- Total Revenue: $817.1 million
- Adjusted EBITDA: $47.9 million or 5.9% of revenue
- Restaurant Revenue: $671.3 million, decreased 1.5%
- Retail Revenue: $145.8 million, decreased 3.7%
- Comparable Store Restaurant Sales: Decreased by 1.5%
- Off-Premise Sales: 18.9% of restaurant sales
- Comparable Store Retail Sales: Decreased 3.8%
- Total Cost of Goods Sold: 30% of total revenue, down from 31.5%
- Restaurant Cost of Goods Sold: 25.9% of restaurant sales, down from 27.3%
- Retail Cost of Goods Sold: 49% of retail sales, down from 50.2%
- Inventories: $175.3 million, down from $184.8 million
- Labor and Related Expenses: 37.8% of revenue, up from 35.8%
- Other Operating Expenses: 24.5% of revenue, up from 23.6%
- Adjusted General and Administrative Expenses: 5.4% of revenue, flat to prior year
- Store Impairment Charges and Closure Expenses: $22.9 million
- Net Interest Expense: $5.2 million, up from $4.5 million
- GAAP Income Taxes: $15.3 million credit
- Adjusted Income Taxes: $6.4 million credit
- GAAP Earnings Loss Per Diluted Share: Negative $0.41
- Adjusted Earnings Per Diluted Share: Positive $0.88
- Capital Expenditures: $29 million
- Dividends Returned to Shareholders: $28.9 million
- Total Debt: $472.2 million
- Fiscal 2024 Revenue Outlook: $3.47 billion to $3.51 billion
- Full Year Adjusted EBITDA Outlook: $200 million to $220 million
- Capital Expenditures Outlook: $120 million to $125 million
Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cracker Barrel Old Country Store Inc (CBRL, Financial) reported total revenue of $817.1 million and adjusted EBITDA of $47.9 million, reflecting a 5.9% margin.
- The company saw solid improvements in key operational metrics such as guest satisfaction, speed, hourly turnover, and average skill level for key job roles.
- Hourly turnover improved by 10 percentage points, and seat-to-eat times improved by approximately 8%.
- Off-premise missing items scores improved by 18%, and the average skill level for key positions increased by 3%.
- The company managed food waste effectively and saw positive trends in operational discipline, which helped mitigate margin compression from lower traffic.
Negative Points
- Third-quarter results fell below expectations due to weaker than anticipated traffic, highlighting the need for strategic transformation.
- Comparable store restaurant sales decreased by 1.5%, and retail revenue decreased by 3.7% compared to the prior quarter.
- Labor and related expenses increased by 200 basis points to 37.8% of revenue, driven by investments in additional labor hours and hourly wage inflation.
- Other operating expenses increased by 90 basis points to 24.5% of revenue, primarily due to investments in advertising and higher depreciation.
- The company recorded store impairment charges and closure expenses of $22.9 million, including a $4.7 million goodwill impairment due to the decision to slow down Maple Street's unit growth.
Q & A Highlights
Q: Can you provide more color on your near-term top-line strategies, especially in an increasingly promotional environment?
A: Julie Masino, President and CEO: Cracker Barrel values value and understands its importance to guests. We launched an early-dine program with great dinner items at $8.99 from 4:00 to 6:00 PM, Monday through Friday, and a new Sunrise Special for breakfast at $7.99. We are now advertising these value propositions to communicate that Cracker Barrel offers great value.
Q: Your guidance implies about 200 basis points of adjusted EBITDA margin compression for Q4. Can you confirm this and share traffic and mix details for the quarter?
A: Craig Pommells, CFO: Yes, the margin reduction for Q4 is approximately 200 basis points. Traffic for Q3 was negative 4.9%.
Q: How is consumer behavior affecting same-store sales, and what trends are you seeing in check management and trade-down value?
A: Craig Pommells, CFO: The lower-income consumer, particularly those under $60,000, is more pressured, affecting their visits. There's a slight negative menu mix and reductions in add-ons. Retail sales have seen more softness due to discretionary spending.
Q: Can you elaborate on the confidence behind reinvesting in store remodels and increased maintenance?
A: Julie Masino, President and CEO: Extensive research showed that the Cracker Barrel experience, especially at dinner, needed to be more relevant. We are testing remodels in 25 to 30 stores to find the right investment level. Craig Pommells, CFO: Maintenance investments are based on audits showing we fell behind on guest and employee-facing maintenance items.
Q: Can you provide more details on the $50 million to $60 million cost savings target?
A: Craig Pommells, CFO: Savings will come from industrial engineering efforts focusing on back-of-house operations, simplifying processes, and improving consistency. Additional savings will come from ongoing programs across the full P&L.
Q: What are your expectations for food costs over the next 12 months, and are there any significant contracts coming up for renewal?
A: Craig Pommells, CFO: We will provide more color in September. The underlying dynamic is shifting, and we will update based on the latest information.
Q: Can you share insights on the sequential monthly improvement in retail sales and restaurant trends?
A: Julie Masino, President and CEO: Retail performance has been driven by theme assortments and value items. Inventory levels are down, and margins are up. Restaurant trends were not specifically addressed in this context.
Q: How is the loyalty program performing, and what are your expectations for its future impact?
A: Craig Pommells, CFO: The loyalty program has around 5 million members and is still in its early stages. Julie Masino, President and CEO: We will provide more details in the September call, focusing on how the program will drive key levers in the plan.
Q: What are your plans for the convertible debt due in June 2026?
A: Craig Pommells, CFO: We are starting to work on this well ahead of the due date to understand all options. We have a lot of room on our revolver and reasonable leverage, giving us flexibility.
Q: Can you provide more details on the technology investments and their impact on operations?
A: Julie Masino, President and CEO: We have a three-year tech roadmap focusing on loyalty tech stack, personalization, and retail business improvements. We will provide more guidance in the September call.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
