Cracker Barrel, the US casual dining chain known for its hearty meals and country-themed gift stores, is set to serve up its worst day in almost seven years after it lowered its restaurant sales growth forecast for 2018, blaming inclement weather among other headwinds testing the sector.
The company’s shares were down 8.3 per cent to $159.26 in midday trading on Tuesday. If the losses hold, it would be the Tennessee-headquartered company’s steepest one-day drop since May 2011, according to Thomson Reuters data.
The moves come after Cracker Barrel reported earnings for the three-month period to January 26, the second quarter of its fiscal 2018. Total revenue grew 2 per cent year-over-year to $787.8m, with comparable restaurant sales growing 1.1 per cent thanks to higher average cheques, offsetting an 0.9 per cent decline in comparable-store restaurant traffic.
Net income was boosted to $91.1m for the quarter, or 3.79 per diluted share, a 73 per cent increase from the year-ago period thanks to a benefit from US tax reform.
Wall Street soured, however, on the company’s adjustments to its full-year 2018 forecast for comparable store restaurant sales. It said on Tuesday that it is now expecting this key metric to come in 1-2 per cent higher for the fiscal year, versus its previous expectations for a range of 2-3 per cent. Sales at its retail shops are still expected to be flat compared to a year earlier.
In a call with analysts, Cracker Barrel executives said that the forecast has been dimmed by inclement weather that has affected customers’ appetite for dining out during the fiscal year, starting with several bruising hurricanes in late summer and continuing through with snow and bone-chilling cold snaps that swept across much of the US at winter’s start.
Food inflation is also on the rise for certain items — including eggs, beef and pork, key staples for its comfort-food offerings — and the company said it expects to splash out more on marketing during the current quarter to help promote some new initiatives it hopes will jump-start growth, including enhanced coffee drinks, flavoured teas and other beverages, an expanded catering menu and seasonal menu items.
Cracker Barrel executives also acknowledged the general challenges facing the US casual dining sector, which, like its UK counterpart, has been pressured by a confluence of factors, including the increasing popularity of at-home meal kits like Blue Apron and competition from fast-casual chains.
After rising 34 per cent in 2016, Cracker Barrel shares dropped 2.8 per cent over the course of 2017 and are relatively flat on the year so far in 2018.
Get alerts on Cracker Barrel Old Country Store Inc. when a new story is published