Cracker Barrel's Original Recipe
By
Ryan Fuhrmann, CFA
September 21, 2007
|
CBRL Group (Nasdaq: CBRL), owner and operator of Cracker Barrel Old Country Stores, is embarking on the difficult task of whipping a maturing restaurant concept back into shape. Management recently decided to focus on its country franchise, which is actually unique in the crowded restaurant and retail industries.
Combining a restaurant and retail store under one roof is a somewhat novel concept, but the situation along interstate highways has historically helped shield CBRL from suburban-focused rivals such as Brinker's (NYSE: EAT) Chili's, Applebee's (Nasdaq: APPB), or Texas Roadhouse (Nasdaq: TXRH). Going forward, management plans to focus on "off-highway" locations and tourist destinations, with consumers that may already be accustomed to its home cooking.
That's because Cracker Barrel was recently voted "The Most RV-Friendly Sit-Down Restaurant in America," according to its most recent 10-K filing. A loyal following helped it post a 6% sales increase for fiscal 2007, the results of which were announced earlier this week. Restaurant comps improved a modest 0.7%, while retail same-store sales advanced 3.2%.
CBRL recently decided to return to its country roots by selling off the struggling Logan's Roadhouse chain. As a result, full-year results include Logan's results as discontinued operations. The continuing Cracker Barrel business posted a nice 22% increase in diluted earnings per share. Management also projects another double-digit increase for the coming year.
Those expectations are starting to sound tasty, but CBRL hasn't yet convinced me it can return to its heyday of steady sales and earnings expansion. Still, I'll be watching closely to see if Cracker Barrel can become more like Darden (NYSE: DRI) by continually breathing life into older restaurant concepts. And if things go really well, it will be able to recapture most of its successful past, which is what McDonald's (NYSE: MCD) did by spinning off Chipotle Mexican Grill (NYSE: CMG) and returning to its namesake stores. Too bad it didn't also consider adding retail stores by the restaurant exits.
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