Bob Evans Farms Inc. (BOBE) announced first quarter 2011 earnings of 41 cents per share, which missed the Zacks Consensus Estimate of 44 cents and were also 21% below last year’s 52 cents. The lower-than-expected results were due to cost inflation in the food product segment and challenges at the top line in the restaurant segment.

The company posted a 3.9% year-over-year drop in net sales to $412.6 million, as combined same store-sales fell 4.6%, resulting from a 3.5% same store-sales decrease at Bob Evans restaurants and a 7.6% slip at Mimi’s Cafe. The company’s net sales also fell short of the Zacks Consensus Estimate of $422.0 million.

Segment wise, restaurants net sales slipped 4.6% to $343.1 million and food products net sales fell 0.3% to $69.5 million.

Cost of sales escalated 40 basis points (bps) from the year-ago quarter to 29.6%, other operating expenses spiked up 40 bps to 16.6% and selling and general administrative expense was up 20 bps to 8.7%. However, operating wages fell 40 bps to 34.9%. Interest expense plunged $0.2 million year over year to $2.5 million due to lower average borrowings.

Consolidated operating income of Bob Evans Farms declined 14.7% year over year to $21.4 million and operating margin contracted 70 basis points (bps) to 5.2%.

Financial Position

At the end of the first quarter, total debt was $181.3 million and stockholders’ equity was $643.1 million. During the quarter, the company repurchased 170,000 shares for a total of $4.4 million and the Board has also authorized an additional share repurchase of $25 million in 2011.

Outlook

Bob Evans Farms reaffirmed its fiscal 2011 outlook of operating income in a range of $105 million to $110 million. For fiscal 2011, it expects revenues of $1.7 billion. The company plans to open three new Bob Evans restaurants in 2011 and projects sales in the range of $965 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 restaurant in 2011 and sales are estimated to remain within the range of $380 million to $395 million, with full-year same-store sales declining 2% to 5%.

The company plans to remodel 30 to 35 Bob Evans restaurants and 3 to 5 Mimi’s Cafe restaurants in fiscal 2011 and expects capital expenditure in a range of $60 million to $65 million.

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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