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Rocking Along at Cracker Barrel

Like a meal at one of its many roadside eateries, Cracker Barrel parent CBRL Group (Nasdaq: CBRL  ) posted fiscal first-quarter reports this morning that were heavy but not necessarily good for you.

Analysts had expected earnings per share at the comfort food haven to climb from $0.51 to $0.57. It did, but that is taking into account the performance at the Logan's Roadhouse steakhouse chain that the company has recently unloaded. If we take a look at CBRL without Logan's production, earnings for continuing operations rose to just $0.45 a share after a $0.44 comparable showing a year earlier.

Technically, it is bottom-line improvement. However, the company has been busy buying back shares over the past year. CBRL has been aggressive on that front, watching its fully diluted shares shrink from nearly 52 million to just 36 million. In other words, the marginal earnings per share improvement is actually the result of fewer shares to divide profits into. In reality, net income fell a staggering 31% during the period.

Now that CBRL is all about the Cracker Barrel Old Country Store concept, let's take a look under the hood. As a company that prefers to dot heavily-traveled highways with its concept, Cracker Barrel is tied to traveling motorist trends. On that front, the company should be in fine shape. Gas prices are falling and this year's hurricane season has been considerably tamer than last year's whirlwind of storm activity.

We see that at the store level where restaurant comps rose 1.4%, while the attached gift shops generated a 4.4% spike in sales. The food side gains consisted of a 0.2% uptick in diners and a 1.2% increase in what the average patron was paying at the restaurant. In other words, they were feeling pretty good after their meals and spent liberally on trinkets, crafts, and sweets on the way out.

The company expects the gift shop to outperform its flagship comfort food business. For all of fiscal 2007, CBRL expects a 1% to 3% gain in comps but a 5% to 7% spike in retail same-store sales.

CBRL expects margin growth to come in flat on the year. Yes, lower food costs and higher spending trends will help, but that is offset by a series of factors that includes higher minimum wage requirements for tipped employees in some states and a healthier commitment to ad spending now that CBRL has just one concept to market.

It seems as if all of the comfort food hubs are marching to different kettle drummers these days. Bob Evans (Nasdaq: BOBE  ) is committed to growing its Mimi's Cafe chain at a time when CBRL is shedding its other major concept. Comps were up at Cracker Barrel, yet the same didn't hold true over at Steak n Shake (NYSE: SNS  ) .

Then again, that's how the industry goes. Trends tend to be concept-specific instead of niche-specific. We see that happening in the fresh Mex space with Chipotle Mexican Grill (NYSE: CMG  ) growing at the same time that Wendy's (NYSE: WEN  ) is surrendering its poorly performing Baja Fresh vehicle.

So let's hope that CBRL takes advantage of its leveraged state and share buyback by delivering the results that it has achieved in the past. For hungry tourists who find plated salvation at a roadside exit location, Cracker Barrel is an exit strategy. Dumping Logan's will hopefully be more than just an exit strategy for CBRL.

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Longtime Fool contributor Rick Munarriz loves comfort food, in moderation. He does own shares in CBRL. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.The Fool has a disclosure policy.

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