Cracker Barrel Old Country Store, Inc. CBRL is poised to benefit from enhanced focus on menu innovation, marketing strategies along with seasonal promotions and cost-cutting efforts. The company is gradually reopening its dining rooms after the coronavirus-induced shutdowns. Notably, shares of Cracker Barrel have outperformed the industry in the past three months. The stock has gained 67.4% compared with the industry’s 36.3% growth.
Factors Driving Growth
The company continues to focus on off-premise initiatives, such as curb-side delivery, third-party delivery, family meal baskets to drive performance during the pandemic. It also continues to invest in technology initiatives to enhance guest experience. To this end, the company plans to roll out Pay in App that allows contactless payments via mobile devices. It is also initiating the launch of digital store that enhances customer experience for ordering food and retail. Notably, investments in this direction are likely to boost its hospitality service along with customer experience in a brand new way.
Cracker Barrel intends to support the recovery of its business with improved traffic and more dining re-openings. As of May 29, the company operates 505 stores with limited dine-in service and expects to substantially increase it across all its stores by June-end. Moreover, to support the re-openings, the company has transitioned to a new menu offering greater variety compared to the limited menu of its off-premise only stores.
Additionally, the company has an effective cost-cutting mechanism in place. Currently, it is carrying out its cost-saving plan through its two prime initiatives — food waste and labor management. It has also introduced a food management program that includes additional focus on food reporting and analytics as well as a new food auditing process. This program resulted in savings in the restaurants’ cost of goods sold.
Cracker Barrel is continuously focusing on rejuvenating its menu. Its in-store menu features Fried Chicken Benedict bowl, a Ham n' Maple Bacon bowl as well as a Sausage, Grits Cakes and Green Tomato Gravy bowls. In the last year, Cracker Barrel completed the rollout of crafted coffee.
The company believes that the platform will complement its breakfast all day offering, drive check favorability and promote guest perceptions of menu variety. Moreover, the company plans to strengthen the dinner daypart by introducing signature craveable items. The initiative is likely to simplify the menu to increase consistency and execution as well as providing a more optimized menu. In order to drive traffic, the company relies heavily on seasonal promotions and limited-time offers to boost its top-line performance as these appeal to both regular and less-frequent guests.
Zacks Rank & Other Key Picks
Cracker Barrel currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks from the same space include Wingstop Inc. WING, Restaurant Brands International Inc. QSR and Domino's Pizza, Inc. DPZ. Wingstop sports a Zacks Rank #1, while Restaurant Brands and Domino’s carry Zacks Rank #2.
Wingstop has a three-five year earnings per share growth rate of 11%.
Domino's has a trailing four-quarter positive earnings surprise of 12.7%, on average. The company’s earnings beat the Zacks Consensus Estimate in the last four quarters.
Earnings in 2021 for Restaurant Brands are expected to surge 36.1%.
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