Famous Dave’s Profits Plummet 92% on Lower Sales
Famous Dave’s of America, Inc., saw a sharp drop in first-quarter profits, as revenue fell and the appointment of a new CEO caused administrative costs to rise.
The Minnetonka-based barbecue restaurant chain announced that net earnings for the first quarter, which ended March 31, totaled $62,000, or $0.01 per share, down 92 percent from $817,000, or $0.11 per share, during the same period in 2012. Earnings per share were $0.12 lower than what analysts polled by Thomson Reuters had expected.
Revenue totaled $36.6 million, down about 2.4 percent from $37.5 million during the same period in 2012. Revenue also fell short of the $36.8 million that analysts expected.
“Our first-quarter sales, royalties, and franchise fee results were disappointing, which led to poor [earnings] results,” CEO John Gilbert III said in a Wednesday statement.
Sales at company-owned restaurants that have been open for at least two years decreased 1.8 percent, compared to a 1.6 percent decrease during the same period in 2012.
Franchise royalty revenue decreased to $4.1 million from $4.4 million during the same period the year before. The decline was partially offset by the increase of two additional franchise locations since the first quarter of 2012, the company said.
Famous Dave’s opened no new restaurant locations during the first quarter but closed its Burnsville location.
The decline in quarterly earnings and revenue occurred as general and administrative expenses increased to $5 million this quarter, up about 12 percent from $4.5 million. The increase was largely due to the reorganized CEO and chief operating officer (COO) positions, which resulted in an increase of $325,000 in compensation-related costs, which include salary, bonuses, and stock-based compensation. A loss of $135,000 was also incurred as a result of “legal and other costs related to board activity,” the company said.
Famous Dave’s announced in October that it would shuffle its top leadership positions, appointing Gilbert, a company board member, to the position of CEO. Gilbert replaced Christopher O’Donnell, who shifted into the positions of president and COO.
Famous Dave’s ended its first quarter with 187 restaurants, including 53 company-owned restaurants and 134 franchise-operated restaurants in 34 U.S. states and one in Canada. Famous Dave’s expects to open about 12 additional locations this year.
Shares of Famous Dave’s stock closed down 2 percent at $10.53 on Wednesday. They were trading at $10.60 mid-day Thursday.