We jaded cynics would normally be pretty suspicious of an earnings release in which the bullet points at the top leave off the numbers and instead tout dubious nonoperational achievements. After all, the entire press release game is designed to highlight the good and hide the bad, as we've pointed out many times in the past. So how dire is it when the firm puts items such as litigation settlements and a new PR schedule in the headlines?
Really not so bad, it turns out. True, today's digits from Cracker Barrel Group
Fourth-quarter revenues inched up 5% over the same period last year to $607 million. Earnings were $0.60 per share, including a hefty $0.07-per-share charge for settling discrimination litigation. Comparable sales at the flagship Cracker Barrel locations slipped lower, but a bigger problem to watch is margins. Gross margins were trimmed by 0.8% for the quarter and 1% for the full year.
Digging into the half-full end of the barrel, we find better comps at the firm's Logan's Roadhouse restaurants (up 5.6%) and full-year earnings growth of 10.5% -- if you strain out the settlement charge.
Management looks for slim comps growth in the coming months, and the thin top-line growth means that prospective investors ought to consider the firm as they would any other slow grower, by asking, "What kind of cash is in it for me?" There's a small dividend, but sticklers will want to know about the free cash flow.
There, the answer is, unfortunately, "not enough, and a lot less than last year." This year's free cash flow approaches $56 million, 54% less than in 2003. At $35 per share, that values the firm at an enterprise value-to-free cash flow ratio near 35, more expensive than the market as a whole, and definitely outside the range you could comfortably call a value.
Seth Jayson actually sort of likes the food at Cracker Barrel, but at the time of publication, he had no position in any company mentioned. View his Fool profile here.
