Lebanon, Tennesseebased Cracker Barrel Old Country Store Inc. (CBRL) reported first quarter 2011 earnings of $1.10, surpassing the Zacks Consensus Estimate of 92 cents and 78 cents in the prior-year quarter. The upside was primarily due to higher sales and operating income.
Quarterly Performance
Total revenue upped 3.0% year over yearto $598.7 million, but was below the Zacks Consensus Estimate of $600 million. The year-over-year upside in revenues was due to 3.2% rise in restaurant sales and 2.2% hike in retail sales.
On a comparable basis, retail sales in the first quarter were up 1.5% and restaurant sales grew 2.4%, driven by a traffic gain of 0.5% and a higher average check of 1.9%.
Gross margins in the quarter improved to 70.0% compared with 69.5% in the year-ago quarter. General and administrative expenses increased 4% to $36.9 million.
Higher store operating income, offset by higher general and administrative expenses, pushed up the operating income in the first quarter to $45.4 million from $38.0 million in the first quarter of 2010. Operating margin expanded 110 bps year over year to 7.6% in the quarter.
Store Update
During the quarter, Cracker Barrel opened 3 new stores. At the end of the quarter, the company had 597 company-owned locations.
Financial Position
At the end of the first quarter, Cracker Barrel had cash and cash equivalents of approximately $24.7 million compared with $47.7 million in fiscal 2010. The company also reduced its long-term debt to $572.0 million as compared with $573.7 million in 2010.
Outlook
For fiscal year 2011, Cracker Barrel continues to expect total revenue growth to range approximately between 3.0% to 4.5%. The guidance is premised on the opening of eleven new units during the year, comparable store restaurant sales are estimated to increase within the range of 1.5%–3.0% and comparable store retail sales would go up between 2.0%–4.0%.
Depreciation is expected to be roughly $64–$66 million, operating margin within the 7.1%–7.3% range, net interest expense within $48 million and $49 million, effective tax rate within 27.0%–28.0% and diluted shares outstanding of approximately 23.5–24 million.
The company reaffirmed its earnings per share guidance to be approximately $3.95 to $4.10 and capital expenditures to be between $110 million and $120 million. The company will continue its share repurchase activity in 2011 and repay $25 million of its long-term debt.
Our Take
The company reported better-than-expected results and also reaffirmed its outlook. Cracker Barrel is experiencing a rise in traffic and thus reported positive comparable sales for the second consecutive quarter. The company is also taking sales initiatives such as introducing new entrees to the menu to drive traffic. Thus, we expect estimates to move up in the coming days.
One of Cracker Barrel’s primary competitors, Chipotle Mexican Grill Inc. (CMG) posted third quarter 2010 earnings of $1.52 per share, which outpaced the Zacks Consensus Estimate of $1.30 on the heels of a strong top-line growth, buoyed by higher traffic count and new restaurant openings.
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