Appetite for Cracker Barrel
Posted
Sep 15 2009, 01:42 PM
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InvestorPlace
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This article was written by InvestorPlace's Jim Woods.
Eat less, make more money. Well, that’s not exactly what happened to Cracker Barrel Old Country Store (CBRL) in its fiscal fourth quarter, but it’s not entirely off the mark either. Today the homey restaurant/retailer’s profit jumped an impressive 9% in the quarter, not an easy feat in the midst of a consumer spending contraction.
Bing: More on Restaurant Stocks
The company earned $22.8 million, or 99 cents per share, for the period ended July 31. That’s up nicely from $21 million, or 93 cents per share, a year ago. That 99 cents per share easily topped consensus forecasts for a profit of 95 cents per share.
Like so many other companies we’ve seen this earnings season, Cracker Barrel cooked up their earnings beat despite a revenue miss. In fact, sales actually slipped 1% in the quarter to $595.6 million from $601.8 million, missing Street estimates for a profit of $599.6 million.
So what was the company’s recipe for better-than-expected earnings on a calorie-restricted sales diet? According to their earnings report, general and administrative expenses fell to $32 million from $35.6 million, while interest expense declined to $12.1 million from $13.9 million. In addition to cost-cutting, Cracker Barrel chief executive Michael Woodhouse said the company was able to improve its operating margin due to lower food cost inflation and operating cost containment.
Wall Street traders certainly liked what was on Cracker Barrel’s earnings menu, as the shares were bid up sharply at the open.
Now the question is, what about Cracker Barrel’s future? Should investors consider patronizing the shares, or is today’s move in the shares just a fleeting reaction to the better-than-expected earnings announcement?
According to the company, it expects fiscal 2010 income from continuing operations in a range of $2.85 to $3.10 per share, with revenue up 0.5% to 2.5% from 2009’s $2.37 billion. This would put revenue in a range of approximately $2.38 billion to $2.43 billion. The consensus forecast for 2010 earnings is $2.4 billion, which means that Cracker Barrel sees a solid year ahead.
I agree with the company, and I expect them to continue performing well. More importantly, I expect the shares to continue performing well. If you have an appetite for restaurant stocks, then don’t forget to visit Cracker Barrel.
At the time of this writing, Jim Woods did not own shares of CBRL.
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