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Cracker Barrel (CBRL) Down 6.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Cracker Barrel Old Country Store (CBRL). Shares have lost about 6.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cracker Barrel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Cracker Barrel Q3 Earnings & Revenues Beat Estimates

Cracker Barrel reported third-quarter fiscal 2021 (ended Apr 30, 2021) results, wherein earnings and revenues beat the Zacks Consensus Estimate. Moreover, the top and the bottom lines improved on a year-over-year basis.

The company benefited from easing of dining room capacity restrictions, average weekly sales volumes improvement courtesy of increase in dine-in traffic, retained off-premise volumes, and robust retail performance. The company’s average per-store restaurant sales volumes increased to nearly $70,000 per fiscal week in April from approximately $55,500 per fiscal week in fiscal January.

Earnings & Revenues

During the fiscal third quarter, adjusted earnings per share of $1.51 beat the Zacks Consensus Estimate of 10 cents. In the prior year quarter, the company reported adjusted loss per share of $1.81.

Revenues of $713.4 million during the quarter beat the consensus mark of $666 million. Moreover, the figure increased 64.9% on a year-over-year basis. The company benefited from improvement in both restaurant and retail comparable store sales.

Comps Details

Comparable store restaurant sales declined 8.6% in the reported quarter compared with the same period in fiscal 2019. However, comparable store restaurant sales surged 56.5% year over year. Moreover, comparable retail sales jumped 10.8% and 102.8%, compared with same period in 2019 and 2020, respectively.
    
During the fiscal third quarter, comparable store off-premise sales soared 144% over the more normalized third-quarter fiscal 2019.

Operating Highlights

During the fiscal third quarter, cost of goods sold (exclusive of depreciation and rent) decreased 280 basis points (bps) year over year to 28.9%. General and administrative expenses contracted 130 bps year over year to 5.2%.

Operating income in the fiscal third quarter totaled $52.5 million against ($79) million in the prior-year quarter. Adjusted operating margin came in at 7.8%. Margin benefited from better-than-expected sales performance, particularly in the company’s retail business. Adjusted operating income was $55.7 million.

Balance Sheet

As of Apr 30, 2021, cash and cash equivalents were $384.6 million, up from $363.3 million as of May 1, 2020.

Inventory at the end of the fiscal third quarter amounted to $132.4 million, down from $146.3 million at the end of third-quarter fiscal 2020.

Long-term debt amounted to $575.3 million at the end of the quarter, up from $940 million at the end of the prior-year quarter.

For the nine-months ended Apr 30, 2021, net cash provided by operating activities amounted to $212.5 million compared with $87.2 million in the year-ago period.

Q4 Outlook

Going forward, the company expects improvement in sales and operating margin on the back of stimulus spending, pent-up demand, continued vaccinations and a lower COVID-19 caseload. In fourth-quarter fiscal 2021, the company’s revenues is likely to be nearly flat to fourth-quarter fiscal 2019 total revenues. It anticipates capital expenditure of nearly $25 million. Commodity inflation is expected at approximately 5%. Meanwhile, effective tax rate for quarter is anticipated between 11% and 12%.

Store Updates

Post the acquisition of Maple Street Biscuit Company in October 2019, the company converted six Holler & Dash units into Maple Street locations and closed one Holler & Dash unit permanently. With one opening in the fiscal third quarter, the total number of company-owned Maple units under operation was 37.

As of Apr 30, 2021, the company had 664 Cracker Barrel units and 37 Maple units, making it a total of 701 company-owned units under operation.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 8.61% due to these changes.

VGM Scores

At this time, Cracker Barrel has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cracker Barrel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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