Cracks Appear In Cracker Barrel's Bull Thesis

Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL) reported its fiscal second-quarter 2017 revenue short of expectations and lowered its full-year guidance. Customer traffic at Cracker Barrel could continue to be soft and same-store sales growth would likely decelerate over the next several quarters, Argus’s John Staszak said in a report.

Staszak downgraded the rating on the company from Buy to Hold, citing its decelerating comp growth.

Results And Guidance Disappoint

Cracker Barrel reported its FQ2 revenue at $773 million, below the consensus estimate of $781 million. With a 2.1 percent decline in customer traffic, the SSS at the Cracker Barrel restaurants grew 0.6 percent, missing the consensus estimate of 1.6 percent. Comp sales at the company’s retail stores were down 2.2 percent, more than the consensus estimate of a decline of 1.5 percent.

Management reduced its fiscal year 2017 revenue guidance from $2.95 billion–$3.0 billion to $2.95 billion, while reaffirming the EPS guidance range of $8.10–$8.25. Cracker Barrel projected its fiscal Q3 EPS at $1.75–$1.85, below the consensus estimate of $1.93.

Although the company reported better-than-expected earnings for Q2, it maintained its full-year EPS estimate, “implying slower growth in the second half of the year,” Staszak noted. He reduced the EPS estimates for 2017 and 2018 from $8.30 to $8.20 and from $8.88 to $8.84, respectively.

Cracker Barrel’s stock is trading slightly above the multiples of Darden Restaurants, Inc. (NYSE: DRI), “which we believe has stronger near-term growth prospects,” the analyst pointed out.

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