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Cracker Barrel (CBRL) Stock Down 28% in a Year: Here's Why

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Shares of Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) have declined 28.3% in the past year compared with the industry’s 6.4% decline. The downside was primarily caused by inflationary pressure and staffing challenges.

This Zacks Rank #5 (Strong Sell) company reported first-quarter fiscal 2023 results, with earnings missing the Zacks Consensus Estimate. The company posted adjusted earnings per share (EPS) of 99 cents, missing the Zacks Consensus Estimate of $1.27. In the year-ago quarter, CBRL reported an adjusted EPS of $1.52.

In the past 30 days, earnings estimates for fiscal 2023 have gone down 10.4% to $5.77 per share. Let’s discuss the factors hurting the company’s performance.

Zacks Investment Research
Image Source: Zacks Investment Research

Primary Concerns

Cracker Barrel’s performance has been affected by commodity and wage inflation, supply chain challenges and a challenging macro environment.

During the first quarter of fiscal 2023, the total cost of goods sold (as a percentage of total revenues) came in at 33.5% compared with the 30.9% reported in the prior-year quarter. The increase was primarily driven by commodity inflation and elevated freight costs.

During the quarter, the adjusted operating margin was 3.6% compared with 5.9% in the prior-year quarter. The downside was mainly driven by commodity, wage and other expense inflation and elevated maintenance expense.

The company anticipates high inflation and lower consumer confidence to act as a headwind. Although the company has been strategically increasing prices to mitigate the impact of inflation, it expects commodity inflation to be 8-9% (with sequential moderation) and wage inflation of 5-6% in fiscal 2023. The decline in traffic from pre-pandemic levels is also a concern. The company intends to monitor the situation regularly to gauge the impacts of COVID-19.

High debt remains a concern for the company. Long-term debt at the end of the fiscal first quarter came in at $483.7 million compared with $423.2 million reported in the previous quarter. The times-interest-earned ratio at the end of the fiscal first quarter came in at 12.7x compared with 15.9x reported in the previous quarter.

The company ended the fiscal first quarter with cash and cash equivalents of $38.7 million (compared with $45.1 million reported in the previous quarter), which may not be enough to manage the high debt level.

Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Wingstop Inc. (WING - Free Report) , Tecnoglass Inc. (TGLS - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) .

Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 12%. Shares of WING have lost 20.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.4% and 16.1%, respectively, from the year-ago period’s estimated levels.

Tecnoglass currently carries a Zacks Rank #2 (Buy). TGLS has a trailing four-quarter earnings surprise of 26.9%, on average. Shares of the company have gained 24.9% in the past year.

The Zacks Consensus Estimate for TGLS’ 2023 sales and EPS suggests growth of 11.2% and 9%, respectively, from the year-ago period’s estimated levels.

Yum China currently carries a Zacks Rank #2. YUMC has a long-term earnings growth rate of 11%. Shares of YUMC have gained 20.4% in the past year.

The Zacks Consensus Estimate for Yum China’s 2023 sales and EPS suggests growth of 14.3% and 57.8%, respectively, from the year-ago period’s estimated levels.

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