Bob Evans looks to remodels, value pricing for sales traction

Bob Evans Farms Inc., the operator of the Bob Evans family-dining brand and the Mimi’s Café casual-dining chain, said it will continue to invest in refurbishing its restaurants and value-driven menu offerings to help grow sales meaningfully and accelerate earnings growth over the next year.

“Our company has arrived at an inflection point,” chief executive Steve Davis said during Bob Evans Farms’ fourth-quarter earnings call. “We’ve never been better-positioned to drive consistent sales growth.”

The ongoing Farm-Fresh Refresh program at Bob Evans produced 87 remodels in fiscal 2012, with refurbished units showing sales up 5 percent over the rest of the chain, executives said. The company plans to remodel 150 restaurants in fiscal 2013, including 40 locations in the Columbus, Ohio, market in the first quarter.

Three Mimi’s Café restaurants are scheduled to be refreshed as well in 2013, the company said.

Chief financial officer Paul DeSantis said one of the biggest benefits to remodeled Bob Evans units was the addition of the bakery, which generated incremental sales. The restaurants also were afforded the opportunity to retrain their crew members during the construction phase of remodeling, when restaurants were closed.

Davis noted that carryout sales, which are a large focus in remodeled stores, grew to 11 percent of total restaurant sales for Bob Evans in fiscal 2012, up from the single digits only a few years ago.

“We have a goal for 20 percent [in fiscal 2013], but we see an opportunity beyond that for carryout,” Davis said. “It is high-growth opportunities such as these where we will focus our investments.”

For Mimi’s Café, which continues to lag behind casual-dining peers, the company will continue trying to boost bar sales and carryout sales, which grew 9 percent and 6 percent, respectively, in fiscal 2012 compared with the prior year.

Value will drive further innovation

Davis was pleased with Bob Evans’ growth in carryout sales and expressed optimism for bakery sales, both of which were made possible in restaurants remodeled through Farm Fresh Refresh. But across the entire system, he said, Bob Evans and Mimi’s Café both need to make their value propositions more attractive, as both brands were vulnerable to dips in consumer confidence resulting from things like higher gas prices.

“It’s the same trend that you see in the economy as a whole, which means we have to stay on value,” Davis said. “The same thing needs to happen at Mimi’s, where we need to find a way to bundle value, which doesn’t always mean the lowest price but getting more for your money. We don’t see that changing any time soon, so we’ll continue to innovate around value.”

At Bob Evans, he said, recent offerings like the $6 Farmhouse Deals or the $9.99 3-Course Steak Dinner launched in April did not require much new culinary research and development but rather an effort to repackage existing dishes with a more overt value proposition.

“When you look at our 10 meals under $6, only one of those was a new item, and the three-course deal for $9.99 used ingredients that were already in the pantry,” Davis said. “We had the steak already, we just hadn’t been selling a lot of it.”

He added that those value offerings were developed with a careful eye toward being profitable, and then Bob Evans successfully encouraged the amount of trade-up it needed. More than half the customers opting for a $6 Farmhouse Deal added a side item for 99 cents, he said, and the brand successfully pushed orders of beverages with the combo meals, also boosting profit margins.

“It’s a matter of mixing all that together to make sure you get value, but also so it’s friendly to the P&L,” Davis said.

Columbus-based Bob Evans Farms owns and operates 565 namesake family-dining restaurants and 145 Mimi’s Café locations.

For the April 27-ended fourth quarter of fiscal 2012, the company’s net income rose 4.8 percent to $23.3 million, or 76 cents per share, compared with $22.3 million, or 61 cents per share, a year earlier.

Revenues dipped 2.9 percent to $406.5 million, compared with $418.7 million a year earlier, reflecting negative same-store sales at Bob Evans and Mimi’s Café, as well as a 9.2-percent decline in the company’s packaged-foods division. Same-store sales fell 0.6 percent at Bob Evans and 3.1 percent at Mimi’s Café.

For the full year, Bob Evans Farms’ net income increased 11.6 percent to $75.5 million, or $2.45 per share, compared with $67.7 million, or $1.79 per share, a year earlier. Net sales fell 1.8 percent to $1.65 billion.

Same-store sales decreased 0.6 percent at Bob Evans and 4 percent at Mimi’s Café for the full fiscal year.

Contact Mark Brandau at [email protected].
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