Bob Evans foods segment offsets slow restaurant sales in Q1
Bob Evans Farms Inc. reported earnings per share of 59 cents and consolidated operating income of $27.5 million, or 6.8 percent of net sales, in the first quarter of fiscal 2012. This compares to earnings per share of 41 cents and consolidated operating income of $21.4 million, or 5.2 percent of net sales, in the first quarter of fiscal 2011. The improvement came primarily from a strong performance in the foods segment and cost-control initiatives.
Chairman and CEO Steve Davis said the company met its first-quarter earnings per share goals due largely to improvement in the foods segment that offset lower-than-expected sales results at both restaurant brands.
"Our results this quarter demonstrate the effectiveness and potential of our integrated diversified foods company strategy," Davis said. "We saw significant sales and profit improvement in our foods business, which more than offset softness in our restaurant sales and allowed us to post 44 percent growth in earnings per share. We believe we can judiciously grow both segments of our company, and we plan to use our strong balance sheet to support our growth strategy and achieve our long-term growth target.
"Preliminary results from our Bob Evans remodel program are very encouraging," Davis said. "In addition to the recent expansion to the Toledo and Detroit markets, we are now planning to bring the program to the Cincinnati market."
Consolidated net sales were $405.4 million in the first quarter of fiscal 2012, a 1.7 percent decrease compared to $412.6 million in the first quarter of fiscal 2011. The sales decrease was the result of lower same-store sales in the restaurant segment, partly offset by sales increases in the foods segment.
The restaurant segment reported fiscal 2012 first-quarter operating income of $21.9 million, or 6.6 percent of net sales, compared to operating income of $21.4 million, or 6.2 percent of net sales, in the first quarter of fiscal 2011.
The restaurant segment reported net sales of $333.2 million, a 2.9 percent decrease compared to $343.1 million in the first quarter of fiscal 2011. Same-store sales at Bob Evans Restaurants decreased 1.8 percent in the first quarter of fiscal 2012, with average menu prices up 1.3 percent. At Mimi's Cafe, same-store sales decreased 4.8 percent, with average menu prices up 4.2 percent.
At Bob Evans Restaurants, May and June same-store sales results of negative 1.5 percent and negative 2.0 percent, respectively, compared to the Knapp Track family dining index of negative 1.5 percent and negative 1.3 percent. At Mimi's Cafe, same-store sales of negative 1.8 percent, negative 6.1 percent and negative 6.1 percent trailed the respective Knapp Track casual dining index of 1.8 percent, 2.1 percent and 0.9 percent.
Reported operating income for the foods segment was $5.6 million, or 7.8 percent of net sales, in the first quarter of fiscal 2012. Reported operating income for the foods segment was $29,000, approximately breakeven, in the first quarter of fiscal 2011.
The operating income improvement resulted primarily from pricing and promotional spending adjustments, as well as year-over-year reductions in operating wages and other operating expenses resulting from the company's lean manufacturing productivity initiatives. The lean manufacturing productivity initiatives resulted in the discontinuation of the company's fresh sausage operations at its Galva, Ill., and Bidwell, Ohio facilities, in the second quarter of fiscal 2011.
The foods segment's first-quarter fiscal 2012 net sales were $72.2 million, up 3.9 percent compared to $69.5 million in the first quarter of fiscal 2011. Comparable pounds sold decreased 4.3 percent compared to the first quarter of fiscal 2011, but improved sequentially during June and July. More than offsetting the impact of the decrease in comparable pounds sold was a $1.6 million, or 18.7 percent, year-over-year decrease in promotional discounts provided to retailers, along with increased authorizations of new products in key national accounts.
The company reaffirmed its fiscal 2012 earnings per share outlook of approximately $2.36 to $2.44 and its average annual earnings growth rate of approximately 7 to 10 percent over the next five years. The company expects to encounter a challenging cost environment, including higher maintenance and utility costs, in the second fiscal quarter. It also expects to incur average sow costs in the mid-to-high $70 range for several weeks during the second quarter.
Source: Bob Evans Farms Inc.