Bob Evans looks to the 'side' for growth

by Erica Shaffer
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Bob Evans retail refrigerated side dishes - mashed potatoes and macaroni and cheese
Bob Evans Farms will focus on growing its share of the side-dish market nationwide.
 
NEW ALBANY, Ohio – Bob Evans Farms Inc. had a difficult fourth quarter in which earnings tumbled 90 percent. To reverse the downward trend, the company intends to leverage the strength of the its branded refrigerated side dishes while devoting additional resources to Bob Evans Restaurants.

 

During the fourth quarter ended April 29, the company reported consolidated GAAP net income of $580,000, or 3 cents per diluted share, compared with net income of $5.61 million, or 24 cents per diluted share, in April 2015. Excluding restaurant closures and other items, non-GAAP net income for the quarter was $9.5 million, or 48 cents per diluted share, compared with $13.2 million, or 56 cents per dilutes share a year ago.

Consolidated net sales for the period climbed 4 percent to $345,587,000 compared with $332,393,000 in the year-ago quarter.

A bright spot in the company’s earnings picture was its prepared foods business, Bob Evans Foods, which reported net sales [excluding the 53rd week of FY2016] of $95.3 million, up 1.1 percent compared to $94.2 million reported in the fourth quarter last year.

Saed Mohseni, Bob Evans
Saed Mohseni, CEO, Bob Evans Farms, Inc.

“At Bob Evans Food, our refrigerated side-dish facility expansion is nearly completed, and we expect to bring new capacity on line later this summer,” CEO Saed Mohseni told analysts during an earnings conference call. “The additional production line, a $20 million capital commitment, expands our ability to meet peak holiday demand for greater number of customers.

“Furthermore, as a result of the expansion, Bob Evans Food will have the capacity necessary to expand its SKU count with existing retailers, enter new markets with acquired new customers, deepen its supply relationship with Bob Evans Restaurant and selectively target profitable foodservice and private-label business to optimize non-peak plant utilization.”

Mohseni explained there is “multi-year brand growth opportunity” at Bob Evans Foods. The company recently signed a five-year agreement with a global brand licensing agency specializing in helping companies expand brands into new product categories.

Looking ahead to fiscal 2017, Mohseni said the priorities for Bob Evans Foods are “…Grow our side-dish market share nationwide; expand our sausage business in our core markets; add significant volume to leverage recent investment in our side dish facility in Lima, Ohio, as well as pre-cooked products in our Texas plant; implement the final component of our [enterprise resource planning] system … and lay the foundation for continued growth into FY18 and beyond.”

Same-store sales at Bob Evans Restaurants retreated 3 percent, while fourth quarter net sales [excluding the 53rd week of FY2016] dropped 4.9 percent to $226.5 million compared with $238.2 million reported in the fourth quarter a year ago.

During the quarter, the company closed 21 under-performing restaurants, and no new restaurants opened leaving Bob Evans with 527 restaurants at the end of fiscal 2016. The company expects to close an additional six leased restaurants in fiscal 2017 and rebuild a restaurant in Maryland that was destroyed by fire. That restaurant will re-open in fiscal 2018, the company said.

 Bob Evans restaurant menus
Bob Evans plans a menu redesign set to launch by August.
 

Four key initiatives underway at Bob Evans restaurants includes food quality upgrades, enhanced marketing messages, highlighting hospitality as a differentiator of the company’s restaurants and reconfigurations of the core menu and price-value equation. Mohseni said the re-designed menu will be launched later in August, supported by marketing will better reflect the company’s values of simplicity, value and integrity. Messaging will be delivered across traditional and digital platforms.

“In the interim, with our main menu launch, we introduced our summer bacon promotion, with special bacon-themed items at every day part, including a bacon lover’s omelet, a bacon cheeseburger, strawberry bacon salad, and one of my favorites, a three-course bacon-topped chicken dinner,” Mohseni added.

“We have also reduced the number of seasonal menu change to five, from seven annually. This reduction would not only reduce cost, enable our culinary, marketing, and operational teams to better develop, promote, and execute each seasonal offering.”

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