Company cites slow restaurant sales and high pork costs
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Bret Thorn
Bob Evans Farms Inc. cited lower sales and higher costs, particularly for sows, as it reported a 22.1-percent dive in first-quarter net income.
The Columbus, Ohio-based restaurant operator and sausage maker had net income of $12.5 million, or 41 cents per share, for the July 30-ended quarter, compared with year-ago earnings of $16.1 million, or 52 cents per share.
Bob Evans' first quarter revenue declined 3.9 percent to $412.6 million, reflecting a 4.7-percent decline in restaurant sales and flat sales at its food products division.
Same-store sales dipped 3.5 percent at the Bob Evans family-dining chain and declined 7.6 percent at the Mimi’s Café casual-dining operation, the company said. Check averages were up in the quarter by 3.3 percent at Bob Evans and 3.8 percent at Mimi’s.
In a conference call with investors Wednesday, Bob Evans officials said increased check averages were a result of price increases as well as the promotion of higher-margin items.
They also said that, although traffic was down, guest satisfaction was up, and they intended to avoid “rampant discounting,” which can erode the brand in the long term. They said Bob Evans tried discounting five years ago with poor results.
Bob Evans said most customer complaints were based on poor service rather than food, and so the chain is working on service-focused training and improving food preparation times.
Looking forward, the company said it expects same-store sales to improve sequentially over the next three quarters at both chains. For fiscal 2011, it estimates Bob Evans' same-stores sales will be flat to down 2 percent. Mimi's same-store sales are projected to fall between 2 percent to 5 percent.
Steve Davis, Bob Evans' chairman and chief executive, said the company will build three new Bob Evans restaurants and rebuild two existing locations in fiscal 2011 and but has no plans to open any new Mimi’s units. The company revised downward its remodeling plans to between 30 and 35 Bob Evans units and three to five Mimi’s Cafés in fiscal 2011.
The company ended the quarter with 569-unit Bob Evans restaurants and 145 Mimi's Cafes.
Davis also said the company planned a systemwide rollout of Bob Evans' “Taste of the Farm” format, based on a prototype in Westerville, Ohio, which it opened this past spring.
The retail and carryout operation, which includes a bakery and cold case with grab-and-go items, would be added to remodeled stores going forward, and the concept's takeout items, which change every quarter, would be phased in at all restaurants.
Officials said they were happy with sales at the Westerville location, but did not disclose numbers.
Bob Evans said it would take a $2 million charge in the next quarter because of severance and other costs related to the closing of one of its sausage manufacturing plants last month.
Contact Bret Thorn at [email protected].
