On Tuesday, CBRL Group (NASDAQ:CBRL), operator of Cracker Barrel Old Country Store restaurants and gift shops and Logan's Roadhouse restaurants, will announce earnings for the third quarter of fiscal year 2006. While it serves up steaks and peach cobbler at its restaurants, read on to see what it might serve up for earnings.

What analysts say:

  • Buy, sell, or waffle? Of the 15 looking at the company, the vast majority, 10, have ordered waffles (that is, they rate the stock a "hold"), while two say buy and three say sell.
  • Revenues. Expectations are for $659.4 million, a modest 5% growth from last year.
  • Earnings. Estimates have declined during the quarter and are now sitting at $0.50 per share.

What management says:
"We're working to improve our operations in this challenging sales environment," said chairman, president, and CEO Michael A. Woodhouse in the last earnings release. "During the quarter we took aggressive actions by making management changes at Cracker Barrel and by deciding to close underperforming locations at both concepts. We have strengthened Cracker Barrel's management at the top with fewer reporting lines and greater accountability."

He went on to say, "While there continues to be a high degree of uncertainty in our outlook for revenues, especially retail, we are encouraged that second-quarter revenues were higher than our previous expectations. From our vantage point, there has been no sustained change as yet in consumer spending patterns, despite some relief from higher energy prices. We aren't counting on the consumer to bounce back any time soon. Therefore, we are totally focused on keeping our loyal customers satisfied and generating positive store traffic."

It also gave guidance for the rest of fiscal 2006 of flat same-store restaurant sales growth and modest 3% to 5% growth for revenue. Same-store retail sales are expected to decline significantly, between 8% and 10%.

What management does:
The company has held its margins steady, but we have seen declining sales growth over the last two quarters. Divesting the Logan's Roadhouse chain will allow it to focus on its core Cracker Barrel concept.

Margins %*

10/04

1/05

4/05

7/05

10/05

1/06

Gross

66.9

66.7

66.8

67.0

67.3

67.7

Operating

7.6

7.6

7.6

7.9

7.6

7.4

Net

4.7

4.8

4.7

4.9

4.7

4.6

Sales Growth %**

6.3

8.9

7.5

8.6

3.4

4.1

*Trailing-12-month data for quarter ending in month indicated.
**Year-over-year comparison for quarter ending in month indicated.
All data from relevant company 10-Q and 10-K filings.

One Fool says:
This company is in the middle of unsettled times. It is going to divest itself of the Logan's Roadhouse chain, proceeds of which are estimated to be $500 million to $600 million; it just bought back 35% of outstanding shares, taking on $750 million of debt to do so; and it has taken steps to streamline the management of its Cracker Barrel chain. It has been a busy quarter, though the share repurchase did not finish until earlier this month. I expect things to be a bit unsettled for both this last quarter and the remainder of the year.

With all three months of the quarter showing falling same-store sales for both the restaurant and retail sides (except in April for retail), a revenue miss is not unlikely. With the move of Logan's Roadhouse into discontinued operations, investors will have to read carefully in order to make true year-over-year comparisons. Finally, we don't know how much stock-based compensation will weigh upon earnings. It dropped earnings by $0.03 last quarter. If that remains constant and if analysts haven't taken it into consideration, then the company could have an earnings miss as well.

Unsettled times indeed. Those investors who tendered their shares back at $42 might have gotten the best price they could for a while.

Competitors:

  • Bob Evans Farms (NASDAQ:BOBE)
  • Denny's (NASDAQ:DENN)
  • IHOP (NYSE:IHP)

Fool contributor Jim Mueller does not own shares in any company mentioned.