Cracker Barrel will boost its catering in 2018.

flickr: Mike Mozart

Retail continues to be a challenge for Cracker Barrel.

Cracker Barrel Plans to Ramp Up Off-Premise in 2018

The chain reported a mixed first quarter to start fiscal 2018.

Cracker Barrel’s off-premise future was the key focus of the chain’s first quarter—a mixed start to the fiscal 2018 calendar that sent shares down about 4 percent in Tuesday trading.

Sandra B. Cochran, the brand’s president and chief executive officer, said in a conference call that Cracker Barrel spent much of the quarter on the rollout of its enhanced off-premise platform. This included the introduction of a new catering menu and in-store training of hourly employees.

This systemwide rollout completed in October. “To support the off-premise platform, we launched full-menu online ordering for large parties as well as individual To-Go offerings. Guest responses to the new off-premise platform and the convenience of online ordering have been great,” Cochran said.

Cracker Barrel beat Wall Street expectations on earnings, which came in at $1.92 per diluted share compared to $2.01 in the prior-year quarter. The company estimates that hurricanes Harvey and Irma reduced diluted EPS by about 7 cents, and will reduce second-quarter numbers by about 3 cents. The earnings topped Zacks Consensus Estimate’s $1.86 prediction by 3.2 percent. Cracker Barrel reported revenues of $710.4 million in the quarter, below Zacks’ estimate of $719.1 million by 1.2 percent. Same-store sales gained 0.2 percent and traffic declined 1.8 percent. The company estimated that the storms reduced traffic and same-store sales by about 0.3 percent, and retail by 0.6 percent.

Moving forward, Cochran said Cracker Barrel will continue to leverage its improved off-premise platform “as we seek to grow market share through catering, individual To-Go, and the Heat n’ Serve.”

The holiday Heat n’ Serve program, she added, has driven favorable sales performance over the last two years.

“We believe this success results from the convenience of the program, combined with the quality and style of our food, to create the differentiated offering in the market. We anticipate continued growth this year during the Thanksgiving, Christmas and Easter holidays,” she said.

Cracker Barrel plans to support growth through marketing efforts via social and digital outlets, geo-targeted consumer emails, and in-store collateral. Plans to test multiple delivery options are in the works as well, Cochran said.

Retail has been a difficult arena for Cracker Barrel in recent quarters. That was again the case as retail sales dropped 3.6 percent, a number that decline from August (negative 1.4 percent) to September (negative 3.1 percent) to October (negative 5.6 percent).

“On the retail side, we continue to navigate through a highly promotional environment, with consumers seeking deep discounts and value offerings. Our first quarter retail results fell below our expectations, with our underperformance occurring broadly across the majority of our categories. We worked hard to improve our merchandise value offer, particularly in apparel,” Cochran said.

She added that Cracker Barrel hopes to improve those numbers by “placing greater emphasis on the price-value relationship of our merchandise.”

“Combined with increased operational focus on conversion-driving activities, we're optimistic that these events will support improved sales performance from our first quarter results and help manage our seasonal merchandise inventory levels,” Cochran added, noting that Cracker Barrel has experienced solid numbers on its seasonal collections and that Great Gifts, which are priced at $19.99 and below, have resonated with guests.

“The retail industry has remained highly promotional, and we anticipate this to continue into the foreseeable future,” Jill Golder, chief financial officer, said in the call. “We continue to be cautious in our outlook of the retail business and do not anticipate significant industry improvement this fiscal year, although we do expect that our retail performance will improve versus our first quarter results.”

Cochran said Cracker Barrel has been pleased by the response to its crafted coffee program, which is live in about 40 percent of stores. She said it can drive check favorability and promote guest perceptions of menu variety. The chain expects rollout to be complete by the end of the third quarter.

Also, Cracker Barrel is getting ready to introduce Southern Bowls as a limited-time offer in the spring menu promotion. They will highlight a Fried Chicken Benedict Bowl, Ham n’ Maple Bacon Bowl, and a Sausage Brick Cake and Green Tomato Bowl. “We believe these offerings will appeal to both our core guests and younger consumers, providing new news in the market and driving increased frequency of visits,” Cochran said.

Cracker Barrel opened two new Holler & Dash Biscuit House locations during the quarter, bringing the combined count to 651 total locations. They expect to open eight or nine Cracker Barrels and three Holler & Dash units in fiscal 2018.