Cracker Barrel (NASDAQ:CBRL) Posts Better-Than-Expected Sales In Q4, Stock Soars
Restaurant company Cracker Barrel (NASDAQ:CBRL) announced better-than-expected revenue in Q4 CY2024, with sales up 1.5% year on year to $949.4 million. The company expects the full year’s revenue to be around $3.48 billion, close to analysts’ estimates. Its non-GAAP profit of $1.38 per share was 27.2% above analysts’ consensus estimates.
Revenue: $949.4 million vs analyst estimates of $942.5 million (1.5% year-on-year growth, 0.7% beat)
Adjusted EPS: $1.38 vs analyst estimates of $1.09 (27.2% beat)
Adjusted EBITDA: $74.63 million vs analyst estimates of $61.32 million (7.9% margin, 21.7% beat)
EBITDA guidance for the full year is $215 million at the midpoint, above analyst estimates of $207.8 million
Operating Margin: 3.1%, in line with the same quarter last year
Free Cash Flow Margin: 6.3%, similar to the same quarter last year
Locations: 726 at quarter end, up from 725 in the same quarter last year
Market Capitalization: $896.8 million
Commenting on the second quarter results, Cracker Barrel President and Chief Executive Officer Julie Masino said, "Outstanding execution by our teams, coupled with our actions to improve the profitability of our off-premise channels during the high-volume holiday season, delivered strong second quarter results that exceeded our expectations. Despite some recent industry-wide softness, these results, together with the continued improvements in key guest and operational metrics and the initiatives we have planned for our important fourth quarter, make us confident in raising our financial outlook for the remainder of the year."
Company Overview
Known for its country-themed food and merchandise, Cracker Barrel (NASDAQ:CBRL) is a beloved American restaurant and retail chain that celebrates the warmth and charm of Southern hospitality.
Sit-Down Dining
Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $3.51 billion in revenue over the past 12 months, Cracker Barrel is one of the larger restaurant chains in the industry and benefits from a well-known brand that influences consumer purchasing decisions. However, its scale is a double-edged sword because it's harder to find incremental growth when your existing restaurant banners have penetrated most of the market. To accelerate system-wide sales, Cracker Barrel must lean into newer chains.
As you can see below, Cracker Barrel’s sales grew at a weak 2.3% compounded annual growth rate over the last five years (we compare to 2019 to normalize for COVID-19 impacts) as its restaurant footprint remained unchanged and it barely increased sales at existing, established dining locations.
Cracker Barrel Quarterly Revenue
This quarter, Cracker Barrel reported modest year-on-year revenue growth of 1.5% but beat Wall Street’s estimates by 0.7%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a slight deceleration versus the last five years. This projection is underwhelming and implies its menu offerings will see some demand headwinds.
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Restaurant Performance
Number of Restaurants
Cracker Barrel listed 726 locations in the latest quarter and has kept its restaurant count flat over the last two years while other restaurant businesses have opted for growth.
When a chain doesn’t open many new restaurants, it usually means there’s stable demand for its meals and it’s focused on improving operational efficiency to increase profitability.
Cracker Barrel Operating Locations
Same-Store Sales
A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales is an industry measure of whether revenue is growing at those existing restaurants and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Cracker Barrel’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.8% per year. Given its flat restaurant base over the same period, this performance stems from a mixture of higher prices and increased foot traffic at existing locations.
Note that Cracker Barrel reports its same-store sales intermittently, so some data points are missing in the chart below.
Cracker Barrel Same-Store Sales Growth
Key Takeaways from Cracker Barrel’s Q4 Results
We were impressed by how significantly Cracker Barrel blew past analysts’ revenue, EPS, and EBITDA expectations this quarter. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates. Zooming out, we think this was a solid quarter. The stock traded up 11.5% to $44.93 immediately after reporting.
Cracker Barrel put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
