Cracker Barrel Old Country Store Inc. (CBRL) reported third quarter 2011 adjusted earnings of 58 cents per share, below the Zacks Consensus Estimate of 66 cents per share. The earnings exclude a benefit of 6 cents related to the sale of a property. The lower-than-expected results were due to higher commodity costs.
On a GAAP basis, the company reported earnings of 64 cents, beating the year-ago quarter earnings of 61 cents.
Quarter Performance
Total revenue inched up 0.7% year over year to $582.5 million, but missed the Zacks Consensus Estimate of $594 million. The year-over-year upside in revenues was due to a 0.6% rise in restaurant sales and 1.2% spike in retail sales.
On a comparable basis, restaurant sales dropped 0.3% due to a 2.6% decline in traffic, partially offset by higher average check of 2.3%. Comparable retail sales in the third quarter grew 0.1%.
Gross margin in the quarter plunged 69.1% compared with 70.1% in the year-ago quarter, as cost of goods sold spiked 4%. Moreover, operating margin slipped 10 basis points (bps) year over year to 5.4% in the quarter, attributed to higher labor and other related expenses and other store operating expenses, partially offset by lower general and administrative expenses.
Store Update
During the quarter, Cracker Barrel opened 4 new restaurants. Thus, at the end of the quarter, the company had 601 owned locations.
Financial Position
At the end of the third quarter, Cracker Barrel had cash and cash equivalents of approximately $62.5 million compared with $47.7 million in fiscal 2010. The company also reduced its long-term debt to $568.5 million from $573.7 million in 2010.
Outlook
For the fourth quarter of 2011, the company expects total revenue growth in the range of 1.0% to 2.5%. The guidance is premised on the opening of three new units during the quarter. Comparable restaurant sales are estimated to be flat while same-store retail sales are estimated to increase within the range of 1.0%–3.0%.
For fiscal 2011, Cracker Barrel trimmed its earnings outlook. The company now expects earnings per share in the range of $3.80 to $3.90 (previous guidance $3.95 to $4.10)
Our Take
We expect estimates to go down in the coming days, as the company reported third quarter results below expectations and also reduced its fiscal 2011 outlook, based on continuing pressure from cost inflation. The Zacks Consensus Estimates for 2011 and 2012 are pegged at $3.85 and $4.60, respectively.
One of Cracker Barrel’s primary competitors, Red Robin Gourmet Burgers Inc.(RRGB) reported first quarter 2011 adjusted earnings of 58 cents per share, comprehensively beating the Zacks Consensus Estimate of 24 cents on the back of higher revenue and margin expansion.
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