Bob Evans bounces back

by Erica Shaffer
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Bob Evans broasted chicken 
Forty-eight percent of Bob Evans restaurants offer broasted chicken, and they continue to outperform the rest of the chain,
CFO Mark Hood said.

NEW ALBANY, Ohio – Things are changing at Bob Evans Farms Inc., CFO Mark Hood said during an earnings call with analysts.

Bob Evans Farms’ restaurants, BEF Foods and the company’s support center have shown marked improvements in the fourth quarter of fiscal 2015 and the beginning of fiscal 2016, Hood said. Early results of the company’s turnaround strategy provided reason for encouragement.

“Since we last spoke with you at the third-quarter earnings call, we have closed 18 underperforming restaurants, with two more planned for later this year,” Hood said. “We amended our credit agreement to provide the company with the financial flexibility to complete turnaround efforts in our businesses, and strategically manage capital deployment.

“We engaged CBRE Group to pursue one or more sale-leaseback transactions for our New Albany, Ohio, headquarters and BEF Food facilities at Lima, Ohio, and Sulphur Springs, Texas, with proceeds to be used to repurchase shares under the company's $150-million share repurchase authorization,” he added.

The company also cut 60 positions to achieve $14 million in cost savings in fiscal 2016. 

Mark Hood, CFO, Bob Evans Farms
Mark Hood, CFO,
Bob Evans Farms

All of the company’s actions have resulted in positive near-term earnings results. For the fourth quarter ended April 24, Bob Evans reported net sales of $332.4 million, an increase of $6 million compared to the year-ago quarter. GAAP net income was $5.6 million, or 24 cents per share. Non-GAAP net income for the quarter was $13.2 million, or 56 cents per share, compared to net income of $11.8 million, or 48 cents per share a year ago. The result also is 15 cents higher than analysts’ estimates of 41 cents.

“Our goals are straightforward: to improve the brand experience for our restaurant guests and grocery customers; to profitably increase sales in our restaurants and distribution in the retail grocery channel; to reduce costs; and to allocate capital efficiently,” Hood said. “We believe this approach serves the best interests of our shareholders, our restaurant guests, our grocery customers, our employees.”

While the company’s fortunes have turned around, the search is still on for a CEO. Former CEO Steve Davis left the post following a proxy fight with activist investor Sandell Asset Management Company.

“The committee is balancing a sense of urgency with a mandate for identifying a high-caliber leader of Bob Evans for the long term,” Hood said.

“As I said in our earnings release, we enter FY16 with an improving outlook, a relentless focus on restoring our brand positioning, and a sense of urgency to improve our profits,” Hood explained. “We expect low single-digit, same-store sales improvement beginning in the second quarter through the remainder of FY16, with full-year gains of 1.5 percent to 2.5 percent as we balance reduced discounting with benefits of further menu development and measures to increase operational efficiencies.”

And like the rest of the foodservice industry, the company continues to monitor the impact of avian influenza on the price of eggs.

“While commodity inflation ex-eggs is expected to be moderate at less than 1.5 percent, we are currently projecting overall FY16 commodity inflation of approximately 5 percent to incorporate the impact of higher forecasted liquid and shell egg prices due to the recent avian flu outbreak,” Hood said.

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