Full-service restaurant chain
Bob Evans Farms Inc.
) has recently announced first-quarter fiscal 2014 adjusted
earnings of 58 cents per share, in line with the comparable
year-ago quarter but higher than the Zacks Consensus Estimate by
a penny. Earnings in the quarter received a boost from higher top
line and lower share count due to share repurchases.
The company posted adjusted net sales of $329.4 million which
fell short of the Zacks Consensus Estimate of $334 million by
1.4% but were up from the year-ago quarter's sales of $323.4
million by 1.9%. The year-over-year rise in revenues was driven
by the sales growth at the BEF Foods segment offsetting the lower
sales at Bob Evans Restaurants.
Inside the Headlines Numbers
Columbus, Ohio-based Bob Evans divested the Mimi's Cafe
restaurant segment on Feb 15, 2013. The company is now operating
under two segments, Bob Evans Restaurant and BEF Food. The
company operates 560 restaurants under the Bob Evans Restaurant
In the first quarter, segment-wise net sales at
Bob Evans Restaurant
were down 1.4% year over year at $244.6 million due to the
shutdown of eight restaurants and a 0.6% decline in comparable
sales (comps). Owing to the company's Farm Fresh Refresh program
its restaurants were closed which led to the decline in
BEF Food segment
's net sales increased 12.5% year over year to $84.9 million with
a 13% rise in total pounds sold and 5% increase in volume
following the Kettle Creation acquisition.
Adjusted operating income of Bob Evans fell 17.2% year over
year to $22.7 million owing to higher costs at Bob Evans
Restaurants, higher Farm Fresh Refresh expenses and increased sow
costs at BEF Foods. Cost of sales increased 220 basis points
(bps) from the year-ago quarter to 31.7% due to the rise in cost
of bacon and other pork-related items, higher bread costs and
incremental dairy products expenses.
During the end of the reported quarter, the company revamped
60 Bob Evans restaurants bringing the total to 565.
In order to launch the new protype units, Bob Evans Express,
in non-traditional locations the company has entered into an
agreement with AVI Food Systems, Inc.
Dividend & Share Repurchase
During the quarter, Brinker bought back 0.1 million shares
worth $6.9 million. The company also extended its current share
repurchase authorization by an additional $150 million bringing
it to a total of $175 million.
During the quarter, Bob Evans increased its quarterly dividend
of 27.5 cents to 31 cents, representing a 12.7% hike. The
annualized dividend per share thus, stands at $1.24 per
For fiscal 2014, the company retained its earnings guidance.
Bob Evans expects that earnings per share to lie within the range
of $2.60 to $2.67. For fiscal 2014, Bob Evans Farms expects
revenues to be $1.4 billion.
The company now expects that same-store sales at Bob Evans
restaurants to grow 1%-2% gaining from the company's Farm Fresh
Commodity inflation will be within 3%-4%, up from the previous
estimate of 2%-3%, due to rise in the pork-related items. The
company reduced its operating margin guidance due to higher
commodity costs guidance. Operating margin will be in the range
of 7.8%-8.3%, down from 8.0%-8.5%
In fiscal 2014, net sales at the BEF Foods segment are
projected in the range of $380 million to $400 million and
operating margin within the range of 8.5% to 9.0%.
Although, Bob Evans' earnings beat the estimates in the
reported quarter, we remain concerned about the sluggish comps
growth. Low operating income also remains a major headwind
Moreover, higher commodity cost guidance added to the woes. We
believe that this Zacks Rank #4 (Sell) company is still in a
transitional stage and will take some time to stabilize the
Moving ahead, other retail restaurateurs, that are
continuously trying to expand in the market, include
Burger King Worldwide, Inc.
CEC Entertainment Inc.
Cracker Barrel Old Country Store, Inc.
). All these companies carry a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
BOB EVANS FARMS (BOBE): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
CEC ENTERTANMNT (CEC): Free Stock Analysis
To read this article on Zacks.com click here.