Financial Performance 'Unsatisfactory' at Famous Dave's
Famous Dave's of America, Inc. reported financial results for the first quarter ending April 3.
Highlights for the first quarter of 2016 as compared to the first quarter of 2015:
Comparable sales for company-owned restaurants open 24 months or more decreased 7.7 percent compared to a decrease of 5.9 percent for the same period in 2015. This decline is partially due to the close managerial control of marketing spend in anticipation of new leadership and lapping changes made in the first quarter of last year to restaurants that were not received well by guests.
Franchise royalty revenue declined slightly from $4.3 million to $4.2 million primarily reflecting a comparable sales decrease of 6.1 percent, partially offset by the refranchising of the seven Chicago restaurants late in the first quarter 2016.
Restaurant-level operating margin at company-owned restaurants decreased 590 basis points primarily as a result of year over year increase in food costs, increased management labor as a result of fewer open positions in the current year and sales deleverage.
General and administrative expenses decreased by approximately $1.1 million to approximately $3.8 million for the first quarter of 2016. This decrease reflects a decline in headcount at the support center and a decline in stock-based compensation as a result of executive departures. These savings were partially offset by increased legal fees. Also, the first quarter of 2015 included professional fees related to brand development, which were not repeated in the first quarter of 2016.
During the quarter, the company sold the real estate for a previously closed restaurant in Richmond, Virginia. This transaction generated approximately $1.1 million in cash proceeds and resulted in a one-time gain of approximately $204,000.
Adjusted income from operations was $73,000 compared to $374,000 for the first quarter of 2015; GAAP income from operations was $395,000 compared to $302,000 for the same period in 2015.
Adjusted net (loss) income from continuing operations per share was ($0.01), per basic share, compared to $0.03, per diluted share, for the first quarter of 2015; GAAP net income from continuing operations was flat year over year at $0.02 per diluted share.
During the quarter, the company re-franchised seven restaurants in Addison, Algonquin, Bolingbrook, Evergreen Park, North Riverside, Orland Park, and Oswego, Illinois, which resulted in classifying these restaurants as discontinued operations and recording an income from discontinued operations, net of tax of $681,000 primarily as a result of the recapture of approximately $1.2 million in deferred rent credits and operating results for two months, net of tax. This compares to income from discontinued operations of $89,000, net of taxes, during the comparable quarter in fiscal 2015.
Adam Wright, CEO, comments, “Today, we are reporting our first quarter financial results which are in line with trends experienced over the past several quarters; our financial performance during the quarter was unsatisfactory. We now have a new leadership team in place that is laser focused on improving performance and shares the board’s sense of urgency. While we are confident and focused on a refreshed direction of the company, the changes will take time to effect in order to win back guests, while at the same time acquire new guests. We are intently focused on four priorities to continue re-invigorating the company’s performance and rejuvenating Famous Dave’s by revitalizing sales and traffic, reducing costs, elevating organizational effectiveness, and rebuilding culture. The results we are reporting today only strengthen our sense of urgency and purpose.”
Famous Dave's ended the quarter with 178 restaurants, including 37 company-owned restaurants and 141 franchise-operated restaurants, located in 33 states, the Commonwealth of Puerto Rico, Canada, and United Arab Emirates.