Cracker Barrel Raises Guidance as Sales Declines Narrow

Cracker Barrel Old Country Store, Inc. raised its annual adjusted EBITDA outlook June 9 after a quarter of smaller sales declines and lower adjusted earnings than a year earlier.

For the fiscal third quarter ended May 1, revenue fell 2.9% to $797.4 million. The earnings release sets out the companywide results:

The company recorded a $47.4 million interchange litigation settlement, net of legal fees, on a separate litigation-settlement line. It appears below operating income and before taxes, separate from restaurant and retail operating results.

Cracker Barrel’s non-GAAP reconciliation removed the settlement and reversed its $11.1 million tax effect. Adjusted earnings and EBITDA remained below last year.

Restaurant traffic and retail had different pressures#

The quarterly filing provides the operating detail. Restaurant revenue totaled $658.4 million; retail merchandise contributed $139 million, or 17.4% of company revenue.

Comparable restaurant sales declined 2.6%, reflecting a 6.7% decline in its entrée-based guest-traffic measure partly offset by a 4.3% increase in average check. Menu pricing contributed 4.4%, showing how much of the check increase came from higher prices. The company’s sales comparison therefore masks a larger decline in entrées sold.

Those comparable figures cover Cracker Barrel stores open at least six full quarters, measured on comparable calendar weeks, and exclude Maple Street Biscuit Company. Total company revenue includes that smaller chain. At quarter-end, the company operated 657 Cracker Barrel stores and 52 Maple Street locations.

Retail comparable sales declined 1.8%. Retail cost of goods rose to 49.8% of retail revenue from 48.9%, with tariffs, discounting and lower vendor allowances among the pressures. Restaurant cost of goods sold, by contrast, edged down to 26.1% of restaurant revenue from 26.2%.

The filing attributes the lower restaurant cost ratio primarily to menu pricing, partly offset by commodity inflation. Quarterly commodity inflation was 2.5%. Both cost-of-goods ratios exclude depreciation and rent.

A narrower decline after a difficult second quarter#

The March 4 second-quarter report, covering the period ended January 30, supplies the earlier benchmark. Revenue had fallen 7.9%, restaurant comparable sales 7.1% and retail comparable sales 9.2%. Adjusted EBITDA was $38.2 million, versus $74.6 million a year earlier.

In March, management had already forecast an approximately $46 million net cash benefit from litigation during the third quarter.

The March outlook reduced expected capital spending to $105 million to $115 million, from $110 million to $125 million. It also lowered commodity and hourly wage inflation assumptions. Management was adjusting spending and cost expectations while sales remained under pressure.

In its June outlook, Cracker Barrel raised its annual adjusted EBITDA forecast to $120 million to $125 million, from $85 million to $100 million. Its revenue outlook increased to $3.27 billion to $3.30 billion, from $3.24 billion to $3.27 billion. Capital spending guidance stayed at $105 million to $115 million.