Famous Dave's Misses Earnings and Revs - Analyst Blog

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Famous Dave's of America Inc. ( DAVE ) recently reported first-quarter 2013 earnings of 1 cent per share, missing the Zacks Consensus Estimate of 14 cents per share by 92.9% and the comparable prior-year quarter's earnings by 90.9%. The weaker top-line, higher general and administrative expenses and time shift of Easter are the reasons for the disappointing earnings.

In the first quarter, Famous Dave's, which owns, franchises and operates full-service and counter-service restaurants in the U.S., reported total revenues of $36.6 million, down 2.4% year over year and also below the Zacks Consensus Estimate of $38 million by 3.7%. Revenues in the quarter were mostly affected by the lower traffic at its company-operated and franchised restaurants due to unfavorable weather and  volatile macroeconomic condition.

Quarter Highlights

Restaurant sales dropped 1.3% year over year to $32.3 million owing to a 1.8% decline in comps at company-operated restaurants, bad weather condition and weak industry sales. Franchise fee revenues at Famous Dave's was $44 million, down 74.1% year over year with the fall in comps at franchise-operated restaurants.

Franchise royalty revenues also slid 6.5% year over year to $4.1 million, owing to a 6.1% decline in comps at franchise-operated restaurants. However, higher sales volume generated at two new franchise units positively impacted the company's franchise royalty revenues.

In the first quarter, Famous Dave's' operating margin shrank 300 basis points (bps) to 1.0% as its labor and benefit expense, operating expense and general and administrative expense went up 10 bps, 50 bps and 180 bps to 33.3%, 27.8% and 13.7%, respectively.

Store Update

During the quarter, Famous Dave's shut down a franchised restaurant. At the end of first quarter, the company operated 187 restaurants, including 53 company-owned and 134 franchise-operated restaurants across 34 states in the U.S. and one province in Canada.

Amid such sluggish sales environment, Famous Dave's is intending to launch new initiatives to boost its sales. In addition, the company is also expected to undertake proper cost-control measures to drive its margin. In 2013, Famous Dave's expects to launch new restaurants in 12 places.

Our Take

A continuous decline in earnings, revenues, comps as well as the margins over the past two months has put Famous Dave's a step behind this earnings season. Moreover, a tepid macroeconomic outlook and increasing competition have added to the woes.

However, this Zacks Rank #4 (Sell) company's initiative to focus on key areas such as sales growth, menu as well as restaurant format innovation, excellence in core systems to cost saving strategy might help to improve the scenario, going ahead.

Brinker International Inc. 's ( EAT ) first-quarter 2013 earnings beat the Zacks Consensus Estimate but its revenues failed to meet the same.

Some other restaurateurs that are worth a look at this point include Bloomin' Brands, Inc. ( BLMN ) and Buffalo Wild Wings Inc. ( BWLD ) both carrying a Zacks Rank #2 (Buy).



BLOOMIN BRANDS (BLMN): Free Stock Analysis Report

BUFFALO WLD WNG (BWLD): Free Stock Analysis Report

FAMOUS DAVES (DAVE): Free Stock Analysis Report

BRINKER INTL (EAT): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BLMN , BWLD , DAVE , EAT

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