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Here's Why Investors Should Avoid Cracker Barrel (CBRL) Now
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Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) has been losing sheen so far this year. Dismal comps, rising costs and traffic woes continue to hurt the company.
A look at Cracker Barrel’s price trend reveals that the stock has witnessed an unimpressive run on the bourses so far this year. Shares of the company have lost 47.7% compared with the industry’s decline of 9.1%. This reflects investors’ pessimism on the stock, given the uncertain sales environment.
Moreover, in the past two months, earnings estimates for the current quarter and year have been revised downward by 38.5% and 15.8%, respectively, reflecting analysts’ doubt surrounding the company’s future earnings potential.
Image Source: Zacks Investment Research
Factors Hurting CBRL Performance
Dismal comps continue to hurt the company’s performance. In the fiscal third quarter of 2024, comparable store retail sales declined 3.8% year over year on the back of guest traffic decreases. The decrease in guest traffic was witnessed due to lower consumer demand arising from multiple macroeconomic factors, including inflationary pressures, higher interest rates, increased consumer debt levels and lower savings rates.
Cracker Barrel’s third-quarter fiscal 2024 sales were negatively impacted due to a notable decline in guest traffic. Given the downward trend in traffic, the company lowered its fiscal fourth-quarter sales expectations. The industry is still facing challenges and the company expects industry traffic to remain under pressure for the rest of the fiscal year.
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. The company 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.
This Zacks Rank #5 (Strong Sell) company has also trimmed its outlook for fiscal 2024. The company expects lower-than-anticipated traffic to negatively impact its performance in the fiscal fourth quarter. CBRL expects adjusted EBITDA to reduce by approximately $20 million compared to its prior expectation. The company cautions that this outlook is based on various assumptions, many beyond its control. Persistence of ongoing inflation, low consumer confidence and high interest rates are expected to negatively impact consumer behavior and the potential company results.
It has a trailing four-quarter negative earnings surprise of 21.4%, on average. The stock has surged 111.6% in the past year. The Zacks Consensus Estimate for WING’s 2024 sales and earnings per share (EPS) indicates a rise of 27.9% and 37.1%, respectively, from the year-ago levels.
Brinker International, Inc. (EAT - Free Report) currently has a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 213.4%, on average. EAT’s shares have risen 85.2% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 5.2% and 43.1% growth, respectively, from the year-earlier actuals.
El Pollo Loco Holdings, Inc. (LOCO - Free Report) currently holds a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 19.4%, on average. LOCO’s shares have risen 15.5% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 9.9% growth, respectively, from the prior-year figures.
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Here's Why Investors Should Avoid Cracker Barrel (CBRL) Now
Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) has been losing sheen so far this year. Dismal comps, rising costs and traffic woes continue to hurt the company.
A look at Cracker Barrel’s price trend reveals that the stock has witnessed an unimpressive run on the bourses so far this year. Shares of the company have lost 47.7% compared with the industry’s decline of 9.1%. This reflects investors’ pessimism on the stock, given the uncertain sales environment.
Moreover, in the past two months, earnings estimates for the current quarter and year have been revised downward by 38.5% and 15.8%, respectively, reflecting analysts’ doubt surrounding the company’s future earnings potential.
Image Source: Zacks Investment Research
Factors Hurting CBRL Performance
Dismal comps continue to hurt the company’s performance. In the fiscal third quarter of 2024, comparable store retail sales declined 3.8% year over year on the back of guest traffic decreases. The decrease in guest traffic was witnessed due to lower consumer demand arising from multiple macroeconomic factors, including inflationary pressures, higher interest rates, increased consumer debt levels and lower savings rates.
Cracker Barrel’s third-quarter fiscal 2024 sales were negatively impacted due to a notable decline in guest traffic. Given the downward trend in traffic, the company lowered its fiscal fourth-quarter sales expectations. The industry is still facing challenges and the company expects industry traffic to remain under pressure for the rest of the fiscal year.
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. The company 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.
This Zacks Rank #5 (Strong Sell) company has also trimmed its outlook for fiscal 2024. The company expects lower-than-anticipated traffic to negatively impact its performance in the fiscal fourth quarter. CBRL expects adjusted EBITDA to reduce by approximately $20 million compared to its prior expectation. The company cautions that this outlook is based on various assumptions, many beyond its control. Persistence of ongoing inflation, low consumer confidence and high interest rates are expected to negatively impact consumer behavior and the potential company results.
Key Picks
Wingstop Inc. (WING - Free Report) carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It has a trailing four-quarter negative earnings surprise of 21.4%, on average. The stock has surged 111.6% in the past year. The Zacks Consensus Estimate for WING’s 2024 sales and earnings per share (EPS) indicates a rise of 27.9% and 37.1%, respectively, from the year-ago levels.
Brinker International, Inc. (EAT - Free Report) currently has a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 213.4%, on average. EAT’s shares have risen 85.2% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 5.2% and 43.1% growth, respectively, from the year-earlier actuals.
El Pollo Loco Holdings, Inc. (LOCO - Free Report) currently holds a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 19.4%, on average. LOCO’s shares have risen 15.5% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 9.9% growth, respectively, from the prior-year figures.