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Bear of the Day: Cracker Barrel (CBRL)

Tracey Ryniec
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Cracker Barrel Old Country Store Inc. (CBRL) is struggling to get customers through the door. This Zacks Rank #5 (Strong Sell) saw declining restaurant traffic in its fiscal 2018 fourth quarter. Can it turn it around?

Cracker Barrel Old Country Store operates a dining and shopping experience through its 655 company-owned Cracker Barrel Old Country Store locations in 45 states and its fast-casual Holler and Dash restaurants.

Big Miss in the Fiscal Fourth Quarter

On Sep 18, the company reported its fiscal fourth quarter results and missed on the Zacks Consensus by 17.7%.

Earnings were $2.19 versus the Zacks Consensus of $2.66, for a 47 cent miss.

Comparable restaurant sales declined 0.4% as the store retail stales rose 1.3% compared to the year ago period. A 3.1% increase in average check was partially offset by a 3.5% decrease in restaurant traffic.

The company also saw average menu price increase 2.7%.

A slowdown in comparable sales in May extended throughout the quarter, which spooked Wall Street. It was especially concerned by the drop in traffic, which came at a time of a strong employment market and high consumer confidence.

The company attributed the traffic decline in part to its menu and marketing promotion not delivering.

Estimates Cut

Cracker Barrel supplied earnings guidance for fiscal 2019 which was below consensus. The result was that analysts had to cut.

The guidance called for $8.95 to $9.10, under the Zacks Consensus of $9.51. 2 estimates were cut since the report, pushing the Zacks Consensus down to $8.86, which is under the guidance range.

The company made $8.87 in fiscal 2018 so it's an earnings decline of 0.1%.

Shares Aren't On Sale

Cracker Barrel shares are holding up amidst the recent selling. They're actually up about 6% over the prior month and are down just 2% year-to-date.

They're not on sale, at the moment. They still trade with a forward P/E of 18.

But if you're looking for a restaurant group with a more attractive Zacks Rank, you might want to consider Denny's (DENN) which is a Zacks Rank #2 (Buy) or Dine Brands Global (DIN), which operates Applebee's and IHOP and is a Zacks Rank #3 (Hold).

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