A month has gone by since the last earnings report for Cracker Barrel Old Country Store (
CBRL Quick Quote CBRL - Free Report) . Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cracker Barrel due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Cracker Barrel Q3 Earnings Top Estimates, Revenues Lag
Cracker Barrel 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.
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. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -31.3% due to these changes.
At this time, Cracker Barrel has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Cracker Barrel has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.