Bob Evans restaurant
Bob Evans has initiated efforts to restore sales growth at its more than 525 family-dining restaurants.
ALBANY, OHIO — Bob Evans Farms, Inc. has initiated efforts to restore sales growth at its more than 525 family-dining restaurants, while maintaining strong momentum in its packaged foods business. In the fiscal year ended April 29, Bob Evans net income was $24,222,000, equal to $1.14 per share on the common stock, up 46% from $16,553,000, or 70c per share, in the prior year. Net sales for the year were $1,338,827,000, down slightly from $1,349,190,000, as the company’s restaurant performance offset increased sales of Bob Evans branded side dishes in grocery stores.

Net income for the fourth quarter was $580,000, or 3c per share, down 90% from $5,610,000, or 24c, in the prior-year period. Net sales for the quarter were $345,587,000, up 4% from $332,393,000.

Bob Evans continued making progress on cost-reduction initiatives across the organization during the fourth quarter, said Mark Hood, chief financial officer and chief administrative officer, during a June 15 earnings call with financial analysts.

Mark Hood, Bob Evans
Mark Hood, c.f.o. and chief administrative officer of Bob Evans

“During the quarter, we also completed our previously announced real estate monetization initiatives, with completion of a $197 million sale-leaseback transaction of 143 restaurant properties,” Mr. Hood said. “Along with the $52 million sale-leaseback of two BEF Foods production facilities earlier in the year, these transactions have helped support nearly $500 million of capital returned to shareholders through share repurchases and dividends during the last three years.”

Closed Bob Evans restaurant
Bob Evans closed 21 underperforming restaurants during the quarter.

Bob Evans Restaurants posted an operating loss of $2,794,000 in the fourth quarter, which compared with operating income of $6,531,000 in the prior-year period. For the year, the segment had operating income of $34,793,000, down 38% from $56,239,000 the year before. Net sales in the quarter were $243,193,000, up 2.1% from $238,187,000, while net sales for the year were $951,212,000, down 1.9% from $969,877,000. Excluding the 53rd week of fiscal 2016, the segment’s sales in the quarter declined 4.9%.

“Same-store sales declined 3%, with the balance of the net sales decline due to net restaurant closures earlier in the year,” Mr. Hood said. “Same-store breakfast day part sales remained positive during the quarter, reflecting the ongoing positive impact of our best-in-class breakfast initiatives.”

The company closed 21 underperforming restaurants during the quarter, with plans to shutter six more in the year ahead. Additionally, the company increased its investment in labor to support efforts to improve guest hospitality, along with higher hourly wage rates as a result of minimum-wage increases.

Bob Evans restaurant menus
Bob Evans plans to unveil a redesigned menu with a focus on simplicity and value and food quality improvements.

In the coming months, the company plans to unveil a redesigned menu with a focus on simplicity and value and food quality improvements across some of its core items.

Saed Mohseni, Bob Evans
Saed Mohseni, president and c.e.o. of Bob Evans

“We have also reduced the number of seasonal menu change to five, from seven annually,” said Saed Mohseni, president and chief executive officer. “This reduction would not only reduce cost, enable our culinary, marketing, and operational teams to better develop, promote, and execute each seasonal offering.”

In the BEF Foods segment, operating income was $20,569,000 for the fourth quarter, up 34% from $15,317,000, and $71,011,000 for the year, up 78% from $39,993,000. Net sales were $102,394,000 for the quarter, up 8.7% from $94,206,000, and $387,615,000 for the year, up 2.2% from $379,313,000 for the year.

“As planned, our sales mix continues to shift toward higher-margin retail products, driven by side dishes; however, we continue to use food service sales volume selectively to leverage plant operating efficiencies,” Mr. Hood said. “A 13.7% increase in side-dish pounds sold, and a 0.6% increase in sausage pounds sold supported market-share growth in both product categories.

Bob Evans retail sides
Priorities for the BEF Foods segment in the year ahead include growing side-dish market share nationwide.

“BEF’s leading national market share in the refrigerated dinner sides increased to 51.5%, from 48.5% last year. National breakfast sausage share was flat, at 9.1%. In our core sausage markets, where we spend the bulk of our trade dollars to maintain and selectively grow our No. 1 sausage share, our share increased 20 basis points to 27.6%.”

Priorities for the BEF Foods segment in the year ahead include growing side-dish market share nationwide, expanding the sausage business in core markets and adding significant volume to leverage the recent investment in the company’s Lima, Ohio, side-dish facility.

“We see multi-year brand growth opportunity at Bob Evans Food,” Mr. Mohseni said. “For example, we recently signed a five-year agreement with global brand licensing agency that specializes in collaborating with companies to expand brand into new product categories. We are just beginning work in this area, and it's too early to quantify potential (profit and loss) impact or disclose product categories under consideration, but we believe Bob Evans’ brand equity lends itself to presence in other areas.”