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Bob Evans's CEO Resigns
From the Wall Street Journal of Mon, 15 Dec 2014 00:06:58 EST
The Bob Evans board continues to review strategic options. Pictured, a location in Solon, Ohio.
The Bob Evans board continues to review strategic options. Pictured, a location in Solon, Ohio. AP

Bob Evans Farms Inc. ’s longtime chief executive resigned under pressure Sunday as the company’s board stepped up a push to revamp the restaurant-and-food company following an activist-led proxy fight.

Bob Evans said Steve Davis was stepping down “under mutual agreement” with the board as it continued to review strategic options that could include splitting its restaurant and packaged-food operations. Mr. Davis’s exit after eight years as CEO comes two months after he was stripped of the chairman’s post, which followed the election this summer of four board nominees of the activist hedge fund Sandell Asset Management Corp.

While Bob Evans searches for Mr. Davis’s successor, it is forming an office of the CEO composed of Mark Hood, its chief financial officer, and Mike Townsley, president of the Bob Evans foods unit. The change will take place immediately, though Mr. Davis will stay until the end of the year to assist with the transition.

Bob Evans’s recent performance under Mr. Davis has failed to meet the expectations of the board, said Mary Kay Haben, its nonexecutive chair. “In the beginning he had a good tenure, but at this point, business results are not what we’d like and not what we’re capable of,” she said in an interview.

Earlier this month, the New Albany, Ohio, company reported third-quarter revenue of $333.3 million and flat same-store sales compared with a year earlier, below analysts’ estimates of $343.9 million in revenue and same-store-sales growth of 1.3%. The company had previously reported five consecutive quarters of declining sales. Profit in the quarter fell to $6 million, or 25 cents a share, from $6.1 million, or 23 cents a share, a year ago.

Ms. Haben said that while the chain has modernized its restaurants and added more carryout options, it has faced customer-service problems. “You have to be able to serve the customer what they want at the right price in the right time,” she said. “There are also opportunities on the food side to enhance execution.”

Bob Evans operates 562 restaurants in 19 states, mostly in the Midwest, mid-Atlantic and Southeast. Through its foods division, the company produces and distributes pork sausage and a variety of refrigerated and frozen foods under the Bob Evans and Owens brand names.

The company’s challenges stem partly from the choppy economic recovery and the restaurant category in which it operates. Family dining chains have struggled as U.S. consumers have turned to fast-food and “fast-casual” chains where they can get food more quickly, as well as more cheaply because they don’t have to leave tips.

Earlier this month KeyBanc Capital Markets analyst Christopher O’Cull said in a note to investors that Bob Evans “is not addressing that fewer guests are eating in the restaurants, an issue that we estimate has persisted for at least 14 consecutive quarters.”

Bob Evans stock has lost 0.16% of its value so far this year, compared with an 8.3% gain in the S&P 500.

The board will hire an outside search firm to find someone with deep restaurant-industry experience, as well as packaged-food experience, if possible, Ms. Haben said.

Mr. Davis said in a news release that he is “proud of the legacy we have built” and is “confident the team will continue to build on our sales and profit growth.” He will also step down from the company’s board.

Ms. Haben, a director since 2012, was named the company’s chairman in October, two months after four nominees of Sandell Asset Management were elected to the board. Sandell Asset Management, led by Swedish-born billionaire Thomas Sandell, called for the replacement of the “stale and entrenched” board as it pursued its proxy battle. Sandell has a 9.2% stake in Bob Evans.

Three of the new directors had worked in the food or restaurant business. The fourth was Charles Elson, a corporate governance specialist who runs the Weinberg Center for Corporate Governance at the University of Delaware’s business school.

“It’s important to note that [the decision to seek Mr. Davis’s resignation] was made with unanimity despite the fact that four of us came from different places,” Mr. Elson, who heads the board’s nominating and governance committee, said in an interview. “We believed we had lost confidence in Steve’s ability to take the company forward.”

Write to Joann S. Lublin at and Julie Jargon at

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