Biglari Cracks His Knuckles

It's not just the chairs lining the front porch at Cracker Barrel Old Country Store (NAS: CBRL) that are rocking today.

The comfort food dining chain with attached gift shops posted uninspiring quarterly results this morning, and Biglari Holdings' (NYS: BH) Sardar Biglari is renewing his attack on the company.

Earnings per share fell 34% to $0.75. Revenue growth was flat -- clocking in at $612.9 million -- as a 2.8% increase in average tab per check wasn't enough to offset a decline in traffic. Comps at the restaurants and stores fell 1.4% and 0.7%, respectively.

The restaurateur is frank in its critical self-assessment. It feels that customers are staying away because its value proposition isn't clear, so it will be ramping up more entry-level pricing like so many of the traditional casual dining chains have during this economic lull.

Cracker Barrel also admits that its latest research is showing customer concerns over order accuracy and server friendliness, so it plans on tackling that to make sure that Southern hospitality accompanies its Southern vittles.

The eatery will continue to grow its reach. Cracker Barrel is looking to add 15 new stores in the new fiscal year that began last month, expanding on its 603 existing locations.

Cracker Barrel's guidance for the new fiscal year calls for revenue to grow by 5% to 7% and for earnings per share to climb 12% to 16% higher. However, there is an extra week in fiscal 2012. Back that out, and the low end of the company's guidance falls to a mere 3% top-line spurt on a 5% increase in profitability.

Biglari obviously smells more than chicken and dumplings here. There's an opportunity brewing in the stagnancy.

"It has become increasingly clear to us that top leadership has shaped a culture that lacks, inter alia, accountability, transparency, and stock ownership," Biglari wrote in a letter to shareholders this morning, vying for a board seat.

That seat may have to come by force, because the same letter does a good job of ripping the company's vision and pointing out how its board members are being excessively compensated.

Biglari has amassed a 9.3% stake in the chain, but it remains to be seen what he can bring to the Cracker Barrel table. His company has snapped up Western Sizzlin and Steak n Shake, but it has also made investments in Red Robin Gourmet Burgers (NAS: RRGB) and Sonic (NAS: SONC) , only to unload them later.

Cracker Barrel can feel the heat. This morning it announced that it was beefing up its quarterly dividend by 14% and initiated a new $65 million share buyback. These actions don't address Biglari's concerns, but they will please the shareholders that will ultimately decide if Biglari is sitting in the Cracker Barrel boardroom ... or left out, rocking to and fro in one of the chain's rocking chairs outside.

If you want to follow this boardroom battle, addCracker Barrel Old Country StoreandBiglari Holdingsto My Watchlist.

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