Bob Evans Farms, long the home of pancake and sausage breakfasts, sees its salvation in dinner. The New Albany-based restaurant and prepared-foods company hasn’t seen a gain in same-store sales in five quarters and reported on Tuesday that the key metric declined 2 percent in its most recent quarter.
Bob Evans Farms, long the home of pancake and sausage breakfasts, sees its salvation in dinner.
The New Albany-based restaurant and prepared-foods company hasn’t seen a gain in same-store sales in five quarters and reported on Tuesday that the key metric declined 2 percent in its most recent quarter.
Bob Evans officials, though, are counting on a return to “high-single-digit” increases in same-store sales later in this fiscal year, and they pointed to a new dish as leading the charge: broasted chicken.
Analysts appear skeptical of the company’s outlook.
“I am still having a tough time picturing the high-single-digit same-store sales growth in the second half,” Brian Bittner, an analyst with Oppenheimer, said during an earnings call yesterday. “How do we get to the high single digits?”
Bob Evans CEO Steven Davis believes test results in Cincinnati show great promise for the marinated, pressure-fried chicken. Broasting is a term coined by Broaster Co., a Wisconsin company that sells the frying equipment.
It was so popular, Davis said, that stores in Cincinnati often sold out of the product. In the test market, broasted chicken surpassed the Rise and Shine breakfast as the best-selling menu item and generated as much as 12 percent of sales.
Broasters are being installed chain-wide, with full implementation in November.
One glitch, though, could be that even with broasted chicken, Cincinnati stores posted just a 0.4 percent increase in same-store sales in Bob Evans’ first quarter. That beat the chain’s other restaurants but was hardly spectacular.
Davis attributed the low growth to a lack of advertising around discounted pancake dishes. The discount “did not drive foot traffic; it simply reduced sales,” he said.
The idea that broasted chicken – and a focus on driving lunch and dinner sales – will turn around Bob Evans’ sales isn’t feasible, said John Gordon, principal of Pacific Management Consulting Group.
“To get a change in overall sales trend, they would have to really increase dinnertime traffic and not lose anyone at breakfast or lunch,” Gordon said. “That’s tough to do.”
He added that building the brand around broasted chicken, not pancakes and sausage dishes, won’t happen overnight. Gordon thinks Davis is grasping for life preservers as Bob Evans’ performance slump has deepened.
Bob Evans has battled activist investor Thomas Sandell over the same period. Sandell gained four seats on Bob Evans’ 12-seat board of directors at the company’s annual meeting last week. At the time, analysts wondered whether Davis’ tenure would be short-lived.
The decline in same-store sales started in the summer of 2013. The most recent results showed that sales dropped in May, June and July, and the drop accelerated each month.
Bob Evans, which operates 562 stores in 19 states, also is counting on a milder winter, much better holiday sales in its prepared-foods division and an easing of record-high sow costs. A lot has to go right, Gordon said.
Jumps in same-store sales of close to 10 percent are hard for restaurants to achieve and fleeting, Gordon said.
Same-store sales growth at Wendy’s hit 3 percent last year after it introduced the mega-hit Pretzel Bacon Cheeseburger.
“You can count them on one hand,” Gordon said. “They are very rare. The bump doesn’t last long, either.”