Restaurant operator and meat product company Bob Evans Farms Inc. (BOBE) Tuesday said its first quarter profit increased by 16.7% from last year, driven by lower cost of sales and well-controlled labor costs, restaurant margin improvements and favorable tax rate. Providing an update to its previous forecast, the company reaffirmed its outlook for fiscal 2010.
The Columbus, Ohio-based company reported net income of $16.1 million for the first quarter, a 16.7% increase from $13.8 million in the prior year quarter. Earnings per share rose to $0.52 from $0.45 in the previous year quarter. On average, 7 analysts polled by Thomson Reuters expected the company to earn $0.52 per share for the first quarter. Analysts' estimates typically exclude one-time items.
Operating income improved 6.9% to $25.1 million from $23.5 million in the year-ago quarter, due to significantly lower food and operating expenses in the restaurant segment, as well as lower SG&A in the food products segment.
Second quarter net sales decreased 2.5% to $429.5 million from $440.3 million in the first quarter of fiscal 2009, due to lower same-store sales at Bob Evans Restaurants and Mimi's Cafe, as well as sales declines in the food products segment. Four analysts had a consensus revenue estimate of $435.80 million for the first quarter.
Steve Davis, chairman and chief executive officer of Bob Evans, said effective cost management enabled the company to meet its first-quarter operating income goals, despite significant top-line challenges.
Same-store sales at Bob Evans Restaurants were down 3.0% in the first quarter, with average menu prices up 2.4%. At Mimi's Cafe, same-store sales decreased 6.4%, with average menu prices up 2.3%.
"Our same-store sales were below our expectations in a quarter where both restaurant concepts faced their toughest comps of the year," Davis said.
Net sales from the food products segment fell 3.4% to $69.7 million from $72.1 million last year, while the restaurant segment's net sales decreased 2.3% to $359.8 million from $368.1 million in the first quarter of fiscal 2009.
Cost of sales for the first quarter was $125.5 million or 29.2% of net sales, compared to $130.4 million or 29.6% of net sales in the prior year quarter, reflecting lower commodities costs, positive mix shifts and effective supply chain management in the restaurant segment.
Operating wages for the quarter were $150.1 million or 34.9% of net sales, compared to $152.7 million or 34.7% of net sales in the previous year quarter.
The company's effective tax rate for the first quarter was 28.1%, compared to an effective tax rate of 33.1% a year ago, due to more favorable settlements with state income tax agencies than anticipated.
For fiscal 2010, Bob Evans continues to expect operating income of about $110 million to $115 million, and net sales to be flat year-over-year. The Street currently expects the company report revenues of $1.78 billion for the year.
The outlook for fiscal 2010 includes the impact of a 53rd week, which the company estimates will contribute an incremental $31 million in net sales and $5 million in operating income.
Looking ahead, Bob Evans continues to expect substantively lower future capital expenditures for restaurant development in fiscal 2010 at both Bob Evans Restaurants and Mimi's Cafe. Specifically, the company expects to build no new Bob Evans Restaurants and two Mimi's Cafes in fiscal 2010.
The company also reiterated that it has suspended its share repurchase program until at least the third quarter of fiscal 2010.
Bob Evans closed Tuesday's regular trading session at $28.22, down 5 cents. In after-hours, the share further lost $2.47 or 8.75%.
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