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Cracker Barrel Fights Challenges with Initiatives, Cost Cuts
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On May 29, we issued an updated research report on Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) .
Cracker Barrel’s distinctiveness in the retail-restaurant sector lies in the fact that apart from serving food, its restaurant establishments have old-country feel along with unique gift shops.
Last week, the company posted mixed third-quarter fiscal 2017 results wherein the bottom line beat the Zacks Consensus Estimate, while the top line lagged the same.
Prospects
In fourth-quarter fiscal 2016, Cracker Barrel launched its new fast casual concept, Holler & Dash Biscuit House, with operating hours limited to breakfast and lunch time. It offers the combination of biscuit-inspired entrées and a unique portfolio of beverages. Although there will be no likely financial impact in the current year, this new concept is expected to add considerably to the top line and boost shareholder value over the long term.
Cracker Barrel also plans to expand its long-standing brand’s footprint in new and developing markets. Continuous expansion plans of the company reinstate our belief in the brand’s demand across the country.
We note that Cracker Barrel relies heavily on seasonal promotions and limited time offers to boost its top-line performance because they are appealing to both regular users and less-frequent guests. Going forward, the company aims to continue investing in new product news that will drive business frequency.
On the retail side, the company continues to innovate and introduce novelty in its merchandise assortments. Despite a likely challenged retail environment in fiscal 2017, it expects its summer merchandise to resonate with its guests across all generations and anticipates continued offering of quality products to somewhat boost sales.
Meanwhile, in a bid to address the challenges of the competitive restaurant industry, Cracker Barrel undertakes extensive marketing efforts, mainly focusing on the brand’s differentiation, menu offering and its value. In fact, the company expects its extensive advertising and marketing efforts to favor sales mix in the near term.
Besides, Cracker Barrel has an effective cost cutting mechanism in place and undertakes various measures to keep costs under control. All these efforts coupled with ongoing commodity cost deflation are helping it to make solid progress toward its cost reduction targets. Additionally, these initiatives are expected to aid the company in combating some of the wage inflation pressures. Moving ahead, for fiscal 2017, the company looks forward to deliver between $18 million and $20 million in annual cost savings.
Concerns
Currently, the company operates more than 640 Cracker Barrel outlets across the nation and anticipates adding six stores throughout fiscal 2017.
However, Cracker Barrel loses out in terms of international presence. While the other restaurant chains like Yum! Brands, Inc. (YUM - Free Report) , McDonalds Corporation (MCD - Free Report) and Papa John’s International, Inc. (PZZA - Free Report) are following aggressive global expansion policies, Cracker Barrel seems to be weak on this front.
In fiscal 2017, the company projects comparable store restaurant sales to be flat to up 0.5%, given soft year-to-date sales results along with the ongoing challenged restaurant environment driving continued soft traffic trends. Additionally, comparable store retail sales are expected to be down roughly 3.5%, which reflects the company's more cautious expectations for the fiscal fourth quarter.
Resultantly, shares of the company have underperformed the Zacks categorized Retail–Restaurants industry in the past six months. While shares of Cracker Barrel have gained only 1.4%, the industry recorded a gain of 11.7%.
Moreover, higher labor costs along with expenses related to various sales boosting initiatives as well as opening of new units are anticipated to continue hurting margins.
Bottom Line
Going forward, we expect the company’s enhanced marketing efforts, promotional offerings, new retail merchandise, focus on unit expansion and menu innovation along with cost-cutting initiatives to help fight revenue and cost woes.
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Cracker Barrel Fights Challenges with Initiatives, Cost Cuts
On May 29, we issued an updated research report on Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) .
Cracker Barrel’s distinctiveness in the retail-restaurant sector lies in the fact that apart from serving food, its restaurant establishments have old-country feel along with unique gift shops.
Last week, the company posted mixed third-quarter fiscal 2017 results wherein the bottom line beat the Zacks Consensus Estimate, while the top line lagged the same.
Prospects
In fourth-quarter fiscal 2016, Cracker Barrel launched its new fast casual concept, Holler & Dash Biscuit House, with operating hours limited to breakfast and lunch time. It offers the combination of biscuit-inspired entrées and a unique portfolio of beverages. Although there will be no likely financial impact in the current year, this new concept is expected to add considerably to the top line and boost shareholder value over the long term.
Cracker Barrel also plans to expand its long-standing brand’s footprint in new and developing markets. Continuous expansion plans of the company reinstate our belief in the brand’s demand across the country.
We note that Cracker Barrel relies heavily on seasonal promotions and limited time offers to boost its top-line performance because they are appealing to both regular users and less-frequent guests. Going forward, the company aims to continue investing in new product news that will drive business frequency.
On the retail side, the company continues to innovate and introduce novelty in its merchandise assortments. Despite a likely challenged retail environment in fiscal 2017, it expects its summer merchandise to resonate with its guests across all generations and anticipates continued offering of quality products to somewhat boost sales.
Meanwhile, in a bid to address the challenges of the competitive restaurant industry, Cracker Barrel undertakes extensive marketing efforts, mainly focusing on the brand’s differentiation, menu offering and its value. In fact, the company expects its extensive advertising and marketing efforts to favor sales mix in the near term.
Besides, Cracker Barrel has an effective cost cutting mechanism in place and undertakes various measures to keep costs under control. All these efforts coupled with ongoing commodity cost deflation are helping it to make solid progress toward its cost reduction targets. Additionally, these initiatives are expected to aid the company in combating some of the wage inflation pressures. Moving ahead, for fiscal 2017, the company looks forward to deliver between $18 million and $20 million in annual cost savings.
Concerns
Currently, the company operates more than 640 Cracker Barrel outlets across the nation and anticipates adding six stores throughout fiscal 2017.
However, Cracker Barrel loses out in terms of international presence. While the other restaurant chains like Yum! Brands, Inc. (YUM - Free Report) , McDonalds Corporation (MCD - Free Report) and Papa John’s International, Inc. (PZZA - Free Report) are following aggressive global expansion policies, Cracker Barrel seems to be weak on this front.
In fiscal 2017, the company projects comparable store restaurant sales to be flat to up 0.5%, given soft year-to-date sales results along with the ongoing challenged restaurant environment driving continued soft traffic trends. Additionally, comparable store retail sales are expected to be down roughly 3.5%, which reflects the company's more cautious expectations for the fiscal fourth quarter.
Resultantly, shares of the company have underperformed the Zacks categorized Retail–Restaurants industry in the past six months. While shares of Cracker Barrel have gained only 1.4%, the industry recorded a gain of 11.7%.
Moreover, higher labor costs along with expenses related to various sales boosting initiatives as well as opening of new units are anticipated to continue hurting margins.
Bottom Line
Going forward, we expect the company’s enhanced marketing efforts, promotional offerings, new retail merchandise, focus on unit expansion and menu innovation along with cost-cutting initiatives to help fight revenue and cost woes.
Cracker Barrel carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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