Total of 21 restaurants closed down, 7 more to shut shop in FY17
Bob Evans Farms Inc. (NASDAQ: BOBE) announced its financial results for Q4 FY16 and full year FY16 on June 14th, 2016. The Company owns and operates full-service restaurants under the Bob Evans Restaurants brand name. As of April 29th, 2016, Bob Evans Restaurants owned and operated 527 family restaurants in 18 U.S. states. Through its BEF Foods segment, the Company also produces and distributes refrigerated and frozen convenience food items under the Bob Evans and Owens brand names. Read more about the financial performance of Bob Evans below.
Bob Evans Farms’ Q4 FY16 highlights
Bob Evans Restaurants’ net sales, excluding the 53rd week of FY16, declined by 4.9% to $226.5 million compared to net sales of $238.2 million in the year-ago period, owing to lower customer traffic at stores and closure of many of its restaurants. Despite the Company’s efforts at redesigning the restaurant menu, improving core menu items, and introducing a bacon promotion theme in May 2016, same-store sales fell 3% during the quarter. The Company closed 21 restaurants and no new restaurants were opened during Q4 FY16. To spur restaurant sales, Bob Evans will introduce a new menu in August 2016, while promoting its current specials.
Bob Evans’ BEF Foods division continued to lead the way financially in Q4 for the New Albany-based company. BEF Foods’ net sales, excluding the 53rd week of FY16, increased by 1.1%, or $1.1 million, to $95.3 million, compared to $94.2 million in the year-ago quarter. Pounds sold increased 7.1%, while average net selling price per pound declined 5.5% compared to the same quarter last year. From a net sales perspective, side-dish pounds sold grew 13.7%, sausage pounds sold inched up 0.6%, and food service pounds sold rose 3.7% during Q4 FY16. These increases were partially offset by a $4 million increase in trade spending and an 11.2% decline in frozen product pounds sold.
On a GAAP basis, the Company’s net income plunged to $0.6 million, or $0.03 per diluted share, for Q4 FY16, compared with net income of $5.6 million, or $0.24 per diluted share, in the year-ago period. On a non-GAAP basis, net income fell to $9.5 million, or $0.48 per diluted share, compared with net income of $13.2 million, or $0.56 per diluted share, in the year-ago period.
Other highlights for Q4 FY16
During Q4 FY16, the Company progressed with the expansion of its Lima, Ohio, refrigerated side-dish manufacturing facility. The new production capacity is expected to be completed in the next few months, enabling the Company to meet peak holiday demand and achieve sales growth in the years ahead.
During Q4 FY16, Bob Evans also completed its $197 million sale-leaseback transaction of 143 restaurant properties. Along with the $52 million sale-leaseback of two BEF Foods production facilities earlier in 2016, these transactions have helped support nearly $500 million of capital returned to shareholders through share repurchases and dividends over the last three years.
Bob Evans Farms’ FY16 highlights
For the full year FY16, Bob Evans Restaurants’ net sales, excluding the 53rd week of FY16, declined by 3.7%, or $35.4 million, to $934.5 million compared to net sales of $969.9 million in FY15. Same-store sales fell 2.5% with the balance of the net sales fall accounted by restaurant closures. During FY16, Bob Evans opened one and closed 41 restaurants.
On the brighter side, Bob Evans Farms’ BEF Foods division reported a 0.3% rise in net sales, or $1.2 million, to $380.5 million, excluding the 53rd week of FY16, compared to $379.3 million last year. Pounds sold increased 5.8%, while average net selling price per pound declined 5.2% compared to last year. From a net sales perspective, side-dish pounds sold grew 15.2% and sausage pounds sold rose 9.9% during the year. These increases were partially offset by a $21.5 million jump in trade costs, a 21.7% decline in foodservice pounds sold, and an 8.4% reduction in frozen product pounds sold.
Consolidated GAAP operating income grew to $36.2 million, compared to $17.7 million last year. Consolidated non-GAAP operating income jumped 24% to $66.2 million, compared to $53.5 million last year. As a result, consolidated GAAP net income jumped 61% to $24.2 million, or $1.13 per diluted share, compared with net income of $16.6 million, or $0.70 per diluted share last year. On a non-GAAP basis, net income rose 24% to $43.4 million, or $2.02 per diluted share, compared with $1.63 per diluted share last year.
Guidance for FY17
For FY17, Bob Evans expects negative low-single digit to flat same-store sales, with investments being channeled for restaurant labor hours and marketing. BEF Foods’ net sales in FY17 are expected to be $400-$420 million, with the refrigerated side-dish product line generating most of the growth. The Company expects to incur capital expenditure of $75-$80 million during FY17, consisting of about $20 million for the restaurant technology platform, $12 million for the expansion of BEF Foods refrigerated side-dish facility, $35 million for maintenance and equipment upgrades in both Bob Evans Restaurants and BEF Foods, and the balance for IT expenditures and infrastructure, and opening of one new Bob Evans Restaurant. On the other hand, the Company expects to close six additional leased restaurants during FY17.
Bob Evans has $78.5 million remaining under its share repurchase authorization; as such, the Company plans to repurchase additional shares during FY17 at current market prices.
Bob Evans’ stock stood at $39.90 at the close on Monday, June 20th, 2016, having reached an intraday high of $40.73 and sliding to a low of $39.74 during the trading session. The stock’s trading volume was at 306,092 for the day. The Company’s market cap was at $825.61 million as of Monday’s close.