U.S. Markets closed
  • S&P 500

    +22.27 (+0.56%)
  • Dow 30

    +132.28 (+0.41%)
  • Nasdaq

    +36.56 (+0.31%)
  • Russell 2000

    +14.63 (+0.85%)
  • Crude Oil

    -0.76 (-1.09%)
  • Gold

    -14.90 (-0.75%)
  • Silver

    +0.11 (+0.47%)

    -0.0073 (-0.6781%)
  • 10-Yr Bond

    -0.0260 (-0.76%)
  • Vix

    -0.87 (-3.85%)

    -0.0057 (-0.4624%)

    -0.1190 (-0.0910%)

    +103.41 (+0.37%)
  • CMC Crypto 200

    -21.06 (-3.41%)
  • FTSE 100

    -94.15 (-1.26%)
  • Nikkei 225

    -34.36 (-0.13%)

Here's Why You Should Retain Cracker Barrel (CBRL) Stock

Cracker Barrel Old Country Store, Inc. CBRL is likely to benefit from technological enhancements, off-premise business and menu innovation efforts. Also, the emphasis on marketing initiatives bodes well. However, inflationary pressures and supply chain challenges pose concerns.

Let us discuss the factors that highlight why investors should retain the stock for the time being.

Growth Catalysts

Cracker Barrel focuses on technological enhancements to drive growth. It continues to invest in technology initiatives to enhance its digital store and revamp its app to streamline the ordering process, provide a personalized experience and reduce friction on mobile devices. To this end, it initiated the rollout of Mobile Pay in April 2022. It also mentioned the addition of Apple Pay and Google Pay in the pipeline. It also emphasized launching a loyalty program to enhance customer engagement (concerning restaurant and retail offerings) and drive frequency and growth. We believe that investments in this direction are likely to boost its hospitality service and the customer experience in a brand-new way.

Cracker Barrel continues to benefit from its robust off-premise sales. During the fiscal first quarter, comparable store off-premise sales remained elevated from 2019 levels. Also, it contributed 17.5% of the quarterly restaurant sales. The company stated to have benefited from its catering business and third-party delivery. The company expects to retain at least 60% of the growth through emphasis on order-fulfillment improvements and to expand guest engagement (through its digital platform). To support this, the company continues to enhance its curbside pickup process, improving the integration between off-premise applications and processes (with back-of-house technology) and streamlining processes. The company expects to attract new customers and drive sustained growth in its off-premise business through its virtual brand, Chicken and Biscuits.

To address the challenges of the competitive restaurant industry, Cracker Barrel undertakes extensive marketing efforts, focusing on the brand’s differentiation, menu offering and value. To drive traffic, Cracker Barrel relies heavily on seasonal promotions and limited-time offers to boost its top-line performance, as they are appealing to both regular users and less-frequent guests. During the first quarter of fiscal 2023, the company reported improved guest visitation from younger and older age (65 and more) groups. The company stated gains on account of its culinary and marketing initiatives. Also, it stated benefits from its everyday business (including decor, apparel and accessories categories) and seasonal themes such as harvest and Halloween.

The company focuses on Breakfast menu to drive incremental sales. To this end, the company initiated a two-phase rollout process that involves streamlining breakfast offerings, guest customization and a better value proposition. During the first quarter of fiscal 2023, the company stated solid feedback regarding its breakfast category, Strawberry Cheesecake Pancakes and chicken platform. Also, it reported increased sales of barrel bites, premium sides, desserts and non-alcoholic beverages. The company is focused on its culinary pipeline comprised of offerings designed to fill existing menu gaps, reduce complexity and increase consistency of execution during weekend periods.


Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Shares of Cracker Barrel have declined 14.5% in the past three months against the industry’s 3.9% growth. The downside was mainly caused by commodity and wage inflation, supply chain challenges and a challenging macro environment. Although the company reopened most of its restaurants, traffic is still low compared with pre-pandemic levels. The company intends to monitor the situation regularly to gauge the impacts of COVID-19.

The company is persistently shouldering higher expenses, which have been detrimental to margins. During the first quarter of fiscal 2023, the total cost of goods sold (as a percentage of total revenues) came in at 33.5% compared with 30.9% reported in the prior-year quarter. The increase was primarily driven by commodity inflation and elevated freight costs. During the quarter, the adjusted operating margin was 3.6% compared with 5.9% in the prior-year quarter. The downside was mainly driven by commodity, wage and other expense inflation and elevated maintenance expense. The company anticipates high inflation and lower consumer confidence to act as a headwind. In fiscal 2023, the company anticipates commodity inflation to be 8-9% (with sequential moderation) and wage inflation of 5-6%.

Zacks Rank & Key Picks

Cracker Barrel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. TGLS, Wingstop Inc. WING and Chuy's Holdings, Inc. CHUY.

Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). Shares of the company have gained 13.3% year to date.

The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 11.2% and 9%, respectively, from the year-ago period’s levels.

Wingstop currently sports a Zacks Rank #1. WING has a long-term earnings growth rate of 11%. Shares of WING have decreased 10.9% year to date.

The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18% and 16.2%, respectively, from the comparable year-ago period’s levels.

Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have increased 3.3% in the past year.

The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 8.6% and 10.4%, respectively, from the corresponding year-ago period’s levels.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report

Chuy's Holdings, Inc. (CHUY) : Free Stock Analysis Report

Tecnoglass Inc. (TGLS) : Free Stock Analysis Report

Wingstop Inc. (WING) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research