Cracker Barrel will boost its catering in 2018.

Cracker Barrel

Cracker Barrel expects to open six new stores this year.

As Sales Decline, Cracker Barrel Plots a Path Forward

Despite a slow third quarter, the chain has high hopes for 2017.

Despite results that “performed below our internal expectations,” Cracker Barrel raised its earnings guidance for the fiscal year following its third-quarter report. Sandra B. Cochran, the company’s president and CEO, said during a conference call that marketing and advertising didn’t deliver the sales and traffic the brand hoped. However, many of those initiatives are still kicking into gear and being joined by additional promotions Cracker Barrel believes will result in a lucrative and successful summer.

Same-store sales declined year-over-year 0.4 percent. That number was trending in the right direction, though, as February saw a 1.7 percent drop followed by 1.3 percent in March, and a 1.2 percent fall in April.

Yet this graduated a second quarter where sales increased 0.6 percent versus the prior year. The decline was partially offset by a 1.7 percent boost in average check, leading to earnings per diluted share of $1.95, an increase of 7.1 percent year-over-year. This beat the Zacks Consensus Estimate of $1.84 by 6 percent. Cracker Barrel also reported revenues of $700.4 million, which came up short of Zacks prediction of $710.8 million.

Additionally, traffic fell 2.1 percent in the quarter and menu prices rose nearly 1.6 percent.

So what is driving the 647-unit chain to such optimistic tones? There are a few things.

Firstly, Cochran said guests continue to respond to the brand’s limited-time offerings—a casual dining staple that same leading chains, such as Chili’s, are abandoning in favor of simpler menus.

“We believe our limited-time menu promotions are well received by our guests, appealing to both regular users and our less frequent guests, and we'll continue to invest in new product news that'll drive visit frequency,” Cochran said, referring to the brand’s Multiberry Pancake Breakfast, Maple Jam n Bacon Burger, and Grilled Chicken ‘n’ Strawberry Spinach Salad.

The summer promotion—the popular Campfire menu—recently launched. There’s also the Strawberry French Toast, Peppermill Steak n Eggs, and S’mores dessert.

And like many national chains, Cracker Barrel is growing its off-premise business through its holiday Heat n’ Serve program, which offers family-sized meals to go.

“We believe the large-party off-premise category continues to represent an opportunity for incremental traffic and sales, and through platforms like Heat n' Serve and catering, Cracker Barrel can secure more share from off-premise eating occasions,” Cochran said, adding that Cracker Barrel has also implemented system-wide calorie labeling.

Coming in June, Cracker Barrel is launching online wait-listing to its app. The feature, which is already live on its website, will allow guests to view the wait times in a given market and be added to the wait list at the store of their choice.

Thus far, Cochran said they’ve been pleased with the technology’s impact, and that it has helped maximize business during busy mornings and weekends.

Across the country, more than 1,600 Cracker Barrel billboards are being updated to showcase “everyday affordability, our product quality, and our core menu offerings,” Cochran said.

The Campfire promotion is being touted through eight weeks of national cable and five weeks of national Hispanic advertising. The Hispanic advertising follows Cracker Barrel’s success with local TV ads in the Southwest and Florida. “This incremental spend is part of our strategic plan to reach a broader demographic of people, and we're excited about this growth opportunity and will remain focused on this important segment in the future,” Cochran said.

Cracker Barrel is partnering with the Country Music Association Music Festival in the fourth quarter as well and expects to see results, both in brand strength and consumer reach from the event.

Retail sales remained a point of discussion as sales declined 4.7 percent year-over-year—not surprising given the overall retail climate.

“We continue to compete in a highly promotional retail environment, and our third quarter results were below our expectations, driven by less traffic and fewer guests making a retail purchase,” Cochran said. “In this environment where the consumer is becoming more accustomed to heavy markdown activity, we have had to be more promotional in our offerings and have modified our retail signage to highlight value on the merchandise floor.”

Cracker Barrel raised its earnings outlook to $8.25—$8.35 a share from $8.10—$8.25 in fiscal 2017. The company expects to open six new stores and three Holler & Dash Biscuit Houses, down from eight, and four, respectively, in earlier projections.