Cracker Barrel earnings highlight ongoing challenges

SAN ANTONIO - Biglari Capital Corp. has expressed concern over Cracker Barrel (NASDAQ:) Old Country Store, Inc.'s (NASDAQ: CBRL) recent financial performance, following the restaurant chain's preliminary earnings report for the first quarter of 2025. The investment firm pointed out that Cracker Barrel's adjusted EBITDA margin for Q1 2025 fell to 5.4%, a decrease from the previous year and a continuation of the trend seen in Q1 2024. This period had been noted as the worst in the company's history.

Biglari Capital criticized Cracker Barrel for not adjusting its fiscal year 2025 guidance, despite the company's plans to open additional stores and commit significant capital expenditures ranging from $160 million to $180 million. The firm argued that the unchanged guidance suggests a lack of success in Cracker Barrel's ongoing $700 million transformation plan. The investment firm also highlighted the absence of disclosed changes in guest traffic, which it claims has continued to decline.

The response from Biglari Capital comes amid a contentious period for Cracker Barrel, with the investment firm pushing for change by advocating for shareholders to vote for its proposed board members, Sardar Biglari and Milena Alberti-Perez. The firm's statement reflects a broader skepticism among analysts and investors regarding the effectiveness of Cracker Barrel's transformation efforts.

Biglari Capital's call to action for shareholders to support its nominees for the board is a clear indication of its stance on the need for immediate change within the company. The investment firm's commentary is based on a press release statement issued in response to Cracker Barrel's financial results.

In other recent news, Cracker Barrel Old Country Store, Inc. reported a total revenue of $894.4 million in its fiscal 2024 fourth-quarter earnings, marking a 6.9% increase from the previous year. However, the company noted a decrease in adjusted EBITDA to $57.4 million, and the earnings per share (EPS) for the quarter fell short of both Loop Capital's estimate of $1.12 and the consensus estimate of $1.10. In response to the earnings report, both Truist Securities and Loop Capital maintained their Hold rating on Cracker Barrel's shares, with adjustments to their price targets.

In other recent developments, Cracker Barrel's board is seeking shareholder support against activist investor Sardar Biglari's proposals at the upcoming Annual Meeting of Shareholders. The board's strategy emphasizes maintaining the current pace of change and delivering sustainable value, while Biglari's approach is characterized as a plan to halt long-term investments in growth. Biglari Capital Corp., which owns a 9.3% stake in Cracker Barrel, has called for significant changes at the restaurant chain, citing a substantial loss in shareholder value.

Cracker Barrel also announced its fiscal 2025 plans, which include 25 to 30 store remodels and the opening of new Cracker Barrel and Maple Street locations. The company projects a revenue of $3.4 billion to $3.5 billion for the upcoming fiscal year. Despite these developments, both Loop Capital and Truist Securities anticipate that customer traffic to Cracker Barrel may continue to face challenges. These are the recent developments for the company.

InvestingPro Insights

Recent data from InvestingPro sheds additional light on Cracker Barrel's financial situation, providing context to Biglari Capital's concerns. The company's market capitalization stands at $1.08 billion, reflecting the market's current valuation of the business amidst its challenges.

InvestingPro Tips highlight that Cracker Barrel's stock has taken a significant hit over the last week, with a 1-week price total return of -8.21%. This aligns with the negative sentiment expressed in Biglari Capital's statement. Additionally, the company's short-term obligations exceed its liquid assets, which could potentially complicate its ability to execute on its transformation plan.

On a positive note, Cracker Barrel has maintained dividend payments for 43 consecutive years, demonstrating a long-standing commitment to shareholder returns. However, with a dividend yield of 2.21% and a substantial dividend growth decline of -80.77% over the last twelve months, investors may question the sustainability of these payments given the current financial pressures.

The company's P/E ratio (adjusted) of 17.28 for the last twelve months suggests that despite recent challenges, the market still holds some optimism about Cracker Barrel's earnings potential. This is further supported by the InvestingPro Tip indicating that analysts predict the company will be profitable this year.

For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide valuable insights into Cracker Barrel's financial health and future prospects.

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