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Bob Evans 4Q net, profit fall

Company bullish on year ahead with smaller prototype and increased traffic

Higher food costs and one less operating week drove down Bob Evans Farms Inc.’s income and revenue in its fourth quarter, but same-store sales improvements at the company’s namesake family-dining brand and early results of a remodeling program have them bullish about next year.

Chief executive Steve Davis said Bob Evans’ long-term profitability would be strengthened by the closures of underperforming Bob Evans and Mimi’s Café restaurants, and noted that Mimi’s new president, Mark Mears, would look to turn around sales with targeted menu and service initiatives.

For the April 29-ended fourth quarter, Bob Evans net income fell to $18.4 million, or 60 cents per share, compared with $20.8 million, or 68 cents a share, in the same quarter a year earlier. Revenue fell 5 percent to $418.7 million, reflecting the absence of a 53rd operating week present in the year-earlier fourth quarter.

Same-store sales turned positive at Bob Evans for the first time in two and a half years, increasing 1.2 percent. Same-store sales at Mimi’s Café, the company’s casual-dining chain, fell 1.3 percent.

Full-year net income fell to $54.2 million, or $1.78 per share, compared with $70.3 million, or $2.29 per share, a year earlier. Total revenue fell 2.9 percent to $1.7 billion.

Full-year same-store sales fell 1 percent at Bob Evans and 4.5 percent at Mimi’s Café.

Taking big steps will small-footprint units

During fiscal 2011, the company opened two and rebuilt two Bob Evans restaurants and remodeled 33 locations, mostly in the Dayton, Ohio, market. The brand also remodeled three Mimi’s Café units. Eight Bob Evans restaurants and one Mimi’s Café unit were closed during the year.

“We are excited with the results we’ve seen so far in our Dayton market, as well as results in our newest restaurants, giving us confidence in our expansion plans,” Davis said. “We’ve lowered our remodel costs to approximately $250,000 per restaurant, and as a result, we’re expanding our Taste of the Farm remodel program to 56 additional restaurants, including 44 in Detroit and Toledo, Ohio.”

The two newly built Bob Evans restaurants in Northern Florida have officials optimistic for more meaningful development after fiscal 2012, in which the company plans to open six new units, Davis added.

Capital expenditures will rise from around $45 million in fiscal 2011 to between $70 million and $80 million this fiscal year, including $25 million for new restaurants and remodels, officials said.

A lower-cost prototype looks just like the remodeled Bob Evans units but will allow for greater flexibility in required real estate, Davis said.

“One of our restaurants just opened in Panama City, Fla., and is an end cap, so we’re looking at other end cap opportunities,” he said. “The key is getting that great real estate, those Main on Main corner locations, and those are now in our arsenal of development opportunities.”

Menus focus on meals, not deals

“Our new menu at Mimi’s now contains 20 percent fewer items, which should reduce complexity and improve our speed of service and food quality scores,” Davis said.

Different menu initiatives will combat food cost inflation, Bob Evans executives said.
The company overcame $30 million in commodity and sow cost inflation in fiscal 2011 and expects food costs in the restaurant segment to rise between 5.5 percent and 6 percent for fiscal 2012, Davis said.

“We will focus future promotions on our higher margin items, such as our seasonal features,” he said. “We believe our emphasis on everyday value, rather than discounting, provides us with a key competitive advantage.”

He added that summer promotions at both brands would attempt to drive traffic, including marketing efforts for Big Farm Burgers at Bob Evans and fixed-price lunch and dinner combos at Mimi’s Café. Lunch bundles for $10.99 at Mimi’s Café include a soup or salad to start and a choice of three entrees, while the $13.99 prix-fixe dinner adds a miniature dessert to the mix.

The bundles are helping Mimi’s Café promote a value message, and the resulting mix shift did not negatively affect the average check, which has been bolstered by breakfast, said Paul DeSantis, chief financial officer.

Davis added that Bob Evans is managing the namesake chain’s breakfast business through the e-club but will put its promotional muscle behind the lunch and dinner dayparts.

“Our heritage is breakfast and always will be,” he said. “But what we’ve discovered is when we have a great lunch item like Knife and Fork Sandwiches, we drove traffic at both lunch and dinner. So people order burgers and chicken sandwiches at lunch and dinner, and those carry out well.”

He added that the bar will be an area of opportunity for Mimi’s Café as well, and new president Mark Mears will have plenty of insight from his days at The Cheesecake Factory to lend to that initiative.

Bob Evans Farms is projecting fiscal 2012 earnings per share growth of between 7 percent and 10 percent, assuming same-store sales growth between 0.5 percent and 1.5 percent at Bob Evans and between flat and 1 percent at Mimi’s Café.

Columbus, Ohio-based Bob Evans Farms operates 563 namesake family-dining restaurants in 18 states and 145 Mimi’s Café casual-dining locations in 24 states.

Contact Mark Brandau at [email protected].

Follow him on Twitter: @Mark_from_NRN

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