Investors Grill Famous Dave’s
Stock in Minnetonka-based Famous Dave’s of America Inc. was down more than 10 percent in early trading on Wednesday morning in the wake of the barbecue restaurant chain’s third quarter earnings results, which missed Wall Street expectations.
Famous Dave’s reported revenue of $31.8 million for its third quarter, ending on September 27 — a 15.6 percent drop from the third quarter of 2014. The company attributed the sales drop to the closure of four company-owned restaurants and refranchising five other company restaurants since last year. (Under refranchising, company-owned restaurants are converted into franchise locations.) But another factor was the 9.8 percent decline in comparable sales for company restaurants.
For the third quarter, Famous Dave’s reported net income of $708,000 – a 65 percent drop compared to the same period a year ago. The company’s stock, which closed at $34.15 per share on February 18 earlier this year, closed at $12.17 per share on Tuesday — a 64 percent drop from its peak for the year in February. In mid-morning trading on Wednesday, the stock was down to $10.37 per share.
The company’s earnings statement on Wednesday morning characterized the third quarter results as “disappointing.”
It has been a year of tumult and change for Famous Dave’s. Interim CEO Adam Wright has only been at the helm since June 18, when previous CEO Ed Rensi stepped down after less than 18 months leading the company. In July, the company added four newly appointed board members to its seven-member board. In early August, the company appointed Abe Ruiz as its new chief operating officer.
Wright has been working to bring the sizzle back to Famous Dave’s, but it remains a work in progress.
“Late in the second quarter and early in the third quarter, there was a significant change in senior management and the board, as the board was not satisfied with the direction of the company and its results,” said Wright in a statement. “While we are now confident in the direction of the company, the changes will take time to take effect as we undo the mistakes of prior management and attempt to win back customers we disappointed while at the same time acquiring new customers. We expect to see an improvement in our financial performance in the next few quarters, after we implement our changes.”
Later in the press release, the company added: “While it is always darkest before the dawn, we believe the organization is getting excited about the long-term prospects for Famous Dave’s as a concept, not only to the return of positive same store sales, but long term highly profitable growth. It will just take some time.”
Twin Cities Business recently took an in-depth look at the ongoing challenges for Famous Dave’s and talked with Wright about his plans to cook up a new recipe for the company.
The company earnings release also noted an issue with its credit agreement with Wells Fargo: “Due in large part to the incurrence of various one-time charges resulting from management and strategic changes, we were no longer in compliance with the adjusted leverage and cash flow ratios under our Wells Fargo credit agreement at the end of the third fiscal quarter.” The company is in discussions with Wells Fargo to resolve the issue.
At the end of the quarter, Famous Dave’s had a total of 179 restaurants: 44 company-owned locations and 135 franchise locations.
The company announced on October 23 that founder “Famous” Dave Anderson would be rejoining the company. “Dave is helping to rebuild our company’s culture and improve our guest experience,” Wright said.