Cracked Cracker Barrel

Earlier this year, CBRL Group (Nasdaq: CBRL) the owner and operator of Southern interstate-exit standby Cracker Barrel Old Country Store, appeared ready for a smooth drive with the kids sleepin' in the back seat. Now it seems this quiet ride has been disturbed, with the company estimating next year's restaurant same-store sales to grow only 2%-3%, lackluster retail results in the 0%-2% range, and higher wage and health expenses pressuring earnings lower.

For the lowered sales projections, Cracker Barrel's management blames "continued pressure on consumer discretionary income." There may be some truth to that, as we all know many people are feeling the pinch from higher energy prices, but some restaurants are doing just fine. Results at IHOP (NYSE: IHP), with 19 consecutive quarters of positive comparable sales, and Darden Restaurants (NYSE: DRI), with its strong same-store performance, indicate that some consumers simply choose to spend their money elsewhere.

I like Cracker Barrel, as both a customer and a shareholder. While it's not a new high-growth concept like Buffalo Wild Wings (Nasdaq: BWLD), nor under any threat of fading into Pink Sheet obscurity like Boston Chicken, this company has found its niche and serves it well. Its predictable cash flow enables the company to reward shareholders with strong repurchases and a healthy 2.2% dividend.

Even after lowered projections, earnings are still expected to grow at least 20% from the $2.50 per share earned in fiscal 2007. Following yesterday's 4.1% drop, you can purchase shares for just 11 times next year's low-end estimate of $3 per share. Granted, the valuation won't improve until sales show some signs of perking up. However, with management focusing on their core concepts, I expect it's only a matter of time before growth improves. Plus, IHOP's recently approved $2.1 billion purchase of Applebee's (Nasdaq: APPB) raises the possibility that a suitor might also take an interest in this Old Country Store.

The greatest risk with Cracker Barrel, in my opinion, is that the company will continue to mosey along like it's done for several years and fail to outperform the market. But if you're looking for a reliable company with a dividend and some decent upside potential, this is a worthy choice.

Fill your plate with more Cracker Barrel:

• Cracker Barrel Sales Creep Upward
• Lock, Stock, and Cracker Barrel
• Cracker Barrel's Original Recipe