August 19, 2011

Cost cuts boost Bob Evan's revenue 

Bob Evans Farms Inc. has exceeded Wall's Street's expectations with a profit jump of 42% in its effort to cut costs to offset commodity price increases and lower revenue at its restaurants.

Revenue in the foods business rose as the company reduced promotional discounts to grocery stores.

Net income in the first quarter climbed to US$27.5 million, or 59 cents a share, from US$21.4 million, or 41 cents a share, a year ago.

Revenue fell 2% to US$405.4 million. Revenue in the restaurant business declined 3% to US$333.2 million and in the foods group rose 4% to 72.2 million.

Analysts on average had expected the company to earn 51 cents a share, on revenue of US$415.6 million, according to Thomson Reuters.

The company said a 4.1% on-year decline in sow costs, which averaged US$57.06 per hundredweight in the first quarter, helped offset higher costs for other commodities in its restaurant unit.

Staff scheduling changes and lower heath insurance costs in the restaurant business and manufacturing productivity gains in the foods unit helped offset the lower restaurant business sales, Bob Evans said. The company discontinued fresh sausage operations at its Galva, Illinois, and Bidwell, Ohio, facilities in the second quarter of fiscal 2011.

Columbus, Ohio-based Bob Evans also approved a five-cent increase in its quarterly dividend to 25 cents per share and doubled its share repurchase authorisation to US$50 million.

The company reiterated its full-year forecast for earnings of US$2.36-2.44 per share, but warned it continues to face a challenging cost environment in the second fiscal quarter.

Bob Evans, which operates a total of 701 Bob Evans and Mimi's Café restaurants, said it continues to remodel its restaurants and plans to revamp 86 stores in 2012.