Cracker Barrel: The Casual Dining Industry, Earnings Exceeded Expectations

04:50 11/21/2017

Cracker Barrel Old Country Store, Inc. CBRL , is principally engaged in the operation and development of the Cracker Barrel Old Country Store restaurant and retail concept. Its distinctiveness in the retail-restaurant sector lies in the fact that apart from serving food, its restaurant establishments have old-country feel along with unique gift shops.

Cracker Barrel’s increased focus on off-premise business, improving guest experience, menu innovation and excellent operational execution are expected to boost comps. Meanwhile, the company’s cost saving initiatives along with commodity costs favorability also bode well.

However, a soft consumer spending environment in the U.S. restaurant space might continue to affect traffic. Moreover, management notes that Cracker Barrel’s retail business has been under pressure, given the challenges faced by the retail industry, as a whole.

Investors should note that the consensus estimate for CBRL  has been moving slightly downwards over the last 60 days. Meanwhile, CBRL’s earnings have been strong over the past few quarters. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 4.96%. However, revenues lagged the Zacks Consensus Estimate in each of the trailing four quarters.

CBRL currently has a Zacks Rank #3 (Hold) but that could change following Cracker Barrel’s earnings report.

We have highlighted some of the key stats:

Earnings: CBRL beats on earnings. Our consensus earnings estimate called for earnings per share of $1.86, and the company reported earnings of $1.92 per share.

Revenues: CBRL reported revenues of $710.4 million, lagging the Zacks consensus estimate of $719.1 million.

• Operating income margin was 10.0% of revenue, compared with prior year operating income margin of 10.7% of revenue.

• Comparable restaurant sales of 0.2% and traffic of -1.8% outperformed the Casual Dining Industry, despite the negative impacts from hurricanes Harvey and Irma. (See comparable sales and traffic table for hurricane impact estimates.)

• The Company's Board of Directors declared a quarterly dividend of $1.20 per share on the Company's common stock, payable on February 5, 2018 to shareholders of record on January 12, 2018.

Commenting on the first quarter and fiscal year outlook, Cracker Barrel President and Chief Executive Officer Sandra B. Cochran said, "We delivered positive comparable store restaurant sales in the first quarter, outperformed our casual dining peers, and exceeded our earnings expectations, despite the challenges presented by the impact of hurricanes Harvey and Irma on many of the communities in which we, our customers and our employees live and work. In addition, our field and leadership teams made significant progress on the introduction of several key business initiatives, including the system-wide rollout of our off-premise platform. While being more cautious in our industry outlook and in our expectations for continued wage and commodity pressure, we remain well-positioned to deliver top-line performance and earnings growth as a result of our fiscal 2018 initiatives."

Operating income in the first quarter was $70.8 million, or 10.0% of total revenue. Operating income in the prior year quarter was 10.7% of total revenue. As a percentage of total revenue, increases in other store operating expenses and general and administrative expenses were partially offset by decreases in cost of goods sold and labor and related expenses.

For fiscal 2018, the Company now expects to report earnings per diluted share of between $8.75 and $8.90 reflecting the approximately $0.10 negative impact from hurricanes Harvey and Irma. The Company expects total revenue of approximately $3.1 billion, reflecting the expected opening of eight or nine new Cracker Barrel stores and three new Holler & Dash stores, as well as projected increases in comparable store restaurant sales in the range of 2.0% to 3.0% and comparable store retail sales to be approximately flat.

The Company now projects food commodity inflation in the range of 2.0% to 2.5% for the year. They also project an operating income margin to be approximately 10.5% of total revenue.

The Company expects depreciation expense between $95 million and $100 million; net interest expense in the range of $15 million to $16 million; and capital expenditures of approximately $150 million to $160 million. The Company anticipates an effective tax rate for fiscal 2018 of between 31% and 32%.

Multiple Grammy Award-Winning Superstar Kelly Clarkson and Platinum-Selling Singer-Songwriter Brett Eldredge Partner with Cracker Barrel Old Country Store® for "Rocking and Stockings" PerformancesTo celebrate the holiday season, exclusive music videos feature new hits and traditional holiday classics

Cracker Barrel Old Country Store, Inc. CBRL  shares warm welcomes and friendly service while offering guests high-quality homestyle food and unique shopping - all at a fair price. By creating a world filled with hospitality and charm through an experience that combines dining and shopping, guests are cared for like family. Established in 1969 in Lebanon, Tenn., Cracker Barrel and its affiliates operate 647 company-owned Cracker Barrel Old Country Store® locations in 44 states and own the fast-casual Holler and Dash® restaurants. For more information about the company, visit

As of September 14, 2017, CBRL  operated 645 Cracker Barrel stores in 44 states. None of their stores are franchised. Their stores are intended to appeal to both the traveler and the local customer, and they believe they have consistently been a consumer favorite. The Company prides theirselves on their consistent quality, value and friendly service.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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