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Cracker Barrel (CBRL) Falls 26% in a Year: What's Causing It?
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Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) has been bearing the brunt of declining comps due to reduced guest traffic and low consumer spending along with high costs & expenses due to the inflationary environment.
Owing to the headwinds, shares of this American chain of restaurant and gift stores have declined 25.7% in the past year against the Zacks Retail - Restaurants industry’s 3.4% growth.
This currently Zacks Rank #5 (Strong Sell) company delivered a trailing four-quarter negative earnings surprise of 6.5%, on average. Earnings estimates for fiscal 2024 have moved south to $4.92 per share from $5.86 per share over the past 30 days. This depicts analysts' concerns about its growth prospects. The Zacks Consensus Estimate for the company’s fiscal 2023 earnings per share (EPS) indicates a decline of 10.1% from the previous year’s reported levels.
Image Source: Zacks Investment Research
Factors Impeding Growth Prospects
Declining Comps: Comparable store sales are one of the essential metrics defining the growth progress of a company. Cracker Barrel has witnessed increasing comps over the past few quarters, however, in the first quarter of fiscal 2024, the metric declined notably. In the quarter, the comparable store sales (restaurant and retail) declined 2.1% against a 6.5% increase in the year-ago quarter. The decline was attributable to a 7.1% guest traffic decrease due to weaker consumer demand. Also, the comparable store restaurant sales declined 0.5% in the quarter against a 7.1% increase in the year-ago period.
Low Guest Traffic: Given the current economic conditions, Cracker Barrel is witnessing weak consumer demand as it believes that consumers are under economic pressure and are holding onto their discretionary spending. The top line of the company was pressured due to lower guest traffic in the fiscal first quarter of 2024, driven by the impact of inflationary pressures, higher interest rates, higher consumer debt levels, lower savings rates and the risk of recession.
High Costs & Expenses: Despite cost-saving initiatives, higher labor costs due to increased wages and investments in additional labor hours are expected to persistently keep profits under pressure. During the first quarter of fiscal 2024, CBRL witnessed a year-over-year increase in labor and other related expenses and other store operating expenses, as a percentage of total revenues, by 220 basis points (bps) to 37% and 130 bps to 24.7%, respectively. This was driven by higher staffing levels and the investment of additional labor hours to improve the guest experience. For fiscal 2024, Cracker Barrel expects hourly restaurant wage inflation to be in the mid-single digits.
Tepid Q1 Results: Cracker Barrel reported unimpressive first-quarter fiscal 2024 results, wherein earnings and revenues missed the Zacks Consensus Estimate by 34.6% and 0.3%, respectively. Furthermore, the top and the bottom lines declined year over year by 1.9% and 48.5%, respectively, on the back of weak consumer sentiments and lower restaurant traffic. The company’s vulnerability to the inconsistent nature of consumer discretionary spending is affecting its results and is likely to continue for some time.
Key Picks
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.
It has a trailing four-quarter earnings surprise of 28.9%, on average. The stock has gained 55.1% in the past year. The Zacks Consensus Estimate for WING’s 2023 sales and earnings per share (EPS) suggests an increase of 26.3% and 29.7%, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 15.2% in the past year.
The Zacks Consensus Estimate for EAT’s fiscal 2024 sales and EPS indicates a 5.1% and a 26.2% rise, respectively, from the year-ago period’s levels.
The Gap, Inc. (GPS - Free Report) currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 137.9%, on average. The stock has gained 53.3% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales suggests an improvement of 0.9% but EPS suggest a decline of 2.8% from the year-ago period’s levels.
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Cracker Barrel (CBRL) Falls 26% in a Year: What's Causing It?
Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) has been bearing the brunt of declining comps due to reduced guest traffic and low consumer spending along with high costs & expenses due to the inflationary environment.
Owing to the headwinds, shares of this American chain of restaurant and gift stores have declined 25.7% in the past year against the Zacks Retail - Restaurants industry’s 3.4% growth.
This currently Zacks Rank #5 (Strong Sell) company delivered a trailing four-quarter negative earnings surprise of 6.5%, on average. Earnings estimates for fiscal 2024 have moved south to $4.92 per share from $5.86 per share over the past 30 days. This depicts analysts' concerns about its growth prospects. The Zacks Consensus Estimate for the company’s fiscal 2023 earnings per share (EPS) indicates a decline of 10.1% from the previous year’s reported levels.
Image Source: Zacks Investment Research
Factors Impeding Growth Prospects
Declining Comps: Comparable store sales are one of the essential metrics defining the growth progress of a company. Cracker Barrel has witnessed increasing comps over the past few quarters, however, in the first quarter of fiscal 2024, the metric declined notably. In the quarter, the comparable store sales (restaurant and retail) declined 2.1% against a 6.5% increase in the year-ago quarter. The decline was attributable to a 7.1% guest traffic decrease due to weaker consumer demand. Also, the comparable store restaurant sales declined 0.5% in the quarter against a 7.1% increase in the year-ago period.
Low Guest Traffic: Given the current economic conditions, Cracker Barrel is witnessing weak consumer demand as it believes that consumers are under economic pressure and are holding onto their discretionary spending. The top line of the company was pressured due to lower guest traffic in the fiscal first quarter of 2024, driven by the impact of inflationary pressures, higher interest rates, higher consumer debt levels, lower savings rates and the risk of recession.
High Costs & Expenses: Despite cost-saving initiatives, higher labor costs due to increased wages and investments in additional labor hours are expected to persistently keep profits under pressure. During the first quarter of fiscal 2024, CBRL witnessed a year-over-year increase in labor and other related expenses and other store operating expenses, as a percentage of total revenues, by 220 basis points (bps) to 37% and 130 bps to 24.7%, respectively. This was driven by higher staffing levels and the investment of additional labor hours to improve the guest experience. For fiscal 2024, Cracker Barrel expects hourly restaurant wage inflation to be in the mid-single digits.
Tepid Q1 Results: Cracker Barrel reported unimpressive first-quarter fiscal 2024 results, wherein earnings and revenues missed the Zacks Consensus Estimate by 34.6% and 0.3%, respectively. Furthermore, the top and the bottom lines declined year over year by 1.9% and 48.5%, respectively, on the back of weak consumer sentiments and lower restaurant traffic. The company’s vulnerability to the inconsistent nature of consumer discretionary spending is affecting its results and is likely to continue for some time.
Key Picks
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector.
Wingstop Inc. (WING - Free Report) sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks Rank #1 stocks here.
It has a trailing four-quarter earnings surprise of 28.9%, on average. The stock has gained 55.1% in the past year. The Zacks Consensus Estimate for WING’s 2023 sales and earnings per share (EPS) suggests an increase of 26.3% and 29.7%, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 15.2% in the past year.
The Zacks Consensus Estimate for EAT’s fiscal 2024 sales and EPS indicates a 5.1% and a 26.2% rise, respectively, from the year-ago period’s levels.
The Gap, Inc. (GPS - Free Report) currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 137.9%, on average. The stock has gained 53.3% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales suggests an improvement of 0.9% but EPS suggest a decline of 2.8% from the year-ago period’s levels.