Bob Evans Farms Inc. same-store sales at its restaurants fell 1.8 percent in the second quarter ended Oct. 28, the company reported Monday, the latest in a long series of declines at the New Albany, Ohio-based family-dining operator.
But in those numbers, the company sees glimmers of hope. For instance, same-store sales improved as the quarter progressed, and then improved further in November, to a decline of 1.3 percent, the company said.
Bob Evans is also selling more breakfast. Same-store sales at breakfast rose a modest 0.1 percent, but they increased 6.5 percent for off-premise orders. And sales of breakfast items were strong all day, the company said during an earnings call Tuesday.
Overall, a third of Bob Evans sales come at breakfast, but breakfast items represent 40 percent of overall sales.
“Throughout the second quarter, sales improved month over month, and that trend continued through the third quarter,” Bob Evans CEO Saed Mohseni said on the call. He said the November election did not change the trajectory, and instead named the company’s service improvements and its recent menu upgrade.
“The feedback continues to improve as our efforts to improve the customer experience” gain traction, Mohseni said. He noted that positive customer comments increased 37 percent in the quarter, while negative comments decreased 32 percent.
Meanwhile, Mohseni said Bob Evans’ same-store sales increased in six states, while the figure had increased in just one state in the past quarter. And the number of units with positive same-store sales rose 65 percent.
He also sees traffic improving, but Bob Evans is still losing customers. Since transactions fell 7.3 percent in June, the results have improved every month, although they remain in decline. Transactions fell 2.6 percent in October, and 2.8 percent for the quarter. Transactions had fallen at least 4.2 percent in 14 of 15 months entering the quarter.
Bob Evans’ heavy presence in the Midwest could be one factor dragging down results. The chain has 192 of its more than 500 restaurants in Ohio, plus another 49 locations in Michigan and 34 units in Pennsylvania.
Executives on the call said weak economies in those states were partly to blame for Bob Evans’ weak performance. But the company is performing well in Indiana, where it has 53 locations, and Florida where it has 47 units.
“We continue to see strength in markets in Indiana and Florida,” Mohseni said. “We look forward to the day when Ohio, Michigan and Pennsylvania can join them from an economic standpoint.”
Potential BEF Foods spinoff looms
Improvement at Bob Evans Restaurants is key for the company, which is under growing pressure to spin off its packaged foods division, BEF Foods.
The company said Monday that it has hired J.P. Morgan to look at alternatives, and Mohseni hinted during the call that a split of the restaurant and the packaged foods division is a possibility.
“We’re positioned to thrive regardless of the structure,” Mohseni said.
The move was enough to satisfy Sandell Asset Management, an activist investor that owns 8.1 percent of Bob Evans stock and has been pushing for a spinoff. Sandell, frustrated that the company wasn’t exploring the idea more aggressively, had recently said it would go directly to shareholders through a consent solicitation.
Sandell backed off that idea Tuesday, saying it was “encouraged” by the move.
“We would be open to many alternatives that would maximize shareholder value, even if the ultimate alternative did not involve a separation and delivered value different from those we have estimated, as long as it was the result of a robust and transparent process aided by a reputable financial advisor,” the activist said in a statement.
Bob Evans stock rose more than 6 percent Tuesday on the news.
Contact Jonathan Maze at [email protected]
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