This Is The Bottom For Cracker Barrel
Cracker Barrel (NASDAQ: CBRL) didn't give guidance for fiscal 2023 revenue or earnings. What it did give guidance for was inflation in a range of mid...
Cracker Barrel Provides A Robust Outlook
Cracker Barrel (NASDAQ: CBRL) didn't give guidance for fiscal 2023 revenue or earnings. What it did give guidance for was inflation in a range of mid to high-single digits and that's kind of scary for the economy at large. Getting back to the point, Cracker Barrel also made two surprising moves at the end of the quarter that amount to an overwhelmingly bullish vote of confidence from the company. Cracker Barrel's management team increased the dividend by 30% and entered into a share repurchase program. The repurchase program is worth $100 million or about 3% of the market cap while the dividend increase brings the payout back to the pre-COVID level. According to data from Marketbeat.com, that is worth about 3.75% of the share price making it a very attractive payout for us.
Cracker Barrel Falls Short Of Consensus
Cracker Barrel had a good 4th quarter capping off a strong rebound from the COVID disruption. The problem is that the $784.41 in revenue missed the consensus estimate which is not good in a market looking for outperformance. The top-line revenue is good for growth of 58% over last year and almost perfectly flat versus the same time frame in 2019. Sales in both the one-year and two-year comparisons are underpinned by strengthening retail sales and off-premise food sales. Comp sales in the restaurants are up 53% over last year but down nearly 7% versus 2019 while retail sales are up 75% over last year and 18% versus 2019. Off-premise sales, which got a boost from the pandemic, are up 19% versus last year and 108% versus 2019.
Moving down the report, the company experienced a slight expansion of margins but less than expected. The GAAP operating margin came in at 8% and the adjusted margin at 8.4% to drive earnings that missed the consensus target in both comparisons. The GAAP EPS of $1.53 missed the consensus by $0.75 while the adjusted $2.25 missed by a dime.
Cracker Barrel Fundamentals Improve
Cracker Barrel's results may have missed the consensus targets but the company's results are still sound. Not only that, but the company is using its cash flow to improve the balance sheet and improve the fundamental outlook as well. The company was able to refinance and pay down debt over the quarter leaving total debt at just over $325 million. This is down 60 million or nearly 16% from the end of the last fiscal year and helps to free up cash flow. With the new dividend payment running at roughly 60% of the consensus earnings estimate for fiscal 2023, that is good news indeed.
Chief Executive Officer Sandra B. Cochran said, "Despite the well-known headwinds that the industry continues to face with respect to staffing, commodity and wage inflation, and the resurgence of the pandemic, we were pleased that our fourth quarter profitability continued to trend positively from the third quarter and that our off-premise sales, retail business, and Maple Street Biscuit Company concept continued to outperform.”
The Technical Outlook: Cracker Barrel Hits Bottom
Shares of Cracker Barrel fell about 5% in the wake of the earnings report but the price action since then is all bullish. The market opened with price action sitting at a key support level that has since been confirmed. Assuming that the candle is able to close at or near the high of the day or higher, we're looking at a double double-bottom. Close inspection of the chart will reveal a small double bottom In August that led to a rally in September that is now retesting support again with another quick double-tap at support.
In our view, this is a strong indication of support and consistent with the outlook for revenue and earnings in the coming year. Even with headwinds, Cracker Barrel should see full-year revenue at or above 2019 levels with comparable levels of earnings. Assuming shares of Cracker Barrel are able to maintain support at current levels we see the stock moving up to retest resistance at the $140 level before moving up to retest resistance at the $145 level and then possibly moving higher later in the year.