Southern Dining at Bob Evans, Cracker Barrel Goes South
It's apparently getting harder to woo diners with heaping servings of country-fried steak, chicken and dumplings, or chicken potpie. Bob Evans Restaurants (BOBE) and Cracker Barrel Old Country Store (CBRL) have chimed in with unimpressive quarterly results in recent days, suggesting that Southern comfort foods have gone out of favor.
Bob Evans posted horrendous results after Tuesday's market close. Net sales plunged 22 percent to $340.1 million, fueled primarily by the sale of its Mimi's Cafe chain. Analysts were bracing for that, but they weren't ready to see comparable-restaurant sales decline 1.8 percent during the period. Wall Street was forecasting net sales of $350.5 million for the period, but it seems as if bad weather outside of Florida was too much to overcome.
The news gets worse for Bob Evans as we work our way down to the bottom line. Rising pork prices and labor costs combined with hiccups on the retail front led to sharply contracting margins. Bob Evans' adjusted profit of 30 cents a share was well short of both the 56 cents a share it rang up a year earlier and the 57 cents a share that the pros were targeting.
It's Not Just the Chairs Rocking
Cracker Barrel -- which combines Southern cooking staples with a rustic gift shop -- earlier reported a step back in its holiday quarter.
The restaurant side held up better than the retail end. Comps for the eatery slipped 0.6 percent, outperforming the 3 percent slide at the country store. However, Cracker Barrel suffered a decline despite tweaking menu prices slightly higher. Restaurant traffic actually mirrored the 3 percent drop at the retail level. Slightly negative traffic trends in November worsened in December as January. For the first time in several quarters, Cracker Barrel failed to beat Wall Street's profit targets.
Cracker Barrel joins Bob Evans in blaming the weather for its disappointing finish, and that's fair to a certain extent. If it's snowing outside you're not likely to drive out for some steak and eggs or blackberry cobbler. Cracker Barrel also happens to be a chain that needs consumers to be taking road trips since it locates many of its establishments near major highways.
I'm a Little Bit Country
Things could have been worse. Bob Evans lowered its outlook for all of fiscal 2014, %VIRTUAL-article-sponsoredlinks%but it raised its longer-term growth expectations. Cracker Barrel followed many in the industry into delivering negative comparable restaurant sales, but this is the ninth quarter in a row that it outperforms the industry as a whole.
Cracker Barrel is introducing healthier menu items to appeal to guests that visit less frequently. It tried to make the most of the nasty Christmas weather by adding more seasonal comfort foods, including a beef and mushroom potpie and buttermilk chicken sliders.
Both Bob Evans and Cracker Barrel have also tried to make it easier to feed folks who don't have time to sit at one of its tables. Bob Evans has been promoting $5 takeout meals, and Cracker Barrel is beefing up the availability of licensed food products that it sells from the store.
Motley Fool contributor Rick Munarriz owns shares of Cracker Barrel Old Country Store. The Motley Fool has no position in any of the stocks mentioned.