Cracker Barrel Beats on Earnings, Affirms View

Zacks

Cracker Barrel Old Country Store, Inc. (CBRL) posted strong fiscal first quarter 2014 results. Adjusted earnings (excluding proxy contest expenses) of $1.22 per share increased 13.0% year over year and also beat the Zacks Consensus Estimate of $1.13 by 8.0%. Top-line growth and lower interest expenses boosted earnings in the quarter.

Including proxy contest expenses, reported earnings stood at $1.14, up 17.5% year over year.

Revenues

Cracker Barrel quarterly revenues were $649.1 million, up 3.5% year over year. The top line also beat the Zacks Consensus Estimate of $645.0 million by 0.6%. The upside reflects increase in retail and restaurant comps.

In fiscal first quarter 2014, restaurant comps grew 2.8% driven by a 2.9% increase in average check, attributable to an increase in menu prices. Retail comps increased 2.5%.

Restaurant and retail comps growth decelerated in October compared to August and September.

Despite the negative impact of the 16-day partial shutdown of the federal government in October, the company posted positive comparable restaurant sales and retail sales for the eighth consecutive quarter.

Operational Highlights

Labor and related expenses ratio improved 60 basis points (bps) to 36.5% driven by continued progress in store-level labor productivity and a higher average check. Other store operating expenses ratio was up 80 bps due to higher advertising expenses.

Operating income declined 4.2% year over year to $49.2 million as a result of higher general and administrative expenses. Operating margin declined 60 basis points to 7.2%.

Financial Condition

As of Nov 1, 2013, cash and cash equivalents were $57.5 million, down from $121.7 million as of Aug 2, 2013. Long-term debt was approximately 393.8 million, down from $400.0 million as of Aug 2, 2013. Net cash used in operating activities during the quarter was $9.2 million versus $13.6 million in the year-ago quarter.

Guidance

For the second quarter of fiscal 2014, the company expects earnings in the range of $1.50 to $1.60 per share.

The company reaffirmed its guidance for fiscal 2014. It expects revenues in the range of $2.70 billion to $2.75 billion for fiscal 2014. The guidance takes into account seven or eight expected new store openings and increases in comparable store restaurant sales and retail sales in a band of 2.0% to 3.0%.

For fiscal 2014, the company expects operating margin in the range of 7.0% to 8.0% and earnings per share in the range of $5.60 to $5.80. Capital expenditures are expected to be in the range of $90.0 million to $100.0 million.

Zacks Rank

Cracker Barrel currently has a Zacks Rank #2 (Buy). Other players in the industry, which look attractive at current levels, include Darden Restaurants, Inc. (DRI), DineEquity, Inc. (DIN) and Famous Dave's of America Inc. (DAVE). All these stocks carry the same Zacks Rank as Cracker Barrel.

 

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