk to earnings guidance because the expected seasonal decline of wing costs won't happen. And analysts believe the alternative proposed by activist investors Marcato Capital Management, which includes refranchising, "makes less sense given recent fundamental deterioration." Marcato, which owns about 9.9% of Buffalo Wild Wings shares, issued an open letter to shareholders on Tuesday urging shareholders to vote for its director nominees and laying out its plan for the company, which includes a transition to a 90% franchised model. Buffalo Wild Wings' Chief Executive Sally Smith issued her own letter on Tuesday highlighting the positive same-store sales the company posted in the first quarter of 2017 and the changes the company is making to drive growth. "It is critical that we maintain institutional knowledge and memory on the board and it would be unwise, in my view, to jostle the careful balance we have achieved between fresh perspective and intimate knowledge of our operating model, company history and culture," Smith's letter said. Buffalo Wild Wings' annual meeting will take place on Friday. The company's shares are down 2.2% in Tuesday premarket trading, and down 2.2% for the year so far. The S&P 500 index is up 8% for 2017 to date.
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