Bear Of The Day: Cracker Barrel Old Country Store

Cracker Barrel Old Country Store (CBRLis a Zacks Rank #5 (Strong Sell) that is engaged in the ownership and operation of full-service restaurants with a restaurant and a retail store in the same unit.

The restaurants serve home-style country food, including meatloaf, homemade chicken n' dumplings as well as its signature biscuits using an old family recipe. Meanwhile, the retail stores offer unique gifts and self-indulgences.

The stock has struggled all year and is trading close to recent lows as earnings disappoint and analyst estimates continue to move lower.

While the dividend is attractive, investors might want to shop elsewhere for their next investment.  


About the Company

Cracker Barrel was founded in 1969 and is headquartered in Lebanon, TN.The company operates over 660 stores and employs over 73,000 people.

CBRL is valued at $2 billion and has a Forward PE of 17. The stock holds Zacks Style Scores of “B” in Momentum, but “C” in both Growth and Value. The stock pays a healthy dividend of 5.5%


Q3 Earnings

Cracker Barrel last reported earnings in early June, missing expectations by 9%. This was the second miss over the last three quarters, which has kept the stock from going higher in a strong year for the stock market.

Looking closer at the quarter, the company reported Q3 at $1.21, below the $1.33 expected. Revenues also missed, coming in at $832.7M v the $845M expected.

Management commented that the near-term environment will remain challenged due to heightened economic uncertainty, lower discretionary spending, and weaker consumer confidence. While that narrative doesn’t line up with the overall economic tone, management is clearly seeing issues with its business.

One issue was Same Store Sales were down 4.6% v the +2.8% expected. The company now sees Q4 +1-3% year over year.



Earnings estimates have been trending lower as that Q3 report and revenue guide has forced analysts to continue to lower numbers.

Over the last 60 days, numbers for the current quarter plummeted from $2.03 to $1.70 or 16%.

For the current year, analysts have lowered estimates or 8% over that same time frame.

Looking at the longer term, things do not improve. For next year, estimates have fallen from $6.98 to $6.58 over the last 60 days or almost 6%.


Technical Take

The stock is trading at multi-year lows in a market that has been very strong. This relative weakness is concerning, especially with a 5% dividend to offer investors.

CBRL has had trouble at the $120 level and is now threatening to take out 2023 lows. If the company disappoints on earnings again, look for new lows and a possible test of the COVID lows.

For bulls looking to buy, the 200-day moving average at $105 needs to be taken first. A combination of that technical breakout and an earnings turnaround would bring investors back into the name.


In Summary

The relative weakness shown in CBRL should signal to investors to shop elsewhere for their next investment. Don’t let that dividend tempt you and be patient with this one if you like the name.

For those interested in the sector, a better option might be Kura Sushi (KRUS) . The stock is a Zacks Rank #1 (Strong Buy) and recently reported a 220% EPS beat.

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