Cracker Barrel Beats, Guidance Up - Analyst Blog

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Tennessee-based Cracker Barrel Old Country Store Inc .'s ( CBRL ) second-quarter fiscal 2013 adjusted earnings of $1.43 per share comfortably beat the Zacks Consensus Estimate of $1.24 by 15.3%.

Earnings also significantly beat guidance range of $1.22 and $1.27 per share, while growing 19.2% year over year. The better-than-expected earnings results were driven by the company's comparable sales (comps) growth.

Total revenues for the second quarter climbed 4.4% year over year to $702.7 million, thanks to positive comps growth and higher restaurant sales. The quarterly revenues also surpassed the Zacks Consensus Estimate of $694 million.

Quarter Details

The company operates through two segments: restaurant and retail. Cracker Barrel through its restaurants serves a wide range of menu items for breakfast, lunch, and dinner whereas its retail services provide various products including rocking chairs, gifts, toys, apparel, cookware and foods.

Restaurant

Restaurant revenues jumped 4.9% year over year to $528.2 million. Comparable store restaurant sales rose 3.3% on the back of a 3.1% improvement in average check and a 2.6% upside in menu prices.

Retail

Retail revenues surged 2.8% annually to $174.5 million. Comparable store retail sales in the quarter also crept up 3.1%. Comps at both restaurant and retails were adversely impacted by lower traffic.

Gross margin in the quarter expanded 20 basis points (bps) to 65.2%. Further, adjusted operating margin enhanced 90 bps year over year to 8.4% in the quarter, attributable to decrease in general and administrative as well as other store operating expenses and labor and related costs.

Store Update

During the quarter, Cracker Barrel opened one new restaurant. Year to date, the company has unveiled 5 new units. Thus, at the end of the third quarter, the company had 621 units across 42 locations.

The company is planning to launch 8 new Cracker Barrel stores in fiscal 2013.

Financial Position

At the end of second quarter of fiscal 2013, Cracker Barrel had cash and cash equivalents of approximately $186.1 million versus $118.7 million in the previous quarter. Long-term debt was $512.5 million as compared with $518.8 million in the first quarter.

Fiscal 2013 Outlook Upped

The company raised its earnings guidance for fiscal 2013, based on its improved financial performance till date. Adjusted earnings are now expected in the range of $4.60 to $4.80, increased from previous guidance of $4.50 to $4.70.

The company however maintained its guidance for revenues, comps and adjusted operating margin. Revenues are expected in the range of $2.6 billion and $2.65 billion while comparable restaurant and retail sales are expected to increase in the range of 2.0% to 3.0%. Adjusted operating margin is estimated to be within 7.3% to 7.5%.

Third Quarter Guidance

The company expects third quarter earnings per share in the range of 90 cents to 95 cents.

Our Take

We are impressed by the company's better-than-expected financial performances and higher earnings outlook for 2013. In the near term, the company is taking several initiatives like refining menu pricing, growing units and improving restaurant operations and services to drive traffic and sales in future quarters. However, cost inflation, uncertain economic conditions, bad weather conditions, remain challenges, going forward.

Cracker Barrel carries a Zacks Rank #4 (Sell). Another restaurateur Red Robin Gourmet Burgers Inc. 's ( RRGB ) adjusted earnings in the fourth quarter of 2012 was way ahead of the Zacks Consensus Estimate as well as the year-ago quarter's earnings.

Other restaurant companies like Krispy Kreme Doughnuts, Inc. ( KKD ) with a Zacks Rank #1 (Strong Buy) and Burger King Worldwide, Inc. ( BKW ) with a Zacks Rank #2 (Buy) are expected to perform well, going ahead.



BURGER KING WWD (BKW): Free Stock Analysis Report

CRACKER BARREL (CBRL): Free Stock Analysis Report

KRISPY KREME (KKD): Free Stock Analysis Report

RED ROBIN GOURM (RRGB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BKW , CBRL , KKD , RRGB

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