Cracker Barrel Old Country Store Inc
. (
CBRL
) reported first quarter 2012 adjusted earnings of $1.09 per
share, outpacing the Zacks Consensus Estimate of 97 cents.
Quarterly earnings exclude a charge of 6 cents related to the proxy
war with
Biglari Holdings Inc.
(
BH
). The better-than-expected results were driven by sequential
upside in restaurant and retail sales.
On a GAAP basis, the company reported earnings of $1.03 per
share, surpassing the year-ago quarter earnings of $1.01 per share.
Total revenue of the company remained flat year over year at $598.4
million, due to lower comps, which were somewhat compensated by
unit growth.
Quarter Performance
Both restaurant revenue and retail revenue remained flat year
over year at $481.5 million and $116.9 million respectively.
On a comparable basis, restaurant sales dropped 1.6% due to a
3.8% decline in traffic, partially offset by higher average check
(up 2.2%). The upside in average check was driven by a 2.1% rise in
menu prices and a favorable mix impact of 0.1%. However, guest
count remained low given the prevailing economic challenges.
Comparable retail sales in the quarter also dipped 1.3%.
Gross margin in the quarter plunged to 68.8% from 70.0% in the
year-ago quarter, based on higher cost of goods sold (up 1.1%).
Moreover, operating margin slipped 10 basis points (bps) year over
year to 7.5% in the quarter, attributable to a 60 bps dip in labor
and related expense and 50 bps decrease in other store operating
expenses, partially offset by 10 bps spike general and
administrative expenses and a 5.5% rise in food cost prices.
Store Update
During the quarter, Cracker Barrel opened 3 new restaurants.
Thus, at the end of the first quarter, the company had 606 owned
locations.
In 2012, Cracker Barrel plans to open 15 new units.
Financial Position
At the end of first quarter of 2012, Cracker Barrel had cash and
cash equivalents of approximately $49.8 million compared with $52.3
million in fiscal 2011. The company also reduced its long-term debt
to $545.4 million from $550.1 million in 2011.
Outlook
For 2012, the company continues to expect total revenue in the
range of $2.55 billion to $2.6 billion and comparable restaurant
and retail sales to be up flat to 1.5%. The adjusted earnings per
share are projected in the range of $4.10 to $4.25. Cracker Barrel
expects commodity cost pressure to continue in 2012, and foresee
inflation of 5.5%-6.5%. Operating margin is estimated to be in the
single-digit range of 7% to 7.2%.
Our Take
We expect estimates to go up in the coming days, as the company
reported better-than-expected earnings results and encouraging
sales results for the first three week of November. Cracker Barrel
is taking several initiatives like media spending, refined menu and
pricing strategies and improved restaurant operations and services
to drive traffic and sales. Moreover, the company continues to make
efforts to control cost. However, cost inflation and
uncertain economic conditions, which result in lower traffic,
remain challenges going forward. The Zacks Consensus Estimates for
2012 and 2013 are pegged at $4.19 and $4.54 per share,
respectively. Cracker Barrel, which competes with
Domino's Pizza, Inc
(
DPZ
), currently retains a Zacks #2 Rank (short-term Buy rating). We
also reiterate our long-term Neutral recommendation on the
stock.
BIGLARI HOLDING (
BH
): Free Stock Analysis Report
CRACKER BARREL (
CBRL
): Free Stock Analysis Report
DOMINOS PIZZA (
DPZ
): Free Stock Analysis Report
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