Famous Dave's Misses by 1 Cent

Minnetonka, Minnesota-based Famous Dave's of America, Inc. (DAVE - Snapshot Report) recently posted fourth quarter 2010 earnings of 6 cents, which missed the Zacks Consensus Estimate by a penny and 8 cents reported in the prior year quarter.

Famous Dave’s is engaged in the ownership, franchising and operation of restaurantssaid that total revenue in the quarter climbed 11.0% year over year to $36.2 million. But it was in line with the Zacks Consensus Estimate. The upside in revenues was attributable to comparable sales growth of 3.3% at company-owned restaurants, partially offset by a drop of 0.8% at franchised restaurants.  

The company’s full-year earnings per share were 82 cents versus 62 cents in full fiscal 2009. Revenues were $148.3 million in full fiscal 2010, representing a year-over-year leap of 9.0%, as comparable sales at company-owned restaurants inched up 0.7%.

During the quarter, company-owned restaurants sales soared 13.8% to $32.2 million, due to improved economic conditions, resulting in higher consumer spending, inspite of a price increase of 1.2%. However, franchise royalty revenue plunged 9.8% to $3.7 million attributable to royalties lost from eight New York and New Jersey restaurants that were divested and decrease in comparable sales growth.  

Operating income dipped 28.3% to $1.0 million in the reported quarter, due to a spike in total expenses.

Store Update

During the quarter, the company opened 5 franchised restaurants and closed one franchised and one company-owned restaurant. Moreover, in the reported quarter Famous Dave’s also signed a Area Development Agreement for three units in Indianapolis.

At the end of the year, the company had 182 restaurants, including 52 company-owned restaurants and 130 franchise-operated restaurants, located in 37 states.

Financial Position

Famous Dave's ended the year with cash and cash equivalents of $2.7 million and shareholders’ equity of $32.9 million.

In fiscal 2010, company also repurchased approximately 1.1 million shares, at an average price of $8.18.

Outlook

In fiscal 2011, the company expects to open 10 to 12 new restaurants and plans capital expenditure of $5.5 million for the renovation and maintenance of existing restaurants along with investment in various infrastructure projects.

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 60 days implying absence of any near term catalyst. The Zacks Consensus Estimate for 2011 is pegged at 79 cents and 90 cents for 2012.

One of Famous Dave's primary competitors, AFC Enterprises, Inc (AFCE - Snapshot Report) will announce its fourth quarter 2010 earnings result on March 9, 2011.

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Read the full analyst report on AFCE