Bob Evans Farms Inc. (BOBE) announced third quarter 2011 earnings of 51 cents per share, which missed the Zacks Consensus Estimate of 63 cents and were also 12.1% below the year-ago quarter’s 58 cents.

The lower-than-expected third quarter results were due to higher cost and challenges in the restaurant segment.

The company posted a 0.3% year-over-year drop in net sales to $428.6 million, as combined same store-sales fell 1.3%, resulting from a 0.5% same store-sales decrease at Bob Evans restaurants and a 3.2% slip at Mimi’s Cafe. However, the company’s net sales were slightly higher than the Zacks Consensus Estimate of $428.0 million.

By segments, restaurant net sales declined 1.6% to $337.7 million due to sluggish comparable sales and food products net sales jumped 4.7% to $90.9 million, driven by price increase and less discount provided to retailers.

Cost of sales escalated 30 basis points (bps) from the year-ago quarter to 31.5%, selling and general administrative expense was up 120 bps to 8.7% and other operating expenses spiked 30 bps to 16.1%. However, operating wages fell 100 bps to 33.0%. Interest expense plunged $0.4 million year over year to $2.1 million due to lower average borrowings.

Consolidated operating income of Bob Evans Farms contracted 10.4% year over year to $25.4 million.

Financial Position

At the end of the third quarter, total debt was $149.3 million and stockholders’ equity was $653.7 million. During the quarter, the company repurchased 60,200 shares for $1.8 million. The board has also authorized an additional share repurchase of $25 million in 2011.

Outlook

Bob Evans Farms reaffirmed its fiscal 2011 adjusted operating income outlook of $108 million to $112 million, excluding one-time charges. For fiscal 2011, it continues to expect revenue of $1.7 billion.

The company plans to open two new Bob Evans restaurants in 2011 and projects sales in the range of $975 million to $985 million, with full-year same-store sales remaining flat to down 2%. The company does not plan to open any new Mimi’s Cafe restaurants in 2011. Sales are estimated to remain within the range of $380 million to $390 million, with full-year same-store sales declining 2% to 5%.

The company plans to remodel 30 to 35 Bob Evans restaurants and 3 Mimi’s Cafe restaurants in fiscal 2011 and expects capital expenditure in a range of $45 million to $50 million.

Our Take

We expect estimates to be up in the coming days as the company reaffirmed its guidance, though third quarter results were below expectations due to lower sales.

One of Benihana’s primary competitors, Brinker International Inc. (EAT) reported second quarter 2011 adjusted EPS of 38 cents, surpassing the Zacks Consensus Estimate of 32 cents. The upside in earnings was driven by continued margin expansion at Chili’s and top-line growth at Maggiano’s.

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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