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Cracker Barrel (CBRL) Stock Down Despite Q2 Earnings Beat

Cracker Barrel Old Country Store, Inc. CBRL reported second-quarter fiscal 2021 (ended Jan 29, 2021) results, with earnings and revenues beating the Zacks Consensus Estimate. However, the top and the bottom line declined on a year-over-year basis.

Notably, the company operations were negatively impacted by dining closures and capacity restrictions owing to a resurgence in COVID-19 cases. The situation forced the company to shift its focus towards off-premise business during the holiday season. Moreover, the company witnessed operational and staffing challenges thereby resulting in food waste and labor inefficiencies. Following the announcements, shares of the company fell 3.8% during trading hours on Feb 23.

Earnings & Revenues

During the fiscal second quarter, adjusted earnings per share of 70 cents beat the Zacks Consensus Estimate of 64 cents by 9.4%. However, the bottom line declined 74.1% from $2.70 reported in the prior-year quarter.

 

Revenues of $677.2 million during the quarter beat the consensus mark of $668 million by 1.4%. However, the figure declined 20% on a year-over-year basis. The downside was primarily caused by dining room closures, increased capacity restrictions, and disrupted holiday seasonal travel patterns owing to resurgence in COVID-19 cases. Of revenues, 77% was contributed by the Restaurant segment and 23% was added by Retail supply chain.

Comps Details

Comparable store restaurant sales declined 21.9% in the reported quarter owing to a 24.2% fall in comparable store restaurant traffic. This was partially offset by 2.3% uptick in average check. Moreover, comparable store retail sales in the fiscal second quarter declined 15.3% from the prior-year quarter’s figure.

During the fiscal second quarter, comparable store off-premise sales surged 78% year over year and contributed approximately 30% to restaurant sales.

Meanwhile, the company stated that in the third quarter of fiscal 2021, preliminary comparable store restaurant sales are likely to decline 11-14% compared with the pre-pandemic 2019 levels. Comparable store retail sales are likely to fall between 7% and 9% compared with 2019 levels.

Operating Highlights

During the fiscal second quarter, cost of goods sold (exclusive of depreciation and rent) increased 100 basis points (bps) year over year to 33.2%. General and administrative expenses rose 50 bps year over year to 5%.

Operating income in the fiscal second quarter totaled $14.4 million compared with $79.1 million in the prior-year quarter. Operating margin was reported at 2.1%, down 730 bps from the prior-year quarter’s levels. Notably, lower dine-in sales due to mandated dining-room closures and capacity restrictions had negatively impacted margins. This along with lower seasonal travel, a higher percentage of lower margin Heat n' Serve sales, food waste and labor inefficiencies put pressure on margins during the fiscal second quarter. Adjusted operating income during the quarter came in at $17.6 million, thereby contributing 2.6% to total sales.

Balance Sheet

As of Jan 29, 2021, cash and cash equivalents were $568.8 million, up from $72.8 million as of Jan 31, 2020.

Inventory at the end of the fiscal second quarter amounted to $134.8 million, down from $157.4 million at the end of second-quarter fiscal 2020.

Long-term debt amounted to $835 million at the end of the quarter, up from $460 million at the end of the prior-year quarter.

For the six-months ended Jan 29, 2021, net cash provided by operating activities came in at $121.3 million compared with $184 million in the year-ago period.

Owing to the uncertainty tied to the COVID-19 pandemic, the company suspended its share repurchase activity.

Fiscal 2021 Outlook

Going forward, the company expects improvement in sales and operating margin on the back of stimulus spending, pent-up demand, continued vaccinations and a lower COVID-19 caseload. Notably, the company expects sequential improvement in operating income margins between 50 bps and 100 bps. This is also likely to involve additional investment and ramp-up expenses associated with the continued rollout of key initiatives such as beer & wine, digital enhancements and menu innovation. The company expects the improvement to continue in the fiscal fourth quarter as well.

For the second half of fiscal 2021, the company expects General and Administrative expenses and Capital expenditures of approximately $75 million and $60 million, respectively. Commodity inflation is expected at approximately 2%. Meanwhile, effective tax rate for fiscal 2021 is anticipated between 17% and 18%.

Store Updates

Post the acquisition of Maple Street Biscuit Company in October 2019, the company subsequently converted six Holler & Dash units into Maple Street locations and closed one Holler & Dash unit permanently. With one opening in the fiscal second quarter, the total number of company-owned Maple units under operation was 36.

As of Jan 29, 2021, the company had 663 Cracker Barrel units and 36 Maple units, making it a total of 699 company-owned units under operation. In the prior-year quarter, the company had 689 units under operation.

Zacks Rank & Peer Releases

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.

Yum! Brands, Inc. YUM reported strong fourth-quarter 2020 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics increased year over year. The company’s adjusted earnings of $1.15 beat the Zacks Consensus Estimate of 99 cents. In the prior-year quarter, the company had reported adjusted earnings of $1.00. Quarterly revenues of $1,743 million surpassed the consensus estimate of $1,731 million. The top line also increased 3% year over year. The upside can be attributed to increase in company sales.

McDonald's Corporation MCD reported fourth-quarter 2020 results, with earnings and revenues missing the Zacks Consensus Estimate. The company reported adjusted earnings of $1.70 per share, which missed the Zacks Consensus Estimate of $1.75. Moreover, the bottom line declined 14% year over year. Quarterly revenues of $5,313.8 million missed the Zacks Consensus Estimate of $5,320 million. Moreover, the top line declined 2% year over year. The downtick was caused by the coronavirus pandemic.

Starbucks Corporation SBUX reported mixed first-quarter fiscal 2021 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The company reported adjusted earnings per share (EPS) of 61 cents, which beat the Zacks Consensus Estimate of 55 cents. In the prior-year quarter, the company had reported adjusted EPS of 79 cents. Meanwhile, quarterly revenues of $6,749.4 million missed the Zacks Consensus Estimate of $6,873 million. Moreover, the top line fell 4.9% from the year-ago quarter’s levels. The downside was due to dismal global retail and comparable sales as well as decline in store traffic.

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