Cracker Barrel Reports Results for Second Quarter Fiscal 2013

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Cracker Barrel Reports Results for Second Quarter Fiscal 2013

Positive Comparable Store Traffic, Restaurant and Retail Sales in the Quarter

LEBANON, Tenn.--(BUSINESS WIRE)-- Cracker Barrel Old Country Store, Inc. ("Cracker Barrel" or the "Company") (NAS: CBRL) today reported financial results for the second quarter of fiscal 2013 ended February 1, 2013.


Second-Quarter Fiscal 2013 Highlights

  • Compared to the prior year second quarter, comparable store traffic increased 0.2%, comparable store restaurant sales increased 3.3% and comparable store retail sales increased 3.1%.
  • Fifth consecutive quarter of positive comparable traffic, restaurant sales and retail sales, and outperformance of the Knapp-TrackTMcasual dining index.
  • On a GAAP basis, operating income margin was 8.1% of total revenue, compared with 7.0% in the prior year quarter. Adjusted for proxy contest and severance expenses, adjusted operating income margin was 8.4% of total revenue, compared with 7.5% in the prior year quarter. (See non-GAAP reconciliation below.)
  • On a GAAP basis, earnings per diluted share were $1.47, compared to $1.10 in the prior year quarter. Adjusted for proxy contest and severance expenses, and the prior year benefit from the Work Opportunities Tax Credit ("WOTC"), adjusted earnings per diluted share were $1.43 compared to adjusted earnings per diluted share of $1.20 in the prior year quarter. Second quarter GAAP EPS includes $0.19 per diluted share due to the retroactive reinstatement (effective January 1, 2012) of the WOTC, of which $0.09 per share relates to the prior fiscal year. (See non-GAAP reconciliation below.)

Second-Quarter Fiscal 2013 Results

Revenue

The Company reported total revenue of $702.7 million for the second quarter of fiscal 2013, representing an increase of 4.4% over the second quarter of the prior year. Comparable store restaurant sales increased 3.3%, including a 3.1% increase in average check. The average menu price increase for the quarter was approximately 2.6%. Comparable store retail sales were up 3.1% for the quarter. The Company estimates that inclement weather in the second quarter reduced comparable store traffic, restaurant and retail sales by approximately 0.3%. During the quarter, the Company opened one new Cracker Barrel store, for a total of five new store openings year-to-date.

Comparable store restaurant traffic, average check and comparable store restaurant and retail sales for the fiscal months of November, December and January were as follows:

    

November

   

December

   

January

   

Second Quarter

Comparable restaurant traffic   0.6%   -1.9%   1.6%   0.2%
Average check   3.3%   3.4%   2.7%   3.1%
Comparable restaurant sales   3.9%   1.5%   4.3%   3.3%
Comparable retail sales   -8.4%   11.0%   5.3%   3.1%
            

Fiscal 2012 was a 53-week year. For Fiscal 2013, the Company calculates comparable store traffic, check and sales using the corresponding prior year weeks.

Operating Income

On a GAAP basis, operating income was $57.2 million, or 8.1% of total revenue, in the second quarter of fiscal 2013 compared with $47.3 million, or 7.0% of total revenue, in the second quarter of the prior year. Adjusted for proxy contest and severance expenses, adjusted operating income was $58.9 million, or 8.4% of total revenue, in the second quarter of fiscal 2013, compared with adjusted operating income of $50.6 million, or 7.5% of total revenue, in the prior year quarter. Lower retail cost of goods, restaurant hourly labor expense, and general and administrative expense as a percent of total revenue contributed to most of this operating income margin improvement.

Diluted Earnings Per Share

On a GAAP basis, earnings per diluted share in the second quarter of fiscal 2013 were $1.47, compared with $1.10 in the prior year quarter. During the quarter, Congress retroactively reinstated the WOTC effective to January 1, 2012, which reduced the effective income tax rate in the quarter to 25.0% compared with 29.5% in the prior year quarter, and contributed $0.19 per diluted share to second quarter earnings. Adjusted for proxy contest and severance expenses and the prior-year WOTC benefit of $0.09 per diluted share, adjusted earnings per diluted share were $1.43, an increase of 19.2% over adjusted earnings per diluted share in the prior year quarter.

"This is the first quarter in more than ten years with positive comparable store traffic against a prior-year quarter with positive comparable store traffic," said Sandra B. Cochran, Cracker Barrel's President and Chief Executive Officer. "This was also the fifth consecutive quarter of comparable store traffic and sales growth, and of outperforming the Knapp-Track casual dining index. This quarter's financial results exceeded our expectations and reflect the continued success of our marketing, menu, and operational initiatives. While we remain confident of our ability to execute our strategic plan, we also remain cautious about general economic conditions and consumer spending."

Fiscal 2013 Outlook

Based upon year-to-date financial performance, continued food commodity pressures, inclement weather in February, the reinstatement of WOTC, and remaining uncertainty in the economic environment, the Company adjusted its previous full year earnings guidance. For fiscal 2013, the Company expects total revenue of between $2.6 billion and $2.65 billion and adjusted earnings per diluted share of between $4.60 and $4.80. The revenue projection for fiscal 2013 reflects the expected opening of eight new Cracker Barrel stores and projected increases in comparable store restaurant and retail sales in a range of 2.0% to 3.0%. The Company projects an adjusted operating income margin of between 7.3% and 7.5% of total revenue for fiscal 2013.

The Company expects to report earnings per diluted share for the third quarter of fiscal 2013 of between $0.90 and $0.95. The Company reminds investors that its outlook for fiscal 2013 reflects a number of assumptions, many of which are outside the Company's control.

Fiscal 2013 Second-Quarter Conference Call

As previously announced, the live broadcast of Cracker Barrel's quarterly conference call will be available to the public on-line at investor.crackerbarrel.com on February 26, 2013, beginning at 11:00 a.m. (Eastern Time). An on-line replay will be available at 2:00 p.m. (Eastern Time) and continue through March 12, 2013.

About Cracker Barrel

Cracker Barrel Old Country Store provides a friendly home-away-from-home in its old country stores and restaurants. Guests are cared for like family while relaxing and enjoying real home-style food and shopping that's surprisingly unique, genuinely fun and reminiscent of America's country heritage...all at a fair price. The restaurants serve up delicious, home-style country food such as meatloaf and homemade chicken n' dumplins as well as our signature biscuits using an old family recipe. The authentic old country retail store is fun to shop and offers unique gifts and self-indulgences.

Cracker Barrel Old Country Store, Inc.  (NAS: CBRL) was established in 1969 in Lebanon, Tenn. and operates 621 company-owned locations in 42 states. Every Cracker Barrel store is open seven days a week with hours Sunday through Thursday, 6 a.m. - 10 p.m., and Friday and Saturday, 6 a.m. - 11 p.m. For more information, visit: crackerbarrel.com.

CBRL-F

Except for specific historical information, certain of the matters discussed in this press release may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. These, and similar statements are forward-looking statements concerning matters that involve risks, uncertainties and other factors which may cause the actual performance of Cracker Barrel Old Country Store, Inc. and its subsidiaries to differ materially from those expressed or implied by this discussion. All forward-looking information is subject to completion of our financial procedures for Q2 FY13 and is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "trends," "assumptions," "target," "guidance," "outlook," "opportunity," "future," "plans," "goals," "objectives," "expectations," "near-term," "long-term," "projection," "may," "will," "would," "could," "expect," "intend," "estimate," "anticipate," "believe," "potential," "should," "projects," "forecasts," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology and include the expected effects of operational improvement initiatives, such as new menu items and retail offerings. Factors which could materially affect actual results include, but are not limited to: the effects of uncertain consumer confidence, higher costs for energy, general or regional economic weakness, weather on sales and customer travel, and discretionary income or personal expenditure activity of our customers; our ability to identify, acquire and sell successful new lines of retail merchandise and new menu items at our restaurants; our ability to successfully implement or sustain plans intended to improve operational or marketing execution and performance; changes in or implementation of additional governmental or regulatory rules, regulations and interpretations affecting tax, wage and hour matters, health and safety, pensions, insurance or other undeterminable areas; our ability to successfully implement plans intended to promote or protect our brands and products; commodity price increases; the ability of and cost to us to recruit, train, and retain qualified hourly and management employees in an escalating wage environment; the effects of increased competition at our locations on sales and on labor recruiting, cost, and retention; workers' compensation, group health and utility price changes; consumer behavior based on negative publicity or concerns over nutritional or safety aspects of our food or products or those of the restaurant industry in general, including concerns about pandemics, as well as the possible effects of such events on the price or availability of ingredients used in our restaurants; the effects of our substantial indebtedness and associated restrictions on our financial and operating flexibility and ability to execute or pursue our operating plans and objectives; changes in interest rates or capital market conditions affecting our financing costs and ability to refinance all or portions of our indebtedness; the effects of business trends on the outlook for individual restaurant locations and the effect on the carrying value of those locations; the availability and cost of suitable sites for restaurant development and our ability to identify those sites; changes in land, building materials and construction costs; the actual results of pending, future or threatened litigation or governmental investigations and the costs and effects of negative publicity associated with these activities; practical or psychological effects of natural disasters or terrorist acts or war and military or government responses; disruptions to our restaurant or retail supply chain; changes in foreign exchange rates affecting our future retail inventory purchases; implementation of new or changes in interpretation of existing accounting principles generally accepted in the United States of America; and other factors described from time to time in our filings with the Securities and Exchange Commission, press releases, and other communications.

Any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which made. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

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CRACKER BARREL OLD COUNTRY STORE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
(Unaudited)
(In thousands, except share and per share amounts, percentages and ratios)
 

Second Quarter Ended

Six Months Ended

      Percentage      Percentage
 2/1/13  1/27/12 Change 2/1/13  1/27/12 Change
Total revenue$702,671$673,2344%$1,330,122$1,271,6715%
Cost of goods sold 244,187  235,391 4 442,045  421,698 5
Gross profit458,484437,8434888,077849,9735
Labor and other related expenses244,871234,9334477,610455,9015
Other store operating expenses 122,586  119,136 3 238,451  228,180 5
Store operating income91,02783,7749172,016165,8924
General and administrative expenses 33,830  36,437 (7) 69,511  73,931 (6)
Operating income57,19747,33721102,50591,96112
Interest expense 10,293  11,025 (7) 21,005  22,160 (5)
Pretax income46,90436,3122981,50069,80117
Provision for income taxes 11,736  10,703 10 23,140  20,390 14
Net income$35,168 $25,609 37$58,360 $49,411 18
 
Earnings per share - Basic:$1.48 $1.11 33$2.47 $2.16 14
Earnings per share - Diluted:$1.47 $1.10 34$2.45 $2.13 15
 
Weighted average shares:
Basic23,711,23522,968,002323,644,40522,919,4513
Diluted23,945,23623,306,177323,866,43123,225,9633
 

Ratio Analysis

Total revenue:
Restaurant75.2%74.8%77.6%77.5%
Retail 24.8  25.2  22.4  22.5 
Total revenue100.0100.0100.0100.0
Cost of goods sold 34.8  35.0  33.2  33.2 
Gross profit65.265.066.866.8
Labor and other related expenses34.834.935.935.9
Other store operating expenses 17.4  17.7  18.0  17.9 
Store operating income13.012.4