Cracker Barrel (NASDAQ:CBRL) Misses Q1 Revenue Estimates, Stock Drops

Jabin Bastian /
2023/11/30 8:25 am EST

Restaurant company Cracker Barrel (NASDAQ:CBRL) missed analysts' expectations in Q1 FY2024, with revenue down 1.9% year on year to $823.8 million. The company's full-year revenue guidance of $3.45 billion at the midpoint also came in 1.7% below analysts' estimates. It made a non-GAAP profit of $0.51 per share, down from its profit of $0.77 per share in the same quarter last year.

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Cracker Barrel (CBRL) Q1 FY2024 Highlights:

  • Revenue: $823.8 million vs analyst estimates of $828.1 million (0.5% miss)
  • EPS (non-GAAP): $0.51 vs analyst expectations of $0.76 (32.6% miss)
  • Fiscal 2024 guidance for revenue and operating income were below expectations
  • Free Cash Flow was -$40.43 million, down from $59.86 million in the previous quarter
  • Gross Margin (GAAP): 32%, in line with the same quarter last year
  • Same-Store Sales were down 0.5% year on year (in line)
  • Store Locations: 721 at quarter end, increasing by 3 over the last 12 months

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

Cracker Barrel is one of the larger restaurant chains in the industry and benefits from a strong brand, giving it customer mindshare and influence over purchasing decisions.

As you can see below, the company's annualized revenue growth rate of 2.6% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was mediocre , but to its credit, it opened new restaurants and grew sales at existing, established dining locations.

Cracker Barrel Total Revenue

This quarter, Cracker Barrel reported a rather uninspiring 1.9% year-on-year revenue decline, missing Wall Street's expectations. Looking ahead, Wall Street expects sales to grow 3.2% over the next 12 months.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Number of Stores

The number of dining locations a restaurant chain operates is a major determinant of how much it can sell and how quickly company-level sales can grow.

When a chain like Cracker Barrel is opening new restaurants, it usually means it's investing for growth because there's healthy demand for its meals and there are markets where the concept has few or no locations. As of the most recently reported quarter, Cracker Barrel operated 721 total locations, in line with its restaurant count a year ago.

Cracker Barrel Operating Retail Locations

Taking a step back, Cracker Barrel has generally opened new restaurants over the last eight quarters, averaging 1.4% annual increases in new locations. This growth is decent compared to other restaurant businesses but should be taken lightly as the industry is quite mature. Analyzing a restaurant's location growth is important because expansion means Cracker Barrel has more opportunities to feed customers and generate sales.

Same-Store Sales

A company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.

Cracker Barrel's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 5.5% year on year. With positive same-store sales growth amid an increasing number of restaurants, Cracker Barrel is reaching more diners and growing sales.

Cracker Barrel Year On Year Same Store Sales Growth

In the latest quarter, Cracker Barrel's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 7.1% year-on-year increase it posted 12 months ago. We'll be watching Cracker Barrel closely to see if it can reaccelerate growth.

Key Takeaways from Cracker Barrel's Q1 Results

Sporting a market capitalization of $1.66 billion, Cracker Barrel is among smaller companies, but its more than $13.91 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

Although same-store sales were in line, revenue and EPS missed. Adding to the negatives was the fact that Cracker Barrel initiated fiscal 2024 guidance below Wall Street Consensus for revenue and operating margin. Overall, the results could have been better. The company is down 7.5% on the results and currently trades at $69.5 per share.

Cracker Barrel may not have had the best quarter, but does that create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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