Cracker Barrel Old Country Store, Inc. reported financial results for the second quarter of fiscal 2016 ended January 29.
Second Quarter Fiscal 2016 Highlights
Compared to the prior year second quarter, comparable store restaurant sales increased 0.6 percent and comparable store retail sales increased 2.6 percent.
Operating income margin was 9.2 percent of total revenue compared to GAAP operating income of 9.4 percent in the prior year quarter, or 9.7 percent when adjusted to exclude the impact of a litigation accrual. (See non-GAAP reconciliation below.)
On a GAAP basis, earnings per diluted share were $2.01 versus $1.96 in the prior fiscal year. Results for the current and prior year fiscal quarters each reflect the retroactive reinstatement of the Work Opportunity Tax Credit (“WOTC”). Adjusting for these WOTC impacts and the prior year litigation accrual, adjusted earnings per diluted share in the current year quarter were $1.91 compared to $1.93 in the prior year quarter.
Commenting on the second quarter results, Cracker Barrel President and Chief Executive Officer Sandra B. Cochran says, “We continued to deliver positive comparable store sales in the second quarter, continued to outperform our casual dining industry peers, and delivered earnings at the high end of our expectations. During the second half of the fiscal year, our focus will be on providing honest everyday value to our guests, increasing brand awareness, and bringing new and unique menu items to market. We believe that the strength of our brand, as well as our marketing, menu, and cost reduction initiatives, position us to compete effectively in this challenging environment."
The company reported total revenue of $764 million for the second quarter of fiscal 2016, representing an increase of 1.1 percent over the second quarter of the prior year. Comparable store restaurant sales increased 0.6 percent, as a 3.4 percent increase in average check was partially offset by a 2.8 percent reduction in traffic. The average menu price increase for the quarter was approximately 2.9 percent. Comparable store retail sales increased 2.6 percent for the quarter. The company believes that severe winter weather negatively impacted its comparable store traffic and sales in January by approximately 1.9 percent, and in the second quarter by approximately 0.6 percent.
Operating income for the second quarter was $70.5 million, or 9.2 percent of total revenue. GAAP operating income in the prior year quarter was 9.4 percent of total revenue, or 9.7 percent when adjusted to exclude the impact of a litigation accrual. As a percentage of total revenue, increases in other store operating expenses were partially offset by a reduction in labor and related expenses.
On a GAAP basis, earnings per diluted share were $2.01 versus $1.96 in the prior fiscal year. Results for the current and prior year fiscal quarters each reflect the retroactive reinstatement of WOTC. Adjusting for these impacts and the prior year litigation accrual, adjusted earnings per diluted share in the current year quarter were $1.91 compared to $1.93 in the prior year quarter.
The company raised its fiscal year earnings guidance for fiscal 2016 to reflect expected moderation in food commodity prices and the anticipated tax benefit of WOTC. The Company now expects to report adjusted earnings per diluted share for the 2016 fiscal year of between $7.40 and $7.50. The Company expects to report increases in comparable store restaurant sales and comparable store retail sales in the range of 1.5% to 2.5%. The company expects total revenue of between $2.90 billion and $2.95 billion, reflecting the expected opening of five or six new Cracker Barrel stores during the fiscal year. The company projects food commodity inflation of approximately 1 percent for the fiscal year. The company now projects adjusted operating income margin of approximately 9.5 percent of total revenue for fiscal 2016. The company expects depreciation expense between $76 million and $77 million; net interest expense between $14 million and $15 million; and capital expenditures of between $90 million and $100 million. The company expects an effective tax rate for fiscal 2016 of between 30 percent and 31 percent.
The company expects to report earnings per diluted share for the third quarter of fiscal 2016 of between $1.70 and $1.80. The company reminds investors that its outlook for fiscal 2016 reflects a number of assumptions, many of which are outside the company’s control.