It was almost a year ago that I offered caution on Famous Dave's
Considering its fourth-quarter and FY 2005 results had one less week of operating performance in comparison to 2004, we can cut a break for the restaurateur -- but not much. Contrary to CEO David Gronkin's characterization of 2005 results as "strong," the market seems to have a much different view.
It took the company 52 weeks to muster $89.2 million in restaurant sales, which were roughly equivalent to FY 2004's figures, so an additional week might have done a little to minimally impress investors. To the company's credit, on a comparable basis it appears to be establishing a positive trend in comparable same-store sales, since those units open for 18 months posted comps of 2.1% in 2005, versus 1.1% in 2004.
Several factors, including a second year of television advertising and successes from its TO GO and catering services, as well as limited-time offers, helped to increase comps. In the conference call, Dave's indicated that its improved real estate selection strategy, which moved the sites closer to busy retail centers, is also contributing to the positive comp trends that have developed over the past two years. Management expects that the current strategy will help it to build upon this momentum going forward.
If the company can indeed solve the sales puzzle, there is a compelling growth opportunity here. It provides an attractive product to the consumer and has very little penetration in the market. With 40 company-owned sites and 88 franchised units -- along with an additional 193 franchises currently in the development stages -- the future looks promising if the company can start to show some real strength in the top line. Keep tabs on Famous Dave's -- the BBQ specialist may still offer some flavor for investors.
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