LionEye Capital Still Bullish on Dave’s of America Inc. (DAVE) and Further Raises Stake

Back in 1997, the founder of Famous Dave’s of America expected that the restaurant chain would own and operate as much as 500 outlets, but it currently has only 184. Analysts believe that the company has failed to live up to its potential because it has been mismanaged for the last decade. Famous Dave’s of America is now on its fourth CEO in three years, which does not show any sign of stability and strong future potential. The company is currently looking for a replacement of Ed Rensi, who stepped down as CEO in June this year. Just a little over a year ago, Ed Rensi stepped in as CEO and intended to inject some dynamism so as to revitalize the struggling barbecue restaurant chain. Rensi has put an end to Famous Dave’s policy of discounting menu items, which is believed to have dragged the company’s profits down. However, this move has hit company’s sales quite hard, partly owning to the departure of some discount-driven customers. Rensi also started to refresh and modernize the restaurants, but all the changes promoted by the already ex-CEO have not gone so well. Meanwhile, Adam Wright, a founder of Blue Clay Capital Management, has recently stepped in as interim CEO of Famous Dave’s.

As already mentioned, the significant changes made by the company’s prior management were not received very well by the company’s customers, which is one of the main reasons Famous Dave’s of America delivered very disappointing second quarter financial results. The barbecue restaurant chain posted a revenue of $37.4 million for the quarter, compared to $41.9 million reported a year ago. At the same time, the company’s net income came at $654,000 last quarter, compared to $2.9 million a year earlier, while earnings per share amounted to $0.09, significantly lower than the $0.39 figure reported a year ago.

Famous Dave’s of America might hold great potential for the future, but it needs the right management that would inject new dynamism and growth into the company’s business. And it seems that LionEye Capital believes that the barbecue restaurant chain will be able to unlock more shareholder value in the upcoming years. Another shareholder that raised its stake in the company a couple of months ago is Charles Davidson’s Wexford Capital, which disclosed holding 1.33 million shares in June.

Disclosure: None