• Total Revenue: $949.4 million, up 1.5% from the prior year quarter.
• Comparable Store Restaurant Sales Growth: 4.7%.
• Comparable Store Retail Sales Growth: 0.2%.
• Adjusted EBITDA: $74.6 million, or 7.9% of total revenue.
• Restaurant Revenue: $750.5 million, increased by 2.7%.
• Retail Revenue: $199 million, decreased by 2.8%.
• Pricing: Approximately 6% for the quarter.
• Cost of Goods Sold: 32.6% of total revenue, improved from 33.7% in the prior year quarter.
• Labor and Related Expenses: 34.4% of revenue, improved by 70 basis points excluding prior year favorability.
• Net Interest Expense: $5 million.
• Adjusted Earnings Per Diluted Share: $1.38, increased by 9.5%.
• Capital Expenditures: $38.1 million in the second quarter.
• Total Debt: $471.5 million at quarter end.
• Quarterly Dividend: $0.25 per share.

• Warning! GuruFocus has detected 9 Warning Signs with CBRL.

Release Date: March 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cracker Barrel Old Country Store Inc (NASDAQ:CBRL) reported a strong second quarter with total revenue of $949.4 million, including a 4.7% growth in comparable store restaurant sales.
• The company exceeded expectations with an adjusted EBITDA of $74.6 million, leading to an increase in fiscal 2025 EBITDA guidance.
• Positive comparable store restaurant sales were achieved for the third consecutive quarter, and retail sales turned positive for the first time since fiscal 2023.
• Operational improvements and strategic actions in catering and Heat n' Serve channels significantly boosted profitability.
• The company is making progress on its transformation strategy, focusing on brand refinement, menu enhancement, and digital and off-premise growth.

Negative Points

• Retail revenue decreased by 2.8% to $199 million, indicating challenges in the retail segment.
• The company experienced a negative impact on total sales due to a timing shift related to gift card breakage and a calendar shift.
• There was a 2.7% decline in traffic, partly due to strategic decisions to prioritize more profitable channels over lower-profitability ones.
• Egg costs are expected to increase by $4 million due to avian influenza affecting supply, impacting cost management.
• The company anticipates minimal labor savings in Q3 from its back-of-house optimization initiative, with benefits expected to ramp up in Q4.

Q & A Highlights

Q: How should we be thinking about same-store sales in the back half of the year, considering consumer anxiety? A: Craig Pommells, CFO, noted that while the first two quarters are known and they were able to raise the top end of the sales range, there is some uncertainty, particularly in February due to weather and macroeconomic factors. However, recent trends have improved, and they expect Q3 to be pressured but have factored this into full-year guidance. They anticipate improvements in Q4 due to their innovation pipeline and summer travel period.

Q: How is consumer angst manifesting across income and age cohorts? A: Craig Pommells explained that they have made gains with the over 55 age cohort, while the under 55 cohort has shown some softness. In terms of income, performance between under $60,000 and over $60,000 income levels is now relatively similar, which is a shift from previous quarters where the under $60,000 group showed softness.

Q: Can you discuss the margin improvement in the second quarter and its sustainability? A: Craig Pommells highlighted that the operations team executed well, especially in Heat n' Serve and catering, which improved profitability. While some benefits are unique to Q2, they expect continued gains in labor productivity and commodity management. Investments in Q3 will impact margins, but Q4 should see benefits from back-of-house initiatives.

Q: Are you exposed to imports from China, and how do tariffs impact your business? A: Craig Pommells stated that about one-third of retail purchases are from China. They mitigate tariff impacts through vendor negotiations, alternate sourcing, and pricing adjustments. The restaurant side is mostly domestic, reducing tariff exposure. All current tariff impacts are included in their guidance.

Q: How are you managing egg inflation, and what is the impact on your costs? A: Craig Pommells noted that eggs are a low single-digit percentage of their commodity basket. They faced a $4 million impact due to spot market purchases after losing some contracted capacity. However, they are well-positioned with contracts through fiscal 2026, though supply issues remain a concern.

Q: How do you view pricing power given Cracker Barrel's value proposition? A: Julie Masino emphasized that Cracker Barrel remains a great value, with a $15 average check compared to $28 for casual dining and $18 for family dining. They have room for pricing adjustments but focus on delivering value through various offerings, including early dine specials and loyalty programs.

Q: Can you provide more details on the service model changes and their impact on labor? A: Julie Masino explained that they have evolved their service model to focus on guest satisfaction, integrating new standards across roles. The back-of-house initiative aims to improve quality and service, with expected labor productivity gains in Q4. Craig Pommells added that these changes are part of a multiyear effort to enhance profitability.

Q: What are your expectations for pricing in the second half of 2025? A: Craig Pommells indicated that while Q2 pricing was at 6%, they expect it to be lower in the second half to achieve a 5% annual average. This reflects a strategic approach to pricing adjustments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.