Bob Evans Farms, Inc. announced its financial results for the fiscal 2015 first quarter ended Friday, July 25, 2014. On a GAAP basis, the company reported a net loss of $1 million, compared with net income of $8.4 million, in the comparable period last year.
On an adjusted basis, net income was $2.3 million, compared with net income of $15.2 million, in the comparable period last year.
During the quarter, net sales totaled $326.3 million, a decline of $3.1 million, or 0.9 percent, compared to prior year first-quarter results.
Same-store dinner sales in the Cincinnati Broasted Chicken test market increased 3.6 percent as the platform reversed dinner sales trends during the quarter. Broasted Chicken platform now rolling out in the Dayton and Columbus, Ohio, markets.
Bob Evans Express expects to open three new locations during the next quarter, and be up to 10 new locations are expected by mid-2015.
BEF Foods' operating income negatively impacted $6.7 million due primarily to a 39 percent increase in the quarter's sow costs relative to the prior year period. New refrigerated side dish product authorizations at the company's largest customer, along with new customer accounts, are expected to more than offset lost sales volume experienced in 2014 resulting from a supplier dispute
Bob Evans Restaurants' net sales were $240.2 million, a decrease of $4.4 million,or 1.8 percent, compared to net sales of $244.6 million in the corresponding period last year. Same-store sales declined 2 percent, below the national Knapp-Track family dining index decline of 1.6 percent during the same period.
However, in Bob Evans Restaurants' top three Knapp-Track regions, which comprise 83 percent of the chain as measured by restaurant count, same-store sales results outperformed the regional Knapp-Track family dining index by 60 to 120 basis points.
"Several years ago, our Board and management team determined that comprehensive strategic investments in our businesses were necessary to meet the changing expectations of consumers," says chairman and CEO Steve Davis. "These investments required new processes, new skill sets, and difficult decisions along the way."
"We are seeing early positive results as we begin leveraging our strategic investments," he adds. "At Bob Evans Restaurants, the Farm Fresh Refresh remodeling program has set the stage for new off-premise layers such as carryout and catering, which grew 2.6 percent and 13.7 percent, respectively during the quarter."
The breakfast daypart returned to positive same-store sales during the quarter, reflecting the success of menu items such as Sweet and Stacked Hotcakes and more effective marketing. Lunch and dinner dayparts, while improved relative to the prior quarter, remain challenged as economic headwinds facing the company's core Midwest consumers, and advertising and promotional activity in its peer set remain at a high level.
"The remodeled restaurants also support menu innovations, like our new Broasted Chicken platform, which provide both on- and off-premise sales growth opportunities. Sustained success in the restaurant industry requires a strong asset and strong product offering. One without the other is ultimately a losing proposition.
"With the Farm Fresh Refresh Program complete, we now have the right asset in place. Along with this new asset, we have new menu offerings such as Sweet & Stacked Hotcakes at breakfast and Broasted Chicken at lunch and dinner that we expect to result in an improved sales trajectory. There is a symbiotic relationship between our remodeled restaurants, menu innovation, and new off-premise sales layers. In concert, we expect these items to reverse sales declines across the chain, and we are off to a great start in Cincinnati, the first market to benefit from the combination of the Farm Fresh Refresh program, enhanced off-premise capabilities, and the Broasted Chicken platform.
"Cincinnati, our first market to receive the Broasted Chicken platform, reported an overall same-store sales increase of 0.4 percent during the first quarter, an increase of over 500 basis points relative to its same-store sales decline of 4.9 percent in the prior quarter as this new platform reverses dinner sales trends. This performance outpaced improvement in the balance of the chain by 331 basis points. The impact on off-premise sales in Cincinnati was even more impressive as off-premise same-store sales grew 13 percent compared to 1.1 percent for the balance of the chain. Broasted Chicken accounted for 56 percent of Cincinnati's off-premise same-store sales increase during the quarter.
"The Broasted Chicken rollout continues as 11 of the 28 restaurants in the Dayton, Ohio, market, and 8 of the 49 restaurants in the Columbus, Ohio, market are now offering this exciting product. We expect to complete the Dayton rollout by mid-September, Columbus by early October, and all 192 restaurants in Ohio by early November."
"At BEF Foods, our plant network has been simplified as we have reduced the number of production facilities we operate from nine in 2007 to four today. Furthermore, the four remaining plants have each benefitted from substantial capital investments to expand their capacity and efficiency. With significant recent product authorizations at our largest existing customer, as well as at new customer accounts, the plant capacity and anticipated efficiency gains are vitally important as we expect our refrigerated side dishes to have a strong holiday sales season this year. Although sow costs remain challenging, BEF Foods is now in a position to continue its diversification beyond sausage products as it grows refrigerated side dish sales and other products not impacted by sow costs, while also maximizing sausage product margins through a more efficient two-plant fresh sausage network, and more effective pricing and promotion strategies."