The holding company for Cracker Barrel Old Country Stores, CBRL Group (Nasdaq: CBRL), reported August sales results yesterday -- the first month of the 2008 fiscal year for the company. While new years are often filled with the promise of bigger and better things to come, Cracker Barrel remains on a trend that looks pretty similar to last year.
Same-restaurant sales grew 3.1% in August -- not too bad, considering that restaurant comps were less than 1% last year. The increase looks a little less solid when you realize that two percentage points of this year's growth came from a menu-price increase midway during the month. That means guest traffic only inched up by a single percentage point.
Sales of retail items were less exciting, up only 0.1% year over year at comparable stores. The company blamed soft August retail sales on a later-than-usual introduction of holiday products, and a heat wave that restrained sales of fall apparel. Cracker Barrel is one of the few restaurant chains that depends on retail merchandise for a significant mix of its overall sales.
There was a flurry of interest in CBRL stock last fall when the company announced the sale of the Logan's Roadhouse chain, using the proceeds to recapitalize through a repurchase of about $800 million of its outstanding shares. But last quarter's results included the share count, and the company posted a loss of $11.6 million compared with the previous year's $2.7 million loss. So even with 17% fewer shareholders, the company's performance isn't looking to appetizing.
Cracker Barrel is clearly starting to make some headway in revitalizing its namesake core restaurant concept. Positive comps are, well, positive comps. But progress remains slow here, while other casual-dining chains such as Chipotle Mexican Grill (NYSE: CMG-A) (NYSE: CMG-B) and Buffalo Wild Wings (Nasdaq: BWLD) are on a roll.
Cracker Barrel has built a solid franchise, and the chain enjoys a strong following of loyal customers. Still, I'm not sure the stock will be a winner in the near term. Barriers to entry in the restaurant field aren't large, and customers have a tendency to want to try out the newest, hottest concepts. I'd hold off on any investments here until CBRL can show some more exciting growth in customer traffic, and trickle more of its revenue down to the bottom line.
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