Famous Dave's of America Inc. (DAVE) announced the closure of three of its restaurants in Richmond, VA. The closures of the restaurants in the Richmond area are part of Famous Dave’s’ strategic financial re-evaluation, intended to boost its long-term performance.
If the Richmond-based units had been closed at the beginning of the year, it would have added around 4 cents per share to Famous Dave's earnings per share for 2014. Further, according to the company, 2014 comps would have increased around 0.5%.
Further, the company anticipates incurring impairment charges at four additional company-owned restaurants. As a result of the closures and impairment charges, the company anticipates that it will incur approximately $4.5 million as expenses in fourth-quarter fiscal 2014. These expenses will be associated with the write-off of the book value of the related assets, net of expected income from the sale of these assets.
Famous Dave's’ management continues to evaluate the performance of its company-owned portfolio as it aims to turn itself around and return to positive comps. Of the company's system-wide restaurant, roughly 10% to 15% will be company owned while the rest will be franchised.
Famous Dave's’ comps have been declining over the past few quarters, mainly due to its strategic decision to discontinue e-mail discounting strategy. We believe slowing down of sales remain a serious concern for the restaurateur, especially amid intense competition in the restaurant sector. This is especially alarming as the company expects to report poor comps growth till at least the first quarter of 2015. Although the company is taking steps to lower costs and increase operational efficiency, rising commodity costs are likely to hurt margins.
However, comps would improve in the upcoming quarters as the spring and summer months have historically been better for Famous Dave’s of America’s business. Additionally, the launch of a new website enabling digital ordering would help the company boost sales.
Famous Dave's currently carries a Zacks Rank #4 (Sell). Better-ranked stocks in the same sector include Darden Restaurants, Inc. (DRI), Chipotle Mexican Grill, Inc. (CMG) and Domino's Pizza, Inc. (DPZ). All these stocks have a Zacks Rank #2 (Buy).
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