Cracker Barrel (CBRL) Q1 Earnings Top, Revenues Lag Estimates

Shares of Cracker Barrel Old Country Store, Inc. CBRL declined more than 4% on Nov 26, after reporting mixed first-quarter fiscal 2020 results. Although its earnings surpassed the Zacks Consensus Estimate, revenues missed the same. With this, the company posted earnings beat for the fifth straight quarter.

Adjusted earnings came in at $2.15 per share, which outpaced the Zacks Consensus Estimate of $2.00 by 7.5%. The bottom line also increased 9.7% year over year owing to higher operating margin.

Revenues of $749 million missed the consensus mark of $755.2 million by 0.8% but increased 2.1% from the prior-year quarter figure. The upside was primarily due to positive comparable restaurant sales and the opening of four new Cracker Barrel locations.

Comps Details

Comparable store restaurant sales increased 2.1% in the reported quarter courtesy of a 3.6% uptick in average check, partially offset by a 1.5% decrease in comparable store restaurant traffic. Also, the average menu price rose about 2.3%.

However, comparable store retail sales in the fiscal first quarter fell 0.9% compared to the prior-year quarter.

Operating Highlights

Operating income in the fiscal first quarter totaled $63.4 million, up 3% year over year. Operating margin was 8.5%, up 10 basis points from the prior-year quarter.

The improvement in operating margin was led by reductions in cost of goods sold, which were offset by an increase in other related expenses.

Balance Sheet

As of Nov 1, 2019, cash and cash equivalents were $43.2 million, down from $101.6 million as of Nov 2, 2018. Long-term debt amounted to $485 million at the end of the quarter, up from $400 million in the prior-year quarter.

Inventory at the end of the quarter under review amounted to $188.7 million, up from $181.6 million at the end of first-quarter fiscal 2018.

Net cash provided by operating activities was $44.8 million in the fiscal first quarter, compared with $59.6 million a year ago.

Additionally, in the quarter under review, the company returned $46.3 million to its shareholders through dividends ($32.1 million) and share repurchase ($14.2 million).

Fiscal 2020 Guidance

Cracker Barrel expects total revenues in the range of $3.15-$3.2 billion. The company expects comparable store restaurant sales and retail sales to grow by approximately 2% and 1%, respectively. It continues to expect menu pricing to be approximately 2%.

The company expects capital expenditure between $115 million and $125 million and an effective tax rate of 16-17%.

Furthermore, Cracker Barrel aims to open six Cracker Barrel stores and one Maple Street location in fiscal 2020. It also has plans to convert six of the seven Holler & Dash locations to Maple Street in the coming months.

Management continues to project GAAP earnings per share of $8.5-$8.65 (including the impact of investment in Punch Bowl Social and other non-recurring items) for fiscal 2020.

Cracker Barrel currently carries a Zacks Rank #2 (Buy).

Key Picks

Some other top-ranked stocks from the Zacks Retail – Restaurants industry are Chuy's Holdings, Inc. CHUY, Chipotle Mexican Grill, Inc. CMG and Dunkin' Brands Group, Inc. DNKN. Chuy’s sports a Zacks Rank #1 (Strong Buy), while Chipotle and Dunkin’ carry a Zacks Rank #2. You can the complete list of today’s Zacks #1 Rank stocks here.

Chuy’s, Chipotle and Dunkin’ have an impressive long-term earnings growth rate of 17.5%, 19.6% and 9.8%, respectively.

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