Cracker Barrel’s Earnings Call: Growth Amid Challenges

Cracker Barrel Old Country Store ((CBRL)) has held its Q3 earnings call. Read on for the main highlights of the call.

Cracker Barrel’s recent earnings call reflected a balanced sentiment, highlighting both positive growth and ongoing challenges. The company reported continued growth in restaurant sales, effective cost management, and successful loyalty program developments. However, it also faced challenges with declining retail sales, tariff impacts, and increased operating expenses. Despite these hurdles, a strong start to the fourth quarter suggests potential recovery and improvement.

Positive Comparable Store Restaurant Sales

Cracker Barrel reported positive comparable store restaurant sales for the fourth consecutive quarter, showcasing a consistent growth trend. This achievement underscores the company’s resilience and ability to attract customers despite broader economic challenges.

Adjusted EBITDA Exceeds Expectations

The company’s adjusted EBITDA for the third quarter surpassed expectations, highlighting effective cost management and operational performance. This financial metric is a key indicator of Cracker Barrel’s ability to maintain profitability while navigating a complex economic environment.

Improvement in Employee Metrics

Cracker Barrel saw significant improvements in employee metrics, with hourly turnover improving by approximately 14 percentage points and internal net sentiment scores rising by 2.3% compared to the prior year. These improvements suggest a more stable and satisfied workforce, which is crucial for operational success.

Loyalty Program Achievements

The company reached its fiscal 2025 target of acquiring 8 million Cracker Barrel Rewards members, with over one-third of tracked sales linked to loyalty members. This milestone indicates the effectiveness of the loyalty program in driving sales and customer retention.

Successful Back House Optimization Initiative

Phase one of the back house optimization initiative was successfully implemented, resulting in improved quality, profitability, and positive employee feedback. This initiative is part of Cracker Barrel’s strategy to enhance operational efficiency and customer satisfaction.

Strong Start to Q4

The fourth quarter began on a strong note, driven by the successful Campfire promotion and improved sales trends. This positive start bodes well for the company’s performance in the upcoming months.

Retail Revenue Decline

Despite positive restaurant sales, retail revenue decreased by 2.7% compared to the previous year, with comparable store retail sales dropping by 3.8%. This decline highlights ongoing challenges in the retail segment, which the company needs to address.

Impact of Tariffs on Retail Products

Approximately one-third of Cracker Barrel’s retail products are sourced from China, with tariffs expected to impact Q4 EBITDA by about $5 million. This external factor poses a significant challenge to the company’s profitability.

February Traffic Challenges

The quarter began with soft traffic in February due to weather and macroeconomic uncertainty, which affected overall traffic performance. This highlights the sensitivity of the business to external conditions.

Increased Operating Expenses

Operating expenses increased by 80 basis points, driven by higher advertising expenses and depreciation. Managing these costs will be crucial for maintaining profitability in the future.

Forward-Looking Guidance

Looking ahead, Cracker Barrel anticipates total revenue for Fiscal 2025 to range between $3.45 billion and $3.5 billion, with an expected full-year adjusted EBITDA between $215 million and $225 million. The company also forecasts commodity and hourly wage inflation in the mid-2% range. These projections indicate cautious optimism as the company navigates ongoing economic challenges.

In summary, Cracker Barrel’s earnings call presented a mixed but hopeful outlook. While the company faces challenges such as declining retail sales and tariff impacts, its strong restaurant sales and effective cost management offer a positive counterbalance. The company’s forward-looking guidance reflects cautious optimism, with expectations for continued growth and improvement.