Cracker Barrel Old Country Store (CBRL, Financial) is a chain of combined restaurant and gift stores with a southern country theme. The stock shot up close to 50% in 2014, however the company has not managed to extend that run in 2015. The stock may still have room to run higher after the company’s overwhelming quarterly results.
In Q2FY15, the company reported diluted earnings per share of $1.93, expressively ahead of consensus estimates. The company escalated its seasonal pies and family-sized-meals sales to go by around 20% during this quarter. GAAP net income was accounted $47.2 million or $1.96 per diluted share. Adjusted net income was $46.3 million, an upsurge of $9 million compared to previous year’s same quarter. Adjusted net income in terms of diluted per share was $1.93.
The company’s revenue in this quarter was $756 million, an 8.2% upsurge over the $698.5 million in the prior year quarter. Restaurants revenue and retail revenues were $577.6 million and $178.4 million respectively.
Growth plans
The company’s sales results in the Q2FY15 surpassed all expectations. The strength of their traffic in sales was driven mainly by relative mild winter weather. The restaurant business is projected to rise at a CAGR of 2% over the next three years.
One of the exclusive components of the company’s marketing blend is their music program, which remains an accomplishment, crafting brand parodies and building mindfulness. Enhancement in economic situations is the main reason behind the projected growth. National advertising successfully promoted company for the long run. Falling redundancy will shove customers to spend further on outside doings.
Firstly, the company’s management team remains engrossed on their long-term tactical plan to improve the core business, expand the footprint of their stores and extend the Cracker Barrel brand. In 2015, the company planned to open 6 new restaurants that will benefit in attracting customers from areas where the company had no occurrence earlier. Customer’s share of spending on food will cultivate over the specified period.
Secondly, restaurants are expected to advance their product collection by presenting seasonal menus and stuffs that are considered vigorous to eat. The company’s improved marketing efforts and shots to attract customers will offer a new catalyst for the market to flourish.
The company expanded its gift card business during the holiday season and their gift card sales raised by more than 15% compared to previous year’s same quarter.
Guidance is up
Management elevated supervision in the earnings announcement.
- Comparable sales are predicted to increase 4% to 5%.
- Retail sales are predicted to increase 3% to 4%.
The company believes that the tiered pricing structure will sanction them to convey 2-3% in price upsurges over the next few years. As the company noted in its January statement, it expect the new bank facility to decrease ongoing interest outflow by approximately $1 million per year on a current basis. These goals are difficult to achieve but are definitely possible.
Conclusion
Cracker Barrel may not have pleased investors in 2015, however the stock is still a hold for long-term investors. Despite seeing massive gains in 2014, I think investors should not sell the stock as the company’s growth plans look enticing. Despite beating consensus targets, Cracker Barrel’s shares are flat YTD. Thus, I think investors should buy the stock at present valuation.
