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Yet Another Beat for Cracker Barrel

Zacks Equity Research

Cracker Barrel Old Country Store Inc. (CBRL) reported first-quarter fiscal 2013 adjusted earnings of $1.08 per share, comfortably beating the Zacks Consensus Estimate of $1.05 per share. However, the number fell short of the prior-year earnings by a penny. Quarterly earnings exclude severance and proxy contest expenses. The better-than-expected results were driven by top-line and comps growth.

On a GAAP basis, the company reported earnings of 97 cents per share compared with the year-ago quarter earnings of $1.03. Total revenue inched up 4.8% year over year to $627.5 million, owing to growth in unit and comps.

Quarter Performance

In the reported quarter, restaurant revenues increased 4.8% to $504.5 million. Retail revenues jumped 5.4% to $123.0 million.

On a comparable basis, restaurant sales grew 3.3% due to a 0.8% upside in traffic and a 2.5% increase in average check. Comparable retail sales in the quarter also surged 1.6%.This marks the fourth consecutive quarter of increased sales and traffic.

Gross margin in the quarter contracted to 68.5% from 68.9% in the year-ago quarter, based on higher cost of goods sold (up 0.4%). Operating margin slipped 300 basis points (bps) to 7.2% in the quarter, attributable to a 10 bps rise in labor and other related expenses and 30 bps upside in other store operating expenses, partially offset by a 50 bps decrease in general and administrative expenses.

Store Update

During the quarter, Cracker Barrel opened 4 new restaurants, taking the total count to 620.

In 2013, Cracker Barrel plans to open 9 to 11 new units.

Liquidity Position

At the end of the first quarter, Cracker Barrel had cash and cash equivalents of approximately $118.9 million compared with $152 million in fiscal 2012. The company also reduced its long-term debt to $518.8 million from $525.0 million in fiscal 2012.


The Lebanon, Tennessee-based company reaffirmed its outlook for 2013. The company expects total revenue in the range of $2.6 billion to $2.65 billion, earnings per share between $4.50 to $4.70 and comparable restaurant and retail sales to be up 2.0% to 3.0%. Cracker Barrel expects commodity cost pressure to continue in 2013 and anticipates inflation of 5.0%–6.0%. Operating margin is estimated to be in the single-digit range of 7.3% to 7.5%.

For the second quarter of 2013, the company expects adjusted earnings in the range of $1.22 to $1.27 per share.

Our Take

We expect estimates to go up in the coming days, as the company has posted six straight quarters of positive surprise and has also retained its outlook for fiscal 2013 despite cost inflation and uncertain economic conditions. Cracker Barrel remains focused on enhancing shareholders’ value and ensuring the company’s growth in the long term based on three strategies – increasing the core business, unit growth and extending the Cracker Barrel brand. In the near term, the company plans to implement several initiatives like media spending, refined menu and pricing strategies, and improved restaurant operations and services to drive traffic and sales. Moreover, to expand margins it continues to make efforts to control cost.

Cracker Barrel, which competes with Panera Bread Co. (PNRA), currently retains a Zacks #3 Rank (short-term Hold rating). We also reiterate our long-term Neutral recommendation on the stock.

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