Free

Bob Evans Defines __£Homestyle__ã for 2011__»

While the market has been a little shaky today, one of the stocks that has taken a hit is Bob Evans Farms, Inc. (BOBE), whose stock is down 4.21 percent so far today.

When we read the annual report filed June 29, though, it’s not all doom and gloom. There are some short-term challenges, but the company also laid out its long-term strategies for updating the restaurants and increasing revenues. The result is a mirror of farm life in popular culture, a mix of hardship and stalwart optimism.

The primary challenge is that the sow market is —highly cyclical. The filing adds:

—During fiscal 2010, there was a significant contraction in the live sow market, and we believe that the sow herd is at its lowest level since the early 1900—s. The live sow market is also dependent upon supply and demand for pork products, as well as corn and soybean meal prices (the major food supply for sows), weather and farmers— access to capital.

Bob Evans acknowledged that the higher cost of sows is an issue, in part because ——we cannot assure you that we will be able to pass along any portion to our food products consumers in a timely manner or at all. However, plenty of pork will still be on the menu: the company entered into some contracts to buy sows at market price plus yield premiums.

But there appear to be positive disclosures, too. In FY 2010, the company converted from a direct-store-delivery system to a warehouse system. While this change added some initial expenses, such as severance costs, the company said, ——we expect it will provide a lower cost structure in the long-term.

We also noticed the company’s recent settlement of a California class action through voluntary mediation. The plaintiff, an assistant manager, alleged that he should have been a non-exempt – rather than an exempt – employee. Through mediation, all the cases were settled for $1.03 million, and the Orange County Superior Court approved the final settlement on June 10, 2010.

Finally, there’s a strategy for the future. The company expects to build three new restaurants in high-traffic retail areas or near major interstate highways in FY 2011 and rebuild two others. It closed one Bob Evans (FY 2010) and one Mimi’s (FY 2011) that were underperforming, and it states those actions will free up resources for other, more profitable uses.

Perhaps most importantly, within the next five years, the company hopes to update the chain’s image and remodel most restaurants to look like the prototype it built in Xenia, Ohio. Besides creating a new retail and carryout area with the motto —Taste of the Farm, the new concept

——reflects a contemporary twist on the imagery and feel of the original Bob Evans family farm in Rio Grande, Ohio. It features a new color palette, flat screen televisions, free wireless Internet access, an —eat-in kitchen, a variety of flexible dining spaces, and a large farmhouse table which serves as a gathering spot for families and friends.

What could be better than home-style cooking while watching the game and emailing friends? Well, maybe all that and a farm-fresh growth spurt for the stock.

Image source: The Gifted Photographer via Flickr