I think it's time to be concerned about the effectiveness of the remodels they're doing. I realize that same-store growth is impacted by closed days but at some point, we should see positive same store growth. When you look at the corporate filings, here's the annual same-store growth associated with Bob Evans (excludes Mimi's):
2014 Q1 (0.6)
So, the only fiscal year they had same-store sales growth was 2013 and it was only 1.0%. When you look at what made up that growth, it was driven by 2.4% menu increases which means that total customer visits dropped 1.4%. In the years prior to 2013, not only was every year negative in total but they had menu price increases so the customer counts year-over-year are more negative than the total. You don't need a remodel to increase menu prices. You don't need a expensive remodel to increase prices.
I know this company is a darling to some but you have to wonder "where's the growth?". At this point the impact of the remodel program is a big question mark when it comes to driving profitability. It certainly has jacked up capital expenditures and the associated asset intensity of the business. They are also not growing store count with 2013 ending at 560, the lowest count since before 2010. Some may say that they are focusing on remodels and not opening new stores but I wouldn't be quick to assume that. Their store counts started dropping before the remodel program. Plus, they should be able to do both given the cashflow they have. This might imply that they aren't confident in the returns associated with new unit development?
Maybe it's time to get concerned. This company poured a ton of money into Mimi's and destroyed a significant amount of value by the time they sold it. They are now pouring a ton of money into Bob Evans and the BEF segment (which hasn't grown Operating Income in a long time despite significant investment). Let's hope it works.
Imagine if they had traditional leases on all the owned real estate? Their margins would be low single digits. I know some "activist" made some noise about the underlying value of the real estate but it went nowhere. This is ripe for someone to take private with a bunch of debt and then do a sale-leaseback on the owned sites to pay down the debt.