Cracker Barrel (CBRL)
The stock price for Cracker Barrel Old Country Store (CBRL: Charts, News, Offers) has risen over 60% in the last twelve months and the Cracker Barrel fiscal 2010 3Q report showed why investors are high on this stock as earnings-per-share increased by 17%. The company reported a profit of $14.4 million, translating to $.61 a share as compared with $.52 per share a year ago. Total revenue for the restaurant chain was $578.2 million and beat forecast estimates of 58 cents and $577 million.
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Stock Analysis
This year, Cracker Barrel is celebrating 40 years of country kitsch. Cracker Barrel serves home cooked, southern-style menu items such as meatloaf, grits, country fried steak, chicken n’ dumplings and more. There are almost 600 Cracker Barrel restaurant locations, each with a “country store” where guests can peruse games, trinkets, and entertainment offerings all reminiscent of America’s country heritage. Country store products range from audio books to brain teaser puzzles to country music such as Wynonna Judd’s Love Heals album being offered exclusively at Cracker Barrel country stores. Most Cracker Barrel customers also enjoy the wicker rocking chairs that line the porch in front of the store. The country store is an integral part of the relaxed fun that characterizes the Cracker Barrel experience while adding another revenue stream for the company.
A major component of the Cracker Barrel market strategy has been to place restaurant locations along interstate highways. In fact, it seems natural to expect a truck stop and a Cracker Barrel at every major exit – especially down south. A large part of the Cracker Barrel customer base is travellers, so much so that statistics like the price of gasoline and “vehicle miles travelled” are a good indicator for Cracker Barrel revenue. More families than last year are planning to hit the road on vacation this summer and that bodes well for Cracker Barrel. Even though gasoline prices have crept up over the past year, gas still remains relatively cheap, and Cracker Barrel will benefit. The restaurant’s new “seat to eat” initiative that focuses on getting customers through the door and eating in 14 minutes will also help to make Cracker Barrel more attractive to consumers.
So why so much success at a time when consumer spending is slow? Cracker Barrel CEO, Mike Woodhouse has a couple of theories: high quality meals at affordable prices and staying true to the brand. Woodhouse stated that Cracker Barrel does not have to resort to gimmicks such as discounting or shrinking portions as competitors such as Chili’s (EAT: Charts, News, Offers) and Applebees (DIN: Charts, News, Offers) have had to do over the past year. Furthermore, Cracker Barrel has been successful in keeping the average entree price around $9, while other casual dining, particularly “bar and grill” chains have seen their entree price approach $12 per plate. The fact is that because Cracker Barrel has focused on efficiency and cost savings, the restaurant might have the ability to raise prices, increase profits and not lose any market share.
Cracker Barrel has at least one other way to generate revenue: real estate. Henry Sanders of Aston/River Road Divident All Cap Value Fund said, “They [Cracker Barrel] sold about a dozen of their stores a few months back, and if you look at the prices they got — about $3 million per store — and extrapolate it, that adds up to well over a billion dollars in real estate that doesn’t show up on the balance sheet but gives us a high degree of comfort.” Cracker Barrel outright owns the majority of the property on which their restaurants sit, this is an indicator of low debt and helps the asset side of the balance sheet.
More News about Cracker Barrel:
- 2010 Fiscal Outlook: 17% increase in 3Q EPS
- Menu Update: Low Country Boil adds new flavor
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Joshua Caucutt is long-time market follower and finance writer. Debt management, entrepreneurship and government economic policy are areas of emphasis. He regularly contributes to the Stock of the Day analysis.
