NEW ALBANY, OHIO – The future of Bob Evans Farms, Inc., may be summed up simply — sausage and sides. Following the drama that led to the sale of its restaurant business to Golden Gate Capital earlier this year, the company has settled into its position as a pure-play packaged foods business. If its first-quarter fiscal 2018 results are any indication, the company’s products appear to be gaining traction in the marketplace.
|J. Michael Townsley, president and c.e.o. of Bob Evans Farms|
“As is evident in the results, we had a strong first-quarter sales performance on both refrigerated sides and sausage,” said J. Michael Townsley, president and chief executive officer, during an Aug. 30 conference call with financial analysts. “Per I.R.I. (Information Resources, Inc.) data, for (the) 12 weeks ended July 9, we increased pounds sold by 14%, compared to the category growth of 8%, and expanded category household penetration to 22.1% during the first quarter and are on pace to expand Bob Evans household penetration by 150 to 200 basis points this year.”
Net income from continuing operations for the first quarter of fiscal 2018, ended July 28, was $7,049,000, equal to 35c per share on the common stock, up from $4,576,000, or 23c per share, in the same period a year ago.
Sales for the quarter were $109,265,000, up from $85,941,000 in the first quarter of fiscal 2017.
While retail played a key role in the company’s quarterly performance, Mr. Townsley said there are also opportunities in food service.
“We continue to get good inbound interest from restaurants looking to reduce labor in the back of the house with our refrigerated sides,” he said. “We have progressed from a state of idea formulation with chain restaurants to the point of in-store testing, and early tests have gone very well. Pineland is now in the late innings of finalizing a new relationship with a major food service distributor. This business combination puts us in a strong position to expand food service sales.”
Despite the positive news regarding food service, Mr. Townsley emphasized that Bob Evans Farms at its core is a retail supplier.
“ … Driving the brand in our retail is our main focus,” he said. “As long as we have available capacity in our plants and we can drive our overall costs down by supporting both, that’s the way we’re going to go. But we’re always going to focus priority on the brand and driving our retail brand.”
One challenge identified by management is the price of sows, which are the raw materials for the company’s sausage-making operation.
“Given the higher prices during the first quarter and, thus far, during the second quarter, we have revised our forecast for fiscal 2018 sow prices that is embedded in our guidance to $48 to $52 per cwt from $43 to $46 per cwt previously,” said Mark E. Hood, chief financial officer. “Note that we are forecasting higher sow prices impacting sausage margins more during the second quarter than the balance of the year. We anticipate that Q2 sow costs will be $18 to $20 per cwt higher than last year. For the second half, we continue to expect sow costs to be higher than last year but within our previously planned levels.”For fiscal 2018, Bob Evans Farms forecasts it will generate $474 million to $486 million in sales and earnings per share in the range of $2.10 to $2.30.