Showdown at the Annual Meeting: Will shareholders message management and the board?
We hosted an activist investor presentation focused on BJ's Restaurants, Inc. (BJRI) on March 18th, 2024. The presentation highlighted concerns about the company's management, strategy, and overall performance. The multiple activist investors will continue pushing for changes to unlock shareholder value and improve the company's prospects.
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The feedback collected post-presentation from BJRI stakeholders has further solidified the necessity for change within the company. It is increasingly evident that the current management's strategy is falling short of expectations. There is a growing consensus among stakeholders that maintaining the current course is untenable. Activist shareholders are increasingly vocal about their demands for actions, signaling a clear call for a strategic overhaul to realign the company's trajectory to enhance shareholder value.
The April annual shareholders meeting will be pivotal for BJRI's management team and board of directors. At this meeting, shareholders can voice their opinions and vote on important matters related to the company's governance and direction. The management team will face scrutiny from shareholders regarding their performance, decision-making, and inability to create value. This meeting will serve as a platform for shareholders to hold management accountable and make their voices heard. At the 2023 annual meeting, the voting spotlighted several directors whose contributions have not aligned with shareholder expectations:
- Gregory A. Trojan, age 65, with a 12-year board tenure and a past as BJ's Restaurants CEO, saw his leadership era marked by consistent underperformance against the S&P 500. Following his CEO tenure, which ended on September 1, 2021, the baton was passed to Greg Levin, who has not achieved a year where the company's stock outperformed the S&P 500.
- Peter A. Bassi, the lead independent director at 75 years old with two decades on BJ's Restaurants Board, witnessed the company's shares lagging 40% behind the S&P 500 during this period. Bassi's extensive career includes board participation at YUMC and leadership roles as Chairman at Potbelly Corp and president of Yum! Brands, Inc., and Chairman of Yum! Restaurants International, Inc.
- Larry D. Bouts, another independent director of the same age as Bassi, has also dedicated 20 years to the board. Bouts's career history includes being CFO at PepsiCo, Inc., President-International Division at Toys "R" Us, Inc., and Chairman & CEO of Six Flags Theme Parks, Inc.
- James A. Dal Pozzo, age 65 and a board member for 23 years, currently serves as Chairman of Monrovia Nursery Co., Inc. and Advisor at CerraCap LLC. The consensus among shareholders indicates a pressing need for substantial board-level reforms.
As we pointed out in our Black Book, BJRI's stock has significant upside potential, with an estimated 75-100% increase from its current price. This upside could be realized through various initiatives, such as:
- Leadership Changes: Replacing underperforming executives or board members with individuals with a proven track record of success in the industry.
- Strategic Shift: Implementing new strategies to improve operational efficiency, reduce costs, and drive revenue growth. This could involve menu innovations, marketing campaigns, expansion into new markets, or exploring strategic partnerships (Sports Betting?) that could help BJRI expand its footprint, access new technologies, or benefit from economies of scale.
- Capital Allocation: Reassessing the company's capital allocation priorities, including the potential for share buybacks, dividends, or investments in growth initiatives.
- An outright sale of the company.
The activists aim to pressure BJRI's management and board to pursue these value-creating opportunities and address the concerns raised by shareholders. The upcoming annual meeting will be a critical juncture in this process, as it will provide a forum for shareholders to make their voices heard and influence the company's future direction. Our feedback suggests strong support for the Activists should they step up the pressure. The potential upside in the stock price reflects the market's belief that the company has an untapped value that can be unlocked through the right actions and leadership.
