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Factors Setting the Tone for Cracker Barrel (CBRL) Q1 Earnings

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Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) is scheduled to report first-quarter fiscal 2019 results on Nov 27. In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 17.7%.

How Are Estimates Faring?

Let’s look at the estimate revision trend in order to get a clear picture of what analysts are thinking about Cracker Barrel prior to the earnings release. For the quarter to be reported, the Zacks Consensus Estimate is pegged at $1.91, which remained flat over the past 60 days. This reflects a 0.5% decline from $1.92 in the year-ago quarter. Revenues are expected to come in at $717 million, up 0.9% year over year.

Factors at Play

In the first quarter, Cracker Barrel is expected to witness top-line growth, courtesy of increase in sales at the restaurant and retail divisions. The Zacks Consensus Estimate for restaurant sales stands at $581 million, up 0.5% year over year. The same for retail sales is pegged at $136 million, up 3% from the prior-year quarter number.

Meanwhile, Cracker Barrel is continuously focusing on rejuvenating its menu, which is the backbone of the company’s riveting growth potential. Expansion of units, extensive marketing efforts, seasonal promotions, enhanced focus on retail business along with cost-saving initiatives bode well for the company.

In order to drive traffic, Cracker Barrel relies heavily on seasonal promotions and limited-time offers to boost its top-line performance as they are appealing to both regular users and less-frequent guests. In fiscal 2019, the company aims to meet consumers' need for convenience via growth in its off-premise business. By introducing catering menu offering and the in-store training of hourly employees, Cracker Barrel plans to enhance its off-premise platform.

Despite cost-saving initiatives, higher labor costs due to increased wages are expected to continue keeping profits under pressure. Also, the company is apprehensive that inflationary costs are likely to be incurred. Meanwhile, management is making significant investments to support the training and launch of several initiatives as well as its value testing. Although these initiatives are anticipated to drive the top line in fiscal 2019, initial investments are likely to dent margins. Expenses pertaining to the opening of units are also expected to persistently hurt margins.

Cracker Barrel Old Country Store, Inc. Price and Consensus

What Does the Zacks Model Unveil?

Our proven model does not show that Cracker Barrel is likely to beat earnings estimates in first-quarter fiscal 2019. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Cracker Barrel has an Earnings ESP of 0.00% and a Zacks Rank #3.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the Retail-Wholesale space, which per our model have the right combination of elements to post earnings beat in their respective quarters.

RH (RH - Free Report) has an Earnings ESP of +1.65% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zumiez Inc. (ZUMZ - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank #3.

Starbucks Corporation (SBUX - Free Report) has an Earnings ESP of +0.18% and a Zacks Rank #3.

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