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Famous Dave's Of America Had A Lousy FY 2014

William Bias profile picture
William Bias


  • Famous Dave’s of America saw its revenue and net income decline in FY 2014.
  • The company is driving consumers away by discontinuing its discounts.
  • Famous Dave’s of America’s margin of safety in interest cost coverage is declining.

On Feb. 19, barbecue restaurant chain Famous Dave's of America (NASDAQ: DAVE) came out with its FY 2014 earnings announcement. The company had the double whammy of declining fundamentals and disappointing Wall Street on the EPS line in the final quarter.

In FY 2014, Famous Dave's of America saw its revenue and net income decline 4% and 39%, respectively year-over-year. According to the limited data available in the earnings announcement, DAVE's operating cash flow declined 19% year-over-year in 2014.

The company did see its cash position improve. At the end of 2014, Famous Dave's of America clocked in a cash and equivalent balance of $2.1 million or 7% of stockholder's equity vs. 4% at the end of 2013. However, I like to see companies with cash amounting to 20% of stockholders' equity or greater to get them through rough times. Let's take a look to see what is going on with the company.

What happened?

First of all Famous Dave's of America saw sales at its established company and franchised store sales decline 5% and 3%, respectively. This gives indication that consumers are losing interest. Consumers are most likely turned off by the fact that company management eliminated its "heavy discounting strategy". The consumer who was used to its low prices got offended by the higher prices. Moreover, they may be sensing a sinking ship due to its lack of popularity. DAVE also reduced its location count. The company saw its location count decline by 5 in 2014, or 3%.

Cutting it close on interest coverage

The company is also experiencing increasing difficulty meeting its interest expense obligations, despite using less credit relative to 2013. In 2014, its long-term debt as a percentage came in at 16%, almost half the 35% it registered in 2013. This definitely lies below my personal threshold of 50%. However, DAVE's operating income

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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Comments (4)

William Bias, any thoughts on the night club idea? I believe they have high margin bar business buried in a family restaurant like feel. This could be the way to expand margins.
OXBORO profile picture
I think Dave's do a great job at training, food serve, pricing and consistency of products at over 20+ location I have been to. It is my favorite chain restaurant.

However the B/S and the P/L does not support the stock price. It would be a better buy if the did a 60+ million secondary to put a little beef in the B/S.
William Bias profile picture
Thanks for reading OXBORO.
I always liked DAVE. The food was good and pretty consistent. It seems the franchisees are not that happy and needless to say the results are marginal. I sense that they need to come up with a way to up the bar business later at night and possibly they could turn into a dance club at night. Maybe even a strip club in the right neighborhoods. Whatever they can do to leverage fixed costs.
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