Bob Evans Farms Inc. (BOBE) announced first quarter 2012 earnings of 59 cents per share, which outpaced the Zacks Consensus Estimate of 50 cents per share and the year-ago quarter earnings of 41 cents per share.
The better-than-expected results were driven by solid performance from the food products segment and cost-control initiatives, offsetting higher cost of sales and sluggish revenue from the restaurant segment.
The company posted a 1.7% year-over-year drop in net sales to $405.4 million, as combined same store-sales in the restaurant segment fell 2.6%, resulting from a 1.8% dip in same store-sales at Bob Evans restaurants and a 4.8% plunge at Mimi's Cafe.
Segment wise, restaurant net sales declined 2.9% to $333.2 million due to sluggish comparable sales. However, food products net sales jumped 3.9% to $72.2 million, driven by price increases and lower discount sprovided to retailers.
Cost of sales escalated 30 basis points (bps) from the year-ago quarter to 29.9% while selling and general administrative expense spiked 10 bps to 8.8%. However, other operating expenses remained flat year over year at 16.6% and operating wages fell 200 bps to 32.9%. Interest expense also plunged $0.4 million year over year to $2.1 million due to lower average borrowings.
Consequently, consolidated operating income of Bob Evans Farms expanded 28.5% year over year to $27.5 million. Operating margin expanded 160 basis points to 6.8% in the reported quarter.
Store Update
During the first quarter, the company did not open any new Bob Evans restaurants. Thus, at the end of the quarter, the company operated 708 restaurants, out of which 563 were Bob Evans restaurants and 145 Mimi's Cafe restaurants.
In 2012, the company plans to open six new Bob Evans restaurants and remodel 86 restaurants. Bob Evans, however, has no plans of opening any Mimi's Cafe restaurants in 2012.
Financial Position
At the end of the first quarter, cash and cash equivalents were $59.9 million, long-term debt was $97.1 million and stockholders' equity was $680.7 million. During the quarter, the company repurchased 46,900 shares for $1.7 million.
To boost shareholder value, the company hiked its quarterly divided by 25% to 25 cents and has also doubled its share repurchase authorization to $50 million from $25 million.
Outlook
For fiscal 2012, Bob Evans Farms reaffirmed its earnings per share range of $2.36 to $2.44 and revenues of $1.7 billion. However, the company foresees lower consumer spending and rising commodity costs as headwinds in 2012.
The company expects same-store sales at Bob Evans restaurants in the range of flat to down 0.5% to 1.5% for fiscal 2012. Same-store sales at Mimi's Cafe restaurants are estimated in the range of flat to up 1%. Net sales of the Food Product segment are projected in the range of $330 million to $350 million.
Our Take
We expect estimates to go up in the coming days as the company reported better -than-expected results, reaffirmed its guidance and enhanced shareholder value. Additionally, despite an upside in costs, operating margin at food product segment continues to improve on the back of lean manufacturing productivity initiatives, better management of sales promotions and increase in the number of new-item authorizations by retailers.
Benihana currently retains a Zacks #2 Rank (short-term Buy rating). We are also maintaining our long-term Neutral recommendation on the stock.
One of Benihana’s primary competitors, Brinker International Inc. (EAT) reported fourth quarter 2011 adjusted earnings per share of 48 cents, surpassing the Zacks Consensus Estimate by a penny.
Based in Columbus, Ohio, Bob Evans Farms is a full-service restaurant company that owns and operates under the brands – Bob Evans and Mimi’s Cafes.
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