Whatever one's particular stance on the economic response to COVID-19, one thing is now becoming undeniable: Many businesses are being rendered redundant, and it's unclear how relevant many of them will be once the lockdown ends. Restaurants have been hit hard, and switching to digital sales, take-out, and delivery has become a matter of life and death for some of them. 

Cracker Barrel Old Country Store (NASDAQ:CBRL) is faring better than most. Like some other select chains (Texas Roadhouse (NASDAQ:TXRH) comes to mind), the restaurant/retailer has been able to continue operating with fewer hitches owing to its focus on suburban areas.

That isn't to say all is peachy. Though the chain is far from going under, its third-quarter fiscal 2020 report (the three months ended May 1, 2020) had some ugly numbers. While I think Cracker Barrel will emerge from this crisis, it could be a less lucrative operation than it was before.

A table set with various country-style dishes.

Image source: Cracker Barrel Old Country Store.

Weathering one epic storm

Cracker Barrel's third-quarter revenue tumbled 42% from the year prior, driven by a 41.7% drop in comparable-store sales (or "comps," a combination of foot traffic and guest ticket size) in its restaurants and a 45.5% comps drop on the retail store half of the equation. All 664 Cracker Barrel locations remained open, but only for pick-up or delivery.  

The company unsurprisingly opted not to invest more funds in the small Punch Bowl Social entertainment chain during the quarter. Cracker Barrel said it would dole out up to $140 million in July 2019 in exchange for a minority stake to foster growth at the food and games venue operator. But with all 20 of those locations shuttered indefinitely, Cracker Barrel walked away from its minority interest and took a $132.9 million noncash (since the cash already left the balance sheet last year) impairment charge instead.

No one last summer could have predicted the current state of world affairs, but the extra cash that went to Punch Bowl Social would have been much better sitting in the assets column of Cracker Barrel's balance sheet -- at least from a shareholder perspective, anyway. The company reported negative $122 million in free cash flow (revenue less cash operating and capital expenses) in the last quarter, and there's a good chance more liquidity will be eaten up during the current quarter. Management said that restaurant and retail comps had improved to negative 45% and negative 38%, respectively, as of the week ended May 29. Nearly all stores will have limited dine-in available by the end of June, but with reopening of the economy hitting snags as of late, a fast rally to pre-pandemic traffic looks unlikely. Time for investors to hit the reset button on this restaurant stock.  

Far from a swan song, but not exactly a hot deal

Of course, Cracker Barrel isn't dead in the water, and eventually the world will return to some state of normalcy. But it's anyone's guess how long that will take. In the meantime, besides losing a significant amount of cash on an investment gone wrong, Cracker Barrel has had to take on more debt to manage its operations.

As of the end of Q3, the company had $363 million in cash and equivalents on the books. That's a decent amount and means the chain is far from folding -- really an enviable situation given that many big restaurant brands have been running on minimal cash in recent years in a race to open new locations. However, Cracker Barrel isn't totally free and clear.

Total debt was $940 million compared to $400 million a year ago. As low as interest rates are these days, having to service that debt will surely lower Cracker Barrel's bottom line going forward. And like the rest of the restaurant and retail industry, it wasn't a super high-profit-margin concern in the first place.  

CBRL Revenue (TTM) Chart

Data by YCharts.

Long story short, I think Cracker Barrel will still be around once the coast clears. However, for investors looking for potential rebound candidates, there are better stocks out there -- restaurant or otherwise.