Cracker Barrel (CBRL)

Restaurant company Cracker Barrel (NASDAQ:CBRL) met Wall Street’s revenue expectations in Q1 CY2025, but sales were flat year on year at $821.1 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $3.48 billion at the midpoint. Its non-GAAP profit of $0.58 per share was significantly above analysts’ consensus estimates.

Company Overview

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 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.

Full-service restaurant competitors include Bloomin’ Brands (NASDAQ:BLMN), Darden Restaurants (NYSE:DRI), Dine Brands (NYSE:DIN), and Texas Roadhouse (NASDAQ:TXRH).

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $3.51 billion in revenue over the past 12 months, Cracker Barrel is one of the larger restaurant chains in the industry and benefits from a well-known brand that influences consumer purchasing decisions. However, its scale is a double-edged sword because it’s harder to find incremental growth when your existing restaurant banners have penetrated most of the market. For Cracker Barrel to boost its sales, it likely needs to adjust its prices, launch new chains, or lean into foreign markets.

As you can see below, Cracker Barrel grew its sales at a weak 2.1% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as its restaurant footprint remained unchanged and it barely increased sales at existing, established dining locations.

This quarter, Cracker Barrel’s $821.1 million of revenue was flat year on year and in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a slight deceleration versus the last six years. This projection doesn't excite us and implies its menu offerings will face some demand challenges.

Number of Restaurants

Cracker Barrel listed 728 locations in the latest quarter and has kept its restaurant count flat over the last two years while other restaurant businesses have opted for growth.

When a chain doesn’t open many new restaurants, it usually means there’s stable demand for its meals and it’s focused on improving operational efficiency to increase profitability.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.

Cracker Barrel’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.3% per year. Given its flat restaurant base over the same period, this performance stems from a mixture of higher prices and increased foot traffic at existing locations.

In the latest quarter, Cracker Barrel’s same-store sales rose 1% year on year. This performance was more or less in line with its historical levels.

Gross profit margins tell us how much money a restaurant gets to keep after paying for the direct costs of the meals it sells, like ingredients, and indicate its level of pricing power.

Cracker Barrel has good unit economics for a restaurant company, giving it the opportunity to invest in areas such as marketing and talent to stay competitive. As you can see below, it averaged an impressive 32.5% gross margin over the last two years. That means for every $100 in revenue, roughly $32.46 was left to spend on selling, marketing, and general administrative overhead.

Cracker Barrel’s gross profit margin came in at 32.8% this quarter, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as ingredients and transportation expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is a key profitability metric because it accounts for all expenses keeping the business in motion, including food costs, wages, rent, advertising, and other administrative costs.

Cracker Barrel was profitable over the last two years but held back by its large cost base. Its average operating margin of 2% was weak for a restaurant business. This result is surprising given its high gross margin as a starting point.

Analyzing the trend in its profitability, Cracker Barrel’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Cracker Barrel generated an operating margin profit margin of 1.8%, up 4.2 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Cracker Barrel’s full-year EPS dropped 52.6%, or 8.8% annually, over the last five years. We tend to steer our readers away from companies with falling EPS, especially restaurants, which are arguably some of the hardest businesses to manage because of constantly changing consumer tastes, input costs, and labor dynamics. If the tide turns unexpectedly, Cracker Barrel’s low margin of safety could leave its stock price susceptible to large downswings.

In Q1, Cracker Barrel reported EPS at $0.58, down from $0.88 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Cracker Barrel’s full-year EPS of $3.39 to shrink by 16.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Cracker Barrel has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.5%, subpar for a restaurant business.

Taking a step back, we can see that Cracker Barrel’s margin dropped by 1.6 percentage points over the last year. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s becoming a more capital-intensive business.

Cracker Barrel burned through $13.24 million of cash in Q1, equivalent to a negative 1.6% margin. The company’s cash burn increased meaningfully year on year and is a deviation from its longer-term margin, indicating it is a seasonal business.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Cracker Barrel’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 9.3%, slightly better than typical restaurant business.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Cracker Barrel’s $1.14 billion of debt exceeds the $9.81 million of cash on its balance sheet. Furthermore, its 5× net-debt-to-EBITDA ratio (based on its EBITDA of $225.9 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Cracker Barrel could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Cracker Barrel can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We were impressed by how significantly Cracker Barrel blew past analysts’ EPS and EBITDA expectations this quarter. We were also excited its full-year EBITDA guidance outperformed Wall Street’s estimates. On the other hand, its same-store sales slightly missed, but we still think this was a solid quarter with some key areas of upside. The stock traded up 3% to $59.50 immediately following the results.

Updated: June 23, 2025 at 10:41 PM EDT

A common mistake we notice when investors are deciding whether to buy a stock or not is that they simply look at the latest earnings results. Business quality and valuation matter more, so we urge you to understand these dynamics as well.

We cheer for all companies serving everyday consumers, but in the case of Cracker Barrel, we’ll be cheering from the sidelines. First off, its revenue growth was weak over the last six years, and analysts expect its demand to deteriorate over the next 12 months. And while its favorable reputation gives it meaningful influence over consumers’ dining decisions, the downside is its projected EPS for the next year is lacking. On top of that, its declining EPS over the last five years makes it a less attractive asset to the public markets.

Cracker Barrel’s P/E ratio based on the next 12 months is 21.1x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $53.86 on the company (compared to the current share price of $60.12).