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Cracker Barrel (CBRL) Beats Q3 Earnings Estimates, Stock Down

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Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) reported mixed third-quarter fiscal 2022 (ended Apr 29, 2022) results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same. The top line rose year over year, while the bottom line declined on a year-over-year basis.

Following the results, the company’s shares dropped 5.8% during trading hours on Jun 7. Negative investor sentiments were witnessed as the company cited a challenging macro environment, including deteriorating consumer sentiment, high gas prices and inflationary pressures. The company anticipates the high inflation environment to dent its 2022 margins.  

Earnings & Revenues

The company’s fiscal third-quarter adjusted earnings per share (EPS) of $1.29, beating the Zacks Consensus Estimate of $1.21. In the prior-year quarter, the company had reported an adjusted EPS of $1.51.

 

Cracker Barrel reported revenues of $790.2 million during the quarter under review, which missed the consensus mark of $790.4 million. The top line increased 10.8% on a year-over-year basis. The company benefited from a rise in dine-in traffic, retail sales growth and solid off-premise retention levels.

Comps Details

Comparable store restaurant sales inched up 1.3% in the reported quarter compared with the same period in fiscal 2019. Comparable store restaurant sales increased 10.9% year over year. Comparable retail sales rose 21.6% and 9.7% compared with the same period in 2019 and 2021, respectively.
    
During the fiscal third quarter, the company stated that comparable store off-premise sales remained significantly elevated from pre-COVID levels.

Operating Highlights

During the fiscal third quarter, the cost of goods sold (exclusive of depreciation and rent) came in at $250 million compared with $205.4 million reported in the prior-year quarter. As a percentage of total revenues, the cost of goods sold (exclusive of depreciation and rent) increased 280 basis points (bps) year over year to 31.6%. General and administrative expenses during the quarter came in at $40.2 million compared with $37.4 million reported in the prior-year quarter.

Adjusted operating income in the fiscal third quarter totaled $33.6 million compared with $55.7 million reported in the prior-year quarter. The adjusted operating margin was 4.3% compared with 7.8% in the prior-year quarter. The downside was mainly driven by elevated inflation, increased restaurant management headcount and improved hourly staffing levels.

Balance Sheet

As of Apr 29, 2022, cash and cash equivalents were $24.8 million compared with $384.6 million as of Apr 30, 2021.

Inventory at the end of the fiscal third quarter amounted to $192.4 million, up from $132.4 million at the end of third-quarter fiscal 2021.

Long-term debt amounted to $372.9 million at the end of the quarter compared with $575.3 million at the end of the prior-year quarter.

For the nine months ended Apr 29, 2022, net cash provided by operating activities was $106.4 million compared with $212.5 million reported in the year-ago period.

The company declared a cash dividend of $1.30 per share. The dividend will be paid out on Aug 5, 2022, to shareholders on record as of Jul 15, 2022. The company’s board of directors announced an additional $200.0-million stock buyback program.

Q4 Outlook

In the fiscal fourth quarter, the company anticipates high inflation and lower consumer confidence to act as a headwind. Adjusted operating margin in the fiscal fourth quarter is anticipated at approximately 4-4.5% of total revenues. Operating margins in the fiscal fourth quarter are expected to bear the impact of significant commodity, wage and other operating expenses inflation. For the fiscal fourth quarter, the company anticipates commodity inflation of approximately 16-18% and wage inflation of approximately 8-10%.

Capital expenditures in fourth-quarter fiscal 2022 are anticipated at approximately $30 million. The effective tax rate for the fourth quarter of fiscal 2022 is anticipated to be nearly 8%. During the quarter, the company expects to open six new Maple Street Biscuit Company locations.

Zacks Rank & Key Picks

Cracker Barrel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Retail-Wholesale sector are MarineMax, Inc. (HZO - Free Report) , BBQ Holdings, Inc. (BBQ - Free Report) and Arcos Dorados Holdings Inc. (ARCO - Free Report) .

MarineMax sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 32.8%, on average. Shares of the company have declined 12.1% in the past year.

The Zacks Consensus Estimate for MarineMax’s 2022 sales and EPS suggests growth of 16% and 21.5%, respectively, from the year-ago period’s levels.

BBQ Holdings carries a Zacks Rank #2 (Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have decreased 19% in the past year.

The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 46.1% and 67.6%, respectively, from the year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2. ARCO has a long-term earnings growth of 34.4%. Shares of the company have increased 18.6% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 83.3%, respectively, from the year-ago period’s levels.

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