Famous Dave's Beats by a Penny

Zacks

Famous Dave's of America Inc. (NasdaqGS:DAVE - News) recently reported second quarter 2011 adjusted earnings of 29 cents per share, which beat the Zacks Consensus Estimate by a penny and came in line with the prior-year earnings.

Minnetonka, Minnesota-based Famous Dave’s, which owns, franchises and operates restaurants in the U.S., reported total revenue of $41.3 million, up 1.5% year over year. Same-store sales for company-owned restaurants were down 1.2% during the quarter compared with an increase of 0.6% in the year-ago quarter. Same-store sales from franchise-operated restaurants declined 1.4% versus a 0.6% decline in the second quarter 2010.

During the quarter, company-owned restaurants sales inched up 0.8% to $36.5 million, despite a price increase of 2.0%. Franchise royalty revenue upped 4.0% year over year to $4.4 million, reflecting the opening of two new franchise-operated restaurants. 

Operating income decreased 4.9% to $3.9 million in the reported quarter, due to a significant rise in total expenses.

Store Update

At the end of the second quarter, the company’s portfolio boasted of 181 restaurants, including 52 company-owned restaurants and 129 franchise-operated restaurants.

Financial Position

Famous Dave's ended the quarter with cash and cash equivalents of $2.3 million and shareholders’ equity of $34.6 million.

Outlook

For fiscal 2011, the company expects two company-owned restaurant and approximately eight franchise-operated restaurant openings.

Our Take

As the economy is showing signs of improvement, we believe Famous Dave's will be able to generate improved earnings. However, estimates have not budged in the last 30 days, indicating the absence of any near-term catalyst.

One of Famous Dave's primary competitors, Buffalo Wild Wings Inc.’s (NasdaqGS:BWLD - News) second quarter 2011 earnings of 58 cents per share missed the Zacks Consensus Estimate of 60 cents.

Famous Dave's currently retains a Zacks #4 Rank, which implies a short-term Sell rating on the stock. We reiterate our long-term Neutral recommendation.

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