Credit: Wikimedia Commons / Billy Hathorn
Bob Evans restaurant.
The company has been reinventing itself over the last several years with new healthier menu options and revamped stores. However, its prepared foods division has continued to suffer as an increasing amount of consumers move towards healthier, fresh, and organic food options.
In the company's 2016 first-quarter results report, Chief Financial Officer Mark Hood laid out four priorities to drive the company's turnaround success.
1. Improve the brand experience for restaurant guests and grocery customers.
According to Hood, the company has already been partially successful in this approach through the launch of its "best in class breakfast" initiative. That approach features a menu with more fresh products, few processed ingredients, and mugs already placed on tables to deliver more coffee sales to customers. The company has also revamped the physical appeal of its restaurants under its "Farm Fresh" renovation program, which began in 2013.
Credit: Flickr/Stephanie McCratic
Bob Evans restaurant menu.
2. Increase sales and consumer food distribution.
The company revamped its stores in an attempt to increase bakery, carryout, and catering services. That plan has been underway since 2013 and has been attributed to increases in some of the company's recent sales. In 2013, the company reported 2% increases in same-store renovated locations.
The company's biggest play may be its ability to introduce new food lineups. In mid-June Hood said the company's
Specific plans for increasing consumer food distribution have not been fully disclosed at this time.
3. Reduce costs, particularly at the corporate level.
In June, Hood announced the company was cutting 60 jobs to help inch the organization closer to its goal of cutting $35 million in annual expenses over the next three years. Details about the job cuts were not discussed during a conference call with analysts.
4. Allocate capital efficiently.
In April, the company announced the closure of 20 underperforming restaurant locations, which is expected to improve annual operating income by approximately $2.5 million to $3 million.
The company also plans to go to market with some of its 561 restaurants across the US. The restaurant chain, under pressure from activist shareholder Sandell Asset Management, plans to sell some of its physical properties and then lease them back from the new owner.
The company hopes to raise $165 million to $170 million in the move, which will then be used to pay down debt and buy back shares. Hood said the firm will "maintain a prudent adjusted leverage level" moving forward.
"We have completed our review of alternatives concerning a transaction for our owned restaurant properties and determined … that given our current business and market conditions, a sale-leaseback transaction of up to $200 million is the most appropriate path to further enhance shareholder value," Hood said in a release on Tuesday.
"We would anticipate net proceeds of $165 to $170 million from such a transaction," he added.
Credit: Flickr/Haydn Blackey
Bob Evans restaurant in Oregon, Ohio.
The Wall Street Journal has reported that the restaurant chain could split its business in two. Currently Bob Evans Farms operates its retail locations and sells food directly to grocers through its prepared-food line. The report says Sandell fully supports the separation because of the company's "woeful track record for underperformance." Officials at Bob Evans said in March that an in-house analysis found that splitting the brands would not provide a benefit to the company.
In his earnings call on Tuesday, Hood said the company has not ruled out the possibility of splitting up the businesses various interests. However, he would prefer to "unlock" the value of BEF Foods in an "accretive way."