Bob Evans Still Hog-Tied

First it was the mouse scandal that wound up being a hoax at CBRL Group's (Nasdaq: CBRL  ) Cracker Barrel, and then it was the Atkins low-carb insanity, sparking dramatically higher hog prices that hurt both Bob EvansFarms (Nasdaq: BOBE  ) and Steak n Shake (NYSE: SNS  ) . What's next? People simply getting in their cars and going to eat a decent meal?

The management team at Bob Evans probably wishes that more people had walked into its restaurants in May; same-stores sales dropped 4.7% as menu prices increased 2.4% thanks to surging hog prices. The company has yet to get a handle on how to turn the shortfall around. In its press release, Chairman and CEO Stewart K. Owens said, "Restaurant sales trends for the first two weeks of our new fiscal year have been even more disappointing." Ouch.

Restaurant sales and profits also fell short of the company's expectation in the fourth quarter, primarily reflecting softness in the company's core Midwestern markets. Straight up, customers don't seem to want to pay more for their sausage and other pork-based products no matter how much they obsessively count carbs.

The company believes that hog prices will keep rising in the first half of the year and then might moderate thereafter. With this assumption in mind, Bob Evans has lowered its margin assumption for its restaurants. Bob Evans is targeting earnings in the range of $1.80 to $2 per share for fiscal 2005, from a previous mean analysts' estimate of $1.98.

For me to believe that Bob Evans Farms is truly a value play (see Value at Bob Evans?), I would like to see management be a little more sure of itself when it comes to diagnosing problems and coming up with solutions. With it seemingly hog-tied about getting its customers back, the shares, which are trading at 14 times the fiscal year 2005 EPS estimate, appear to be cheap for a reason.

Have any great low-carb recipes? Share them on the Low-Carb Way of Life discussion board.

Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.