NEW ALBANY, Ohio — As a major shareholder continues to call for Bob Evans Farms management to spin off the company’s food business, the company reported improved earnings during the first quarter of fiscal 2017.
On Aug. 26, Sandell Asset Management, an investor in Bob Evans Farms, renewed its call, initially made in 2013, for the company to be split up. The investor said it did not believe the company’s stock price reflected the value associated with Bob Evans’ packaged foods business, BEF Foods Inc., the manufacturing division that produces and distributes side dishes and sausage products for the company’s restaurants as well as for retail customers.
On Aug. 31, during a conference call with financial analysts to discuss first-quarter results, Saed Mohensi, president and CEO, iterated that all options remain on the table.
|Saed Mohensi, president and CEO of Bob Evans Farms|
“ … I think over the last seven months I’ve been very, very clear that all options for Bob Evans are under consideration by our board of directors,” he said. “And I believe that ultimately the board will make a decision that is in the best interest of our shareholders and create value for our shareholders.”
For the quarter ended July 29, Bob Evans Farms recorded net income of $9,162,000, equal to 46 cents per share on the common stock, and an increase compared with the same period of the previous year when the company earned $4,280,000, or 19 cents per share.
Sales for the quarter fell to $306,317,000 from $321,713,000 the previous year.
“BEF Foods began fiscal 2017 with continued strong volume growth during the first quarter,” Mohensi said. “Additionally, BEF Foods achieved market share gains in both its key side-dish and sausage product categories. We have completed the expansion of our Lima, Ohio, refrigerated side-dish plant and are now gearing up to meet peak holiday production, which begins during the back half of the second quarter. The Lima plant expansion provides the added production capacity that is critical to our ongoing efforts to gain additional points of distribution, particularly in West coast growth markets.
“While Bob Evans Restaurant sales remained challenged during the first quarter, we are encouraged by the moderating sales trend that began in July and continued into the second quarter, with quarter-to-date same-store sales of -2 percent through Aug. 29. We believe our efforts to enhance the guest experience through improved hospitality and food quality are gaining the attention of guests and improving our sales trend. Positive guest comments increased 24 percent during the first quarter, while negative comments declined substantially; a trend we believe will contribute to future sales improvements. Our focus during the second quarter will be the system-wide launch of our exciting new value-oriented, guest-friendly menu along with relentless attention to improving the guest experience.”
During the quarter, BEF Foods generated an operating income of $15,387,000 on sales of $85,941,000. Operating income for Bob Evans Restaurants totaled $11,602,000 during the quarter on sales of $220,376,000.
The first-quarter results prompted the company to raise its earnings per share guidance range to $2 to $2.17 from $1.95 to $2.12.
“At Bob Evans Restaurants, we continue to expect full-year negative low-single digit to flat same-store sales and a neutral to slightly positive commodity cost environment,” said Mark Hood, chief administrative officer and CFO. “Additionally, we will continue to invest in improving the guest experience to drive sales. As for BEF Foods, we have lowered our sow cost forecast to reflect current expectations for the remainder of the fiscal year. At the corporate level, we have lowered our interest expense guidance to reflect a lower-than-anticipated interest rate environment this year and we will maintain our focus on lowering corporate and other costs required to support our businesses.”