(ZeroHedge)—Cracker Barrel shares are lower in premarket trading after posting softer-than-expected quarterly sales and cutting full-year revenue and profit guidance. Customer traffic dropped more than anticipated, driven in part by backlash after the casual dining chain effectively “Bud Lighted” itself with a disastrous woke rebranding.
The rebranding …
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… which was eventually reversed and the marketing ‘expert’ resigned, appears to have a lasting impact on sales.
First-quarter results swung to an adjusted loss of 74 cents per share versus a profit a year ago, slightly better than the Bloomberg Consensus estimate. Revenue dipped 6% and missed forecasts, with comparable sales for both restaurants and retail declining more than expected.
Wall Street analysts were spooked by the 7.3% decline in customer traffic for the quarter.
Snapshot: First quarter results (courtsey of Bloomberg):
Adjusted loss per share 74c vs. EPS 45c y/y, estimate loss/shr 79c
Revenue $797.2 million, -5.7% y/y, estimate $801.1 million
Restaurant comp sales -4.7% vs. +2.9% y/y, estimate -4.02%
Retail comparable sales -8.5% vs. -1.6% y/y, estimate -6.5%
Ongoing traffic deterioration sharply reduced annual sales and profit guidance (courtsey of Bloomberg):
Sees revenue $3.2 billion to $3.3 billion, saw $3.35 billion to $3.45 billion, estimate $3.38 billion (Bloomberg Consensus)
Sees capital expenditure $110 million to $125 million, saw $135 million to $150 million
Sees adjusted Ebitda $70 million to $110 million, saw $150 million to $190 million
In premarket trading, Cracker Barrel shares are down about 5.5%. As of Tuesday’s close, the stock has been cut in half since the August rebranding debut.
Here’s what Wall Street analysts are saying (courtsey of Bloomberg);
Piper Sandler (neutral, PT to $27 from $49), Brian Mullan
“Unfortunately, the struggles that kicked off in August have continued at CBRL, with traffic in the quarter down 7.3% (better in the beginning of August, and then worse after that),” Mullan writes
Traffic for the fiscal 2Q-to-date period is running down 11%, and management “materially” reduced its annual guidance
Cracker Barrel is sticking with many of the turn-around efforts designed to help over the long-term, but the main takeaway from the 3Q report/conference is that “things remain pretty tough at the business in the here and now”
Citi (sell PT to $20 vs. $24), Jon Tower
“The traffic slump spurred by the ill-fated logo change resonated through F1Q results, and, along with a softer restaurant backdrop, prompted a weaker start to F2Q and a FY26 guidance cut,” Tower writes
In the near-term, the company is “mixing in tactical sales drivers,” like buy-one-get-one and holiday promos, that may “prove costly” to the P&L, and weaving in longer-term initiatives to “sustainably drive the top line and preserve profits.”
Believes the stock will remain under pressure until traffic/sales show “sustained improvement, as out-year numbers remain a question mark”
Truist (buy, PT to $45 from $50), Jake Bartlett
“Sales trends have not begun to recover from the 8/19 re- branding fiasco, or any recovery has been offset by macro pressures,” Bartlett writes
Says Cracker Barrel is “taking the right steps” to boost traffic, with its focus on improved service and food quality
This has been reflected in improving guest satisfaction scores and will eventually, he believes, be reflected in a traffic recovery
Business investments, including adding value to the menu and retaining labor hours, are headwinds to FY26 margins, but should drive operating leverage in FY27
Cracker Barrel is a case study for every other casual dining chain: go woke, get crushed.