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Category: Stock Market and Cracker Barrel Old Country Store
Date: 2 June 2020 Stock Price: $107.69 We take a look at the 3rd quarter earnings release of their 2020 fiscal year of old style country stores and restaurants owner Cracker Barrel who owns and operates 664 stores across 45 states in the United States. The group's revenue declined by -42% compared to 12 months ago, largely driven by the impact of Covid-19.
Beginning in March, the unprecedented circumstances and rapidly changing market conditions caused by the COVID-19 pandemic resulted in significant disruptions to the restaurant industry and to the Company's business" |
About Cracker Barrel Old Country Store
Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL), established in 1969 in Lebanon, Tenn., 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
Overview of Cracker Barrel's 3rd quarter 2020 earnings report
The data below refers to the latest quarterly data unless specified otherwise:
- Total revenue: $432.544 million (down from $739.603 million from the same quarter of the previous year)
- Revenues decreased by -42% over the last 12 months
- Cost of Goods sold: $137.138 million (down from $217.073 million for the same quarter of the previous year)
- Cost of goods sold decreased by -37% over the last 12 months
- Net loss: -$161.932 million (down from $50.414 million for the same quarter of the previous year)
- Diluted loss per share: -$6.81 (down -426% from $2.09 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 23.777 million (up from 24.104 million for the same quarter of the previous year)
- Cash and cash equivalents: $363.330 million
- Cash and cash equivalents per share: $15.28
- Cash and cash equivalents makes up 14.2% of Cracker Barrel's market capital
- Cash and cash equivalents makes up 16.24% of Cracker Barrel's total assets
- Inventories: $146.279 million
- Inventories makes up 6.5% of Cracker Barrel's total assets
- Stockholders equity in Cracker Barrel Old Country Store: $392.209 million
- Stockholders equity per share: $16.49
- Cracker Barrel's is trading at 6.53 times its stockholders equity per share which is well above the expected 2 to 4 times that most firms tend to trade at
- For some perspective the average price to book value of firms in the S&P 500 is 3.7. Read more about the S&P 500 here
- Cash generated from operations for 9 months of fiscal 2020: $87.232 million
- Cash generated from operations per share for six months of fiscal 2020: $3.66
Cracker Barrel's management commentary on their 3rd quarter 2020 earnings and guidance
LEBANON, Tenn., June 2, 2020 /PRNewswire/ -- Cracker Barrel Old Country Store, Inc. ("Cracker Barrel" or the "Company") (Nasdaq: CBRL) today reported its financial results for the third quarter ended May 1, 2020 and provided an update regarding the impact of the coronavirus disease ("COVID-19") pandemic on the Company's business.
OVID-19 Business Update
Beginning in March, the unprecedented circumstances and rapidly changing market conditions caused by the COVID-19 pandemic resulted in significant disruptions to the restaurant industry and to the Company's business. As previously disclosed, the Company undertook numerous actions in response to the pandemic to bolster its liquidity and to adapt its operations to the current environment.
In connection with its actions addressing the COVID-19 pandemic, the Company provided the following update:
OVID-19 Business Update
Beginning in March, the unprecedented circumstances and rapidly changing market conditions caused by the COVID-19 pandemic resulted in significant disruptions to the restaurant industry and to the Company's business. As previously disclosed, the Company undertook numerous actions in response to the pandemic to bolster its liquidity and to adapt its operations to the current environment.
In connection with its actions addressing the COVID-19 pandemic, the Company provided the following update:
- For the third quarter of fiscal 2020, when compared to the comparable period in 2019, comparable restaurant sales declined 41.7% and comparable store retail sales declined 45.5%.
- All Cracker Barrel stores have remained open. However, all stores were operating in an off-premise-only model with no dine-in service from late March through late April, with incremental dine-in openings initiating thereafter.
- For the week ending May 29, 2020, when compared to the comparable period in 2019, comparable store restaurant sales for stores with limited dine-in service decreased approximately 32% compared to approximately 76% for stores that were limited to an off-premise-only business model.
- As of May 29, 2020, 505 stores had limited dine-in service, and the Company expects that substantially all stores will have limited dine-in service by the end of June.
On May 28, 2020 the Company increased outstanding debt by drawing approximately $40 million through an exercise of an accordion feature to increase borrowing capacity under its credit facility. Amounts drawn through the exercise of the accordion feature are scheduled to mature in May 2021.
"The past several months have presented unprecedented challenges for Cracker Barrel, the industry and our country. I believe our strategic priorities, such as accelerating our off-premise business, combined with the rapid actions we took to bolster liquidity, strengthen our business model and adapt our operations to the circumstances have positioned us well for the recovery period to come," said Cracker Barrel President and Chief Executive Officer Sandra B. Cochran. "I am inspired by the tireless work of our teams and how they continue to deliver our mission of Pleasing People during this difficult time. Our Company also greatly appreciates our loyal guests who love and have continued to support our brand, and we're looking forward to welcoming them back into our stores. While there continues to be significant uncertainty, and we expect our industry will be challenged in the coming months, Cracker Barrel remains a trusted and highly differentiated brand, and I believe we have the appropriate strategies in place to navigate this environment and to strengthen our business model."
Fiscal 2020 Outlook
As announced on March 18, 2020, the Company withdrew its previously issued fiscal 2020 outlook, including fiscal 2020 earnings guidance, due to the uncertain impact of the COVID-19 pandemic.
"The past several months have presented unprecedented challenges for Cracker Barrel, the industry and our country. I believe our strategic priorities, such as accelerating our off-premise business, combined with the rapid actions we took to bolster liquidity, strengthen our business model and adapt our operations to the circumstances have positioned us well for the recovery period to come," said Cracker Barrel President and Chief Executive Officer Sandra B. Cochran. "I am inspired by the tireless work of our teams and how they continue to deliver our mission of Pleasing People during this difficult time. Our Company also greatly appreciates our loyal guests who love and have continued to support our brand, and we're looking forward to welcoming them back into our stores. While there continues to be significant uncertainty, and we expect our industry will be challenged in the coming months, Cracker Barrel remains a trusted and highly differentiated brand, and I believe we have the appropriate strategies in place to navigate this environment and to strengthen our business model."
Fiscal 2020 Outlook
As announced on March 18, 2020, the Company withdrew its previously issued fiscal 2020 outlook, including fiscal 2020 earnings guidance, due to the uncertain impact of the COVID-19 pandemic.
Cracker Barrel Old Country Store (NASDAQ:CBRL) stock price history
The image below, obtained from Google, shows the stock price history of Cracker Barrel (NASDAQ: CBRL) for the last 5 years. And its not been a good time for Cracker Barrel stockholders. 5 years ago the stock was trading at around $146 and its currently trading at $107.69. That's a loss of 5.52% suffered by Cracker Barrel investors over the last 5 years.
The stock of Cracker Barrel Old Country Store is trading at a lot close to the midpoint between its 52 week low and 52 week high which to us is a clear indication that the short term sentiment and momentum of Cracker Barrel's stock is neutral at this point in time.
The stock of Cracker Barrel Old Country Store is trading at a lot close to the midpoint between its 52 week low and 52 week high which to us is a clear indication that the short term sentiment and momentum of Cracker Barrel's stock is neutral at this point in time.
Cracker Barrel (CBRL) stock vs Shake Shack (SHAK) stock
The image below shows the stock price performance of Cracker Barrel (CBRL) and Shake Shack (SHAK) over the last 3 years. While the stock of Cracker Barrel declined by -35.13% the stock of Shake Shack increased by 43.98% over the same period. The stock of Shake Shack has therefore easily outperformed the stock of Cracker Barrel.
Recent coverage of Cracker Barrel
The extract below covers the latest regarding Cracker Barrel as obtained from Forbes.com
It’s not often investors get the chance to buy leading businesses at significant discounts. Investors willing to look past the dip in economic activity can find great value. I recently highlighted a leading restaurant operator poised to excel during the widely expected economic recovery. This week, I’ve identified another restaurant, providing a more home-style experience, positioned to survive the crisis and grow profits during the recovery. Cracker Barrel Old Country Store (CBRL) is this week’s Long Idea.
CBRL’s History of Profit Growth
I first featured CBRL as a Long Idea in March 2017 and closed the position in June 2018. CBRL was recently featured in my June 2019 article “3 Undervalued Stocks in the Restaurant Industry.” Now, with CBRL down 37% year-to-date (YTD), it trades at its cheapest valuation in years, as measured by price-to-economic book value (PEBV). For investors willing to look past the current crisis, CBRL represents a great buying opportunity.
Prior to the COVID-19 outbreak, CBRL had a strong history of profit growth. Over the past decade, CBRL grew revenue by 3% compounded annually and core earnings[1] by 12% compounded annually, per Figure 1. The firm increased its core earnings margin year-over-year (YoY) in eight of the past ten years, and its core earnings margin of 7% over the trailing-twelve-months (TTM) is up from 4% in 2010.
Read the article here
It’s not often investors get the chance to buy leading businesses at significant discounts. Investors willing to look past the dip in economic activity can find great value. I recently highlighted a leading restaurant operator poised to excel during the widely expected economic recovery. This week, I’ve identified another restaurant, providing a more home-style experience, positioned to survive the crisis and grow profits during the recovery. Cracker Barrel Old Country Store (CBRL) is this week’s Long Idea.
CBRL’s History of Profit Growth
I first featured CBRL as a Long Idea in March 2017 and closed the position in June 2018. CBRL was recently featured in my June 2019 article “3 Undervalued Stocks in the Restaurant Industry.” Now, with CBRL down 37% year-to-date (YTD), it trades at its cheapest valuation in years, as measured by price-to-economic book value (PEBV). For investors willing to look past the current crisis, CBRL represents a great buying opportunity.
Prior to the COVID-19 outbreak, CBRL had a strong history of profit growth. Over the past decade, CBRL grew revenue by 3% compounded annually and core earnings[1] by 12% compounded annually, per Figure 1. The firm increased its core earnings margin year-over-year (YoY) in eight of the past ten years, and its core earnings margin of 7% over the trailing-twelve-months (TTM) is up from 4% in 2010.
Read the article here
Cracker Barrel (NASDAQ: CBRL) latest stock valuation
So based on the 3rd quarter 2020 earnings report of Cracker Barrel (NASDAQ: CBRL) and what do we value Cracker Barrel (CBRL) stock at? Based on the earnings reported and the fact that the group is now loss making and that they withdrew their fiscal guidance our valuation model provides a target price (full value price) for Cracker Barrel at $142.10 a stock (down significantly from our 2nd quarter 2020 earnings report valuation of Cracker Barrel).
We therefore believe that Cracker Barrel is undervalued at its current price of $107.69
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $142.10. So a good entry point into Cracker Barrel would be around $127.90. We expect the stock of Cracker Barrel to kick up in coming weeks and months as the various states starts opening up after the covid-19 pandemic.
We therefore believe that Cracker Barrel is undervalued at its current price of $107.69
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $142.10. So a good entry point into Cracker Barrel would be around $127.90. We expect the stock of Cracker Barrel to kick up in coming weeks and months as the various states starts opening up after the covid-19 pandemic.
Next earnings release of Cracker Barrel Old Country Store
It is expected that Cracker Barrel Old Country Store will release their 4th quarter 2020 earnings report towards the end of August 2020