Famous Dave’s of America Inc. reported a 4-percent same-store sales decline at company-owned restaurants during the fourth quarter, which executives attributed to the end of its discounting strategy, the company said Thursday.
Same-store sales at franchised locations fell 2.4 percent during the quarter. Additionally, the impairment of three other company-owned locations led to a $3.9 million impairment charge during the quarter ended Dec. 28, which contributed to a $2.5 million loss. The company reported net income of $1.9 million the same quarter the previous year.
“Our company’s sales performed in line with expectations,” Famous Dave’s CEO Ed Rensi said during a call Thursday discussing earnings. “We will continue to face sales headwinds through the second quarter as we continue to eliminate the heavy discounting strategy in place in 2013 and 2014.”
Famous Dave’s closed three corporate locations in Virginia in December, citing the market’s weakness. The company said earnings would have been higher last year if it didn’t operate in that market.
For the year, net income fell 40 percent, to $2.9 million, or 40 cents per share, from $4.8 million, or 62 cents per share, in 2013.
Famous Dave’s has 50 company-owned units and 137 franchised locations. Executives plan to refranchise many corporate units, with the goal of reaching 10 percent to 15 percent company ownership. The effort would mean selling at least half of its locations to independent operators.
Executives said they are making progress on refranchising, and noted that the company plans to complete the process in two years.
A decline in Famous Dave’s restaurant-level cash flow margin of 650 basis points also contributed to the loss. The company said that the timing of its media spending in the quarter, plus one-time expenses, contributed to the decline. Rensi said that the company made some “important strategic decisions” to improve sales and profitability.
Famous Dave’s weak fourth-quarter same-store sales led to a 4.6-percent decline in revenue, to $34.1 million, from $35.7 million the previous year. For the year, revenue fell 3.9 percent, to $149.4 million.
Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, declined 63 percent in the fourth quarter, to $1.7 million, from $4.6 million. For the year, EBITDA rose 1.3 percent, to $15.4 million, from $15.2 million a year ago. The company said lower general and administrative expenses, plus more favorable food costs, lifted annual earnings.
Famous Dave’s stock price fell more than 7 percent in Thursday morning trading. Its stock reached a new 52-week high Wednesday, following a year-long increase in its stock price since Rensi was named interim CEO in February 2014. He was named permanent CEO in May.
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