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Here's Why Investors Should Retain Cracker Barrel (CBRL) Now
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Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) is benefiting from menu innovation, strategic initiatives and expansion efforts. Its shares have declined 36.2% against the industry’s growth of 4.3%. However, in the past month, CBRL has shown some resilience, gaining 7.7%.
Growth Drivers
Cracker Barrel is continuously focusing on rejuvenating its menu, which serves as the backbone of its riveting growth potential. Its in-store menu features a Fried Chicken Benedict bowl, a Ham n’ Maple Bacon bowl as well as a Sausage, Grits Cakes and Green Tomato Gravy bowl. Management is focusing on introducing more shareable starters, alcoholic and non-alcoholic specialty beverages and premium size and add-ons to its menu to attract customers.
Innovation remains crucial for CBRL's menu to stay relevant to its guests. During second-quarter fiscal 2024 earnings call, management stated that it has recently initiated a core menu revamp test in select stores. This test, featuring around 20 new items, several modified items and over 20 deletions, aims to balance innovation with simplification. Although CBRL acknowledges that not all menu changes from this test will proceed to the next phase, it emphasizes the importance of enhancing agility and innovation.
Cracker Barrel’s continuous expansion strategies are also helping it to drive growth. During fiscal 2023, it opened 12 new Maple Street and two new Cracker Barrel locations. As of Jan 26, 2024, the company operated 63 MSBC locations and 662 Cracker Barrel locations. During the second quarter of fiscal 2024, CBRL opened two new Cracker Barrel stores. It expects to open nine to 11 new Maple Street biscuit stores in fiscal 2024.
The Zacks Rank #3 (Hold) company aims to meet consumers' need for convenience via growth in its off-premise business. In fact, it plans to enhance its off-premise platform by introducing catering menu offerings and in-store training of hourly employees.
In second-quarter fiscal 2024, off-premise sales were approximately 23.7% of restaurant sales. This was driven by the seasonally higher sales for its Heat n' Serve offerings and catering business. The company also achieved its goal of growing it to a $100 million channel in fiscal 2023.
Image Source: Zacks Investment Research
Concerns
High costs remain a concern for CBRL. Despite cost-saving initiatives, higher labor costs due to increased wages and investments in additional labor hours are expected to persistently keep profits under pressure. It is apprehensive regarding incurring inflationary costs.
Meanwhile, management is making significant investments to support training, the launch of several initiatives and value testing. Although these moves are expected to drive Cracker Barrel’s top-line growth in the upcoming quarters, initial investments might dent margins. Expenses for opening units are anticipated to weigh on the company’s margins.
Although Cracker Barrel reported solid sales in second-quarter fiscal 2024, with a notable improvement of 300 basis points in traffic trend compared with the first quarter, it acknowledges operating in an uncertain environment. The industry is still facing challenges, and CBRL expects industry traffic to remain under pressure for the rest of the fiscal year.
Key Picks
Some better-ranked stocks in the Zacks Retail-Wholesale sector are discussed below.
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1 (Strong Buy), at present. It has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have jumped 32.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 30.4% growth, respectively, from the year-ago levels.
Texas Roadhouse, Inc. (TXRH - Free Report) currently carries a Zacks Rank of 2 (Buy). It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has risen 41.6% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests a rise of 14.1% and 25.8%, respectively, from the year-ago levels.
CAVA Group, Inc. (CAVA - Free Report) currently carries a Zacks Rank of 2. It has a trailing three-quarter earnings surprise of 533.3%, on average.
The Zacks Consensus Estimate for CAVA’s 2024 sales and EPS indicates 19.8% and 14.3% growth, respectively, from the year-ago levels.
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Here's Why Investors Should Retain Cracker Barrel (CBRL) Now
Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) is benefiting from menu innovation, strategic initiatives and expansion efforts. Its shares have declined 36.2% against the industry’s growth of 4.3%. However, in the past month, CBRL has shown some resilience, gaining 7.7%.
Growth Drivers
Cracker Barrel is continuously focusing on rejuvenating its menu, which serves as the backbone of its riveting growth potential. Its in-store menu features a Fried Chicken Benedict bowl, a Ham n’ Maple Bacon bowl as well as a Sausage, Grits Cakes and Green Tomato Gravy bowl. Management is focusing on introducing more shareable starters, alcoholic and non-alcoholic specialty beverages and premium size and add-ons to its menu to attract customers.
Innovation remains crucial for CBRL's menu to stay relevant to its guests. During second-quarter fiscal 2024 earnings call, management stated that it has recently initiated a core menu revamp test in select stores. This test, featuring around 20 new items, several modified items and over 20 deletions, aims to balance innovation with simplification. Although CBRL acknowledges that not all menu changes from this test will proceed to the next phase, it emphasizes the importance of enhancing agility and innovation.
Cracker Barrel’s continuous expansion strategies are also helping it to drive growth. During fiscal 2023, it opened 12 new Maple Street and two new Cracker Barrel locations. As of Jan 26, 2024, the company operated 63 MSBC locations and 662 Cracker Barrel locations. During the second quarter of fiscal 2024, CBRL opened two new Cracker Barrel stores. It expects to open nine to 11 new Maple Street biscuit stores in fiscal 2024.
The Zacks Rank #3 (Hold) company aims to meet consumers' need for convenience via growth in its off-premise business. In fact, it plans to enhance its off-premise platform by introducing catering menu offerings and in-store training of hourly employees.
In second-quarter fiscal 2024, off-premise sales were approximately 23.7% of restaurant sales. This was driven by the seasonally higher sales for its Heat n' Serve offerings and catering business. The company also achieved its goal of growing it to a $100 million channel in fiscal 2023.
Image Source: Zacks Investment Research
Concerns
High costs remain a concern for CBRL. Despite cost-saving initiatives, higher labor costs due to increased wages and investments in additional labor hours are expected to persistently keep profits under pressure. It is apprehensive regarding incurring inflationary costs.
Meanwhile, management is making significant investments to support training, the launch of several initiatives and value testing. Although these moves are expected to drive Cracker Barrel’s top-line growth in the upcoming quarters, initial investments might dent margins. Expenses for opening units are anticipated to weigh on the company’s margins.
Although Cracker Barrel reported solid sales in second-quarter fiscal 2024, with a notable improvement of 300 basis points in traffic trend compared with the first quarter, it acknowledges operating in an uncertain environment. The industry is still facing challenges, and CBRL expects industry traffic to remain under pressure for the rest of the fiscal year.
Key Picks
Some better-ranked stocks in the Zacks Retail-Wholesale sector are discussed below.
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1 (Strong Buy), at present. It has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have jumped 32.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 4.9% and 30.4% growth, respectively, from the year-ago levels.
Texas Roadhouse, Inc. (TXRH - Free Report) currently carries a Zacks Rank of 2 (Buy). It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has risen 41.6% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests a rise of 14.1% and 25.8%, respectively, from the year-ago levels.
CAVA Group, Inc. (CAVA - Free Report) currently carries a Zacks Rank of 2. It has a trailing three-quarter earnings surprise of 533.3%, on average.
The Zacks Consensus Estimate for CAVA’s 2024 sales and EPS indicates 19.8% and 14.3% growth, respectively, from the year-ago levels.