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Cracker Barrel stock underperformed. Earnings have been a problem.
The time of dreams
When it comes to waking up, even breakfast isn’t safe.
Cracker Barrel Old Country Store (ticker: CBRL), a folksy restaurant known for its southern cuisine, is the latest company to come under fire for its inclusive policies during Pride month, though investors may be more concerned about its recent results report.
Cracker Barrel wasn’t always so welcoming, given anti-gay workforce practices in the 1990s, but has since embraced diversity, as evidenced by a recent advertisement celebrating Pride Month. This move towards tolerance would seem like a good thing, especially since it is illegal to discriminate against employees based on their sexual orientation.
However, Cracker Barrel’s Pride ad has drawn fire from a number of conservative consumers and commentators, who have targeted many companies celebrating LGBTQ+ inclusion this year, despite an often long track record of supporting LGBTQ+ inclusion. equality. The company did not immediately respond to a request for comment.
Cracker Barrel shares are down more than 4% in the past five days, a period when the
S&P500
increased slightly. Still, it seems earnings and pessimistic forecasts, rather than anti-woke crusaders, are the culprits.
On Tuesday morning, Cracker Barrel reported a disappointing fiscal third quarter, saying it earned $1.21 per share, on revenue that rose 5.4% year-over-year to 832.7 millions of dollars. Analysts had expected earnings of $1.34 per share on revenue of $845.1 million.
Additionally, the company said it expects revenue to grow between 1% and 3% year-over-year in the current fiscal fourth quarter. This equates to approximately $838.7 million to $855.3 million, below the consensus estimate of $886.8 million. Visits from younger consumers, a key initiative for the nostalgia-themed channel, were also flat in the quarter, which may have added to investor concerns.
Citigroup’s Jon Tower warned that further underperformance could arise, as “broader retail challenges begin to permeate the business, an older customer base and inordinate macro-sensitivity among customers low income”. He is also wary of Cracker Barrel’s reduced revenue forecast coupled with ongoing cost reductions, a combination “which (1) rarely (if ever) leads to long-term value creation, and ( 2) can be a very difficult cycle to reverse. Tower retained a sell rating and $79 price target on the stock.
Investors may also fear that Cracker Barrel’s issues are an exception in the industry.
“Two factors leave us less constructive on CBRL stocks, relative to stocks in the casual dining peer group,” Gordon Haskett analyst Jeff Farmer wrote. He called Cracker Barrel’s same-store sales, which were up less than 10% from the pre-pandemic period, “a performance that lags the peer group by several hundred basis points,” as well as a slower recovery of its earnings before interest and interest. tax margins. It has an underperforming rating and an $87 price target on the stock.
It wasn’t all bad news: Cracker Barrel said its sustainable cost savings and business model improvements will contribute up to $30 million to full-year earnings, with potential additional gains over the course of the year. in fiscal 2024. Its cohort of older clients also showed signs of spending.
Still, the quarterly shortfall and lackluster outlook weighed on stocks, which were approaching $100 ahead of the report; in a recent check, they were down 2.2% at $93.11.
According to FactSet, only two of the nine analysts who cover Cracker Barrel are bullish on the stock, while three are bearish and four are discounted, a trend that has held since March. The analysts’ average price target of $95 is only marginally higher than the stock’s current situation.
Write to Teresa Rivas at teresa.rivas@barrons.com