Earnings preview: What to expect from Cracker Barrel Q3?

Cracker Barrel Old Country Store Inc. (CBRL) is scheduled to report its earnings results for the third quarter of 2019 on Tuesday before the market opens. The results will be driven by comparable store retail sales and comparable store restaurant sales with most regions likely to experience positive same-store sales growth.

The company’s results will be benefited by its efforts to increase off-premise sales. The seasonal promotions and limited-time offers could be the driving force in attracting traffic to Cracker Barrel stores both regular users and less-frequent guests.

Cracker Barrel believed its efforts and continuous renewal of its menu could be the backbone of compelling growth potential. The company has taken steps in achieving compelling growth potential through cost-saving initiatives, units expansion, seasonal promotions, extensive marketing efforts, and enhanced focus on retail business.

The margins are likely to impacted by increased wages despite cost-saving initiatives. In addition, the initial contribution by the company in supporting the training and launch of several initiatives as well as its value testing could be weighing on the margins in the third quarter.

Analysts expect the company’s earnings to rise by 2% to $2.07 per share and revenue will inch up by 1.90% to $734.99 million for the third quarter. In comparison, during the previous year quarter, Cracker Barrel posted a profit of $2.03 per share on revenue of $721.41 million.

The company has surprised investors by beating analysts’ expectations thrice in the past four quarters. It is expected that Cracker Barrel will report upbeat results for the third quarter. Majority of the analysts recommended a “hold” rating while expecting the stock to reach $171 per share in the next 52 weeks.

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For the second quarter, the company posted a 33% drop in earnings due to a one-time tax benefit reported last year. Margins were hurt by an increase in labor and other expenses offset by the reduction on the general and administrative expenses. Revenues rose 3% year-over-year.

Same-store restaurant sales grew by 3.8% while restaurant traffic growth saw a paltry increase of 0.1%. Increase in food prices helped to improve the average check by 3.7%. However, comparable store retail sales decreased by 1.4% over the last year.

For the full year 2019, Cracker Barrel expects total revenues of about $3.05 billion and earnings in the range of $8.95 to $9.10 per share. The company projects increases in comparable store restaurant sales growth in the range of 1% to 2% and comparable store retail sales growth of about 1% for the full year. Food commodity inflation was predicted to be about 2% for the year.

Shares of Cracker Barrel opened higher on Friday but changed course to the red territory on the Nasdaq. The stock has fallen over 2% in the past three months and over 6% in the past month.

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