Same-store sales declined 0.4 percent year-over-year in Q4 and guest traffic fell 3.5 percent. Adjusted earnings per share of $2.19 and quarterly revenues of $810.9 million both missed analyst expectations. Cracker Barrel’s traffic has been in the red for some time now.
What raised alarm as well was the fact that comps decelerated from Q3’s 1.5 percent increase and Cracker Barrel hit the 0.4 percent decline even with a 3.1 percent increase in average check.
But is there a positive shift on the horizon? Cracker Barrel’s shares have added about 9.4 percent since it reported those Q4 results in September, pointing to a possible upswing, at least compared to where it was in early fall. And Tesley Advisory Group upgraded Cracker Barrel on October 16 to an outperform rating from neutral due to some upcoming changes and the effect on comp sales, especially the fried chicken introduction.
Let’s take a look at the start of Cracker Barrel’s turnaround and what the 660-unit brand is doing to reroute some of these negative trends.
Are guests dissatisfied?
Cracker Barrel’s Campfire menu has been a staple for the past three years. But it appeared to fall flat this time around. What Cracker Barrel did “to provide new news and maintain relevance,” CEO Sandy Cochran said in a September conference call, was to introduce several new menu items. At the time, Cracker Barrel billed this as “somewhat unexpected flavor twists,” including Roasted Sweet Glazed Chicken, Smoky Beef Brisket Breakfast, BBQ Pork, and a S’mores Latte. The expansion “unfortunately did not resonate with guests,” Cochran said. “Unexpected flavor twists” and Cracker Barrel’s core audience proved to be two peas in two pods, or something along those lines.
Meanwhile, Cracker Barrel decided to run fewer weeks of media at higher concentrations, which also didn’t land.
Really, this speaks to a broader directional misstep. Cracker Barrel seems to have veered off track a bit from its customer. Executives spent months spent poring over sales and survey data, and saw evidence of lower guest satisfaction that appeared to reflect this notion.
Cracker Barrel’s data showed “declines in guest experience metrics and a lack of emphasis on our value proposition and on delivering cravable food offerings,” Cochran said. This particularly impacted lighter users, or those guests who aren’t loyal users willing to forgive a deal or one-off experience that doesn’t align with the norm. “Service and hospitality has always been foundational to the Cracker Barrel brand,” Cochran added. “We continue to believe that it is a differentiator and a strength, but we must do a better job in consistently delivering this experience our guests expect.”