Cracker Barrel (CBRL) Post Wider-Than-Expected Loss in Q3

Zacks Equity Research

Cracker Barrel Old Country Store, Inc. CBRL reported dismal third-quarter fiscal 2020 (ended May 1, 2020) results, wherein earnings and revenues not only missed the Zacks Consensus Estimate but also declined on a year-over-year basis. Post the results, shares of the company slipped 0.6% during trading hours on Jun 2.

Loss during the quarter came in at $6.81 per share, which was 44.3% wider than the Zacks Consensus Estimate of $4.72. The company had reported earnings per share of $2.09 in the year-ago quarter. 

Adjusted loss (excluding the impairment charges related to store assets, expenses related to COVID-19, the impairment charge related to Punch Bowl Social, and the related tax effects) was $1.81 per share during the quarter.

Revenues of $432.5 million also missed the consensus mark of $453 million by 4.4%. The figure declined 41.5% on a year-over-year basis primarily due to lower traffic owing to the closure of dining rooms. As a result, breakfast and lunch day part sales were negatively impacted. Of these revenues, 83.3% was contributed by Restaurant segment and 16.7% was added by Retail supply chain.

Cracker Barrel Old Country Store, Inc. Price, Consensus and EPS Surprise

 

Cracker Barrel Old Country Store, Inc. Price, Consensus and EPS Surprise

Cracker Barrel Old Country Store, Inc. price-consensus-eps-surprise-chart | Cracker Barrel Old Country Store, Inc. Quote

Comps Details

Comparable store restaurant sales declined 41.7% in the reported quarter owing to a 43.6% fall in comparable store restaurant traffic, partially offset by a 1.9% uptick in average check. Moreover, comparable store retail sales in the fiscal third quarter declined 45.5% from the prior-year quarter’s figure.

Operating Highlights

Cost of goods sold (exclusive of depreciation and rent) increased 240 basis points (bps). General and administrative expenses rose 150 bps year over year.

Operating loss in fiscal third quarter totaled $79 million against an operating profit of $65.1 million in the prior-year quarter. Operating margin was a negative 18.3%, down 2710 bps from the prior-year quarter. The decline in operating margin was caused by increases in operating as well as general and administrative expenses along with cost of goods sold and labor-related expenses.

Excluding $18.3-million impairment charges related to store assets and approximately $7.1 million of COVID-19-related expenses, adjusted operating loss was $53.6 million.

Balance Sheet

As of May 1, 2020, cash and cash equivalents were $363.3 million, up from $167.6 million as of May 3, 2019. 

Inventory at the end of the quarter under review amounted to $146.3 million, down from $152.6 million at the end of third-quarter fiscal 2019. 

Long-term debt amounted to $940 million at the end of the quarter, up from $400 million at the end of the prior-year quarter.

On May 28, the company withdrew approximately $40 million through an exercise of an accordion feature to increase borrowing capacity under its credit facility, which is scheduled to mature in May 2021.

Net cash provided by operating activities was $87.2 million in the first nine months of fiscal 2020 compared with $252.6 million in the comparable prior-year period.

However, due to uncertainty tied to the COVID-19 pandemic, the company has suspended its share repurchase activity as well as dividend payment program.

Fiscal 2020 Guidance Suspended

Given the level of uncertainty regarding the coronavirus impact, the company has withdrawn its 2020 guidance.

Stores Update

Although Cracker Barrel was operating only through delivery and takeaway services from late March through late April, the company started to initiate dine-in openings thereafter. 

For the week ended May 29, 2020, comparable store restaurant sales for stores with dine-in service fell approximately 32% year over year. As of May 29, 2020, the company operates 505 stores with limited dine-in service and expects to substantially increase it across all its stores by June-end.

Zacks Rank 

Cracker Barrel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

Domino's Pizza, Inc. DPZ reported first-quarter 2020 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $3.07 per share outpaced the consensus mark of $2.29 and improved 39.5% on a year-over-year basis. Revenues of $873.1 million beat the consensus mark of $867 million and improved 4.4% year over year.

Yum China Holdings, Inc. YUMC reported first-quarter 2020 results, wherein both earnings and revenues beat the Zacks Consensus Estimate. Adjusted earnings of 16 cents compared favorably with the Zacks Consensus Estimate of a loss of 25 cents. However, the reported figure declined 72.9% from the year-ago quarter. Total revenues of $1,754 million beat the consensus mark of $1,145 million but deteriorated 23.9% year over year.

BJs Restaurants Inc.’s BJRI first-quarter 2020 adjusted loss (excluding an impairment charge of 12 cents per share) of 10 cents per share was narrower than the Zacks Consensus Estimate of a loss of 38 cents. In the year-ago period, it had reported adjusted earnings of 62 cents per share. Total quarterly revenues of $254.6 million lagged the consensus estimate of $261.7 million by 2.7% and declined 12.4% year over year.

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