Cracker Barrel’s Earnings Call Highlights Challenges and Strategic Shifts

Cracker Barrel Old Country Store ((CBRL)) has held its Q1 earnings call. Read on for the main highlights of the call.

Cracker Barrel Faces Challenging Quarter Amid Declines and Strategic Shifts

The recent earnings call for Cracker Barrel Old Country Store painted a picture of a challenging period for the company. The call highlighted declines in revenue, traffic, and earnings, overshadowing the positive steps being taken in leadership changes, menu innovation, and cost-saving initiatives. Despite efforts to address these issues, the downturn in key financial metrics and operational challenges weighed heavily on the company’s overall performance.

Leadership and Operational Changes

Cracker Barrel has made significant operational leadership changes, promoting Doug Hisel to Senior Vice President of Store Operations. This move underscores the company’s focus on flawless food, operational precision, and shared accountability. These changes have already led to improvements in guest metrics, such as Google star ratings and service quality, signaling a positive shift in customer experience.

Loyalty Program Growth

The Cracker Barrel Rewards Loyalty Program is experiencing impressive growth, with over 10 million members now accounting for 40% of tracked sales. This program not only helps drive traffic but also provides valuable feedback from guests, which is crucial for the company’s strategic planning and customer relationship management.

Introduction of New Menu Items

Cracker Barrel’s introduction of new and returning menu items, such as the Breakfast Burger and Country Fried Turkey, has been well-received by guests. This positive feedback suggests potential for increased traffic, as these items resonate well with the customer base, offering a fresh and appealing dining experience.

Cost-Saving Initiatives

In response to financial pressures, Cracker Barrel is implementing cost-saving measures, including restructuring the corporate support center and reducing planned advertising spend. These initiatives are expected to yield General and Administrative (G&A) savings of approximately $20 million to $25 million annually, providing some relief to the company’s financial strain.

Decline in Revenue and Traffic

The company reported a 5.7% decline in total revenue for the first quarter, with comparable store restaurant sales decreasing by 4.7% and traffic declining by 7.3%. These figures highlight the significant challenges Cracker Barrel faces in maintaining its customer base and revenue streams in a competitive market.

Challenges with Back-of-House Initiative

Cracker Barrel’s back-of-house initiative encountered execution challenges at scale, leading to inconsistencies in food quality. This prompted a decision to revert to previous processes, impacting anticipated cost savings and highlighting the difficulties in implementing large-scale operational changes.

Retail Segment Struggles

The retail segment of Cracker Barrel also faced difficulties, with a 9.4% decrease in retail revenue and an 8.5% drop in comparable store retail sales. These declines were driven by reduced traffic and an unfavorable retail mix, further complicating the company’s financial landscape.

Negative Earnings Per Share

The financial strain is evident in the negative earnings per share, which stood at negative $0.74, and an adjusted EBITDA of $7.2 million, significantly lower than the previous year. These figures reflect the broader challenges facing Cracker Barrel in maintaining profitability.

Forward-Looking Guidance

Looking ahead, Cracker Barrel provided guidance for fiscal 2026, projecting total revenue between $3.2 billion and $3.3 billion. The company anticipates commodity inflation of 2.5% to 3.5% and adjusted EBITDA ranging from $70 million to $110 million. Additionally, capital expenditures are expected to be reduced to between $110 million and $125 million, with a restructuring aimed at achieving annualized G&A savings of approximately $20 million to $25 million.

In summary, Cracker Barrel’s earnings call reflects a period of significant challenges, marked by declines in key financial metrics and operational hurdles. However, the company is taking proactive steps through leadership changes, menu innovation, and cost-saving initiatives to navigate these difficulties. The forward-looking guidance suggests cautious optimism, with strategic measures in place to stabilize and potentially improve the company’s financial standing in the coming years.