What Is Wrong With Cracker Barrel?

With the economy stuck in the doldrums, consumers are feeling less confident about spending these days. One stock that’s been particularly affected is Cracker Barrel Old Country Store (Nasdaq: CBRL), whose shares have shaved 20% off their value in the past month alone. While economic headwinds like elevated inflation and high interest rates persist, this restaurant chain also has some major company-specific issues it must fix.

In the past 52-week span, Cracker Barrel stock has traded between $52 and$116, currently hovering at the bottom of that wide range. With an annual dividend yield of 9.65%, investors have somewhat incentivized to stick around, but they’re sure to run out of patience if Cracker Barrel doesn’t turn things around soon.

Relevant Menu

Consumers have been staying away from Cracker Barrel locations in droves. The issue appears to be one of relevancy, in response to which the company has been spending on labor, advertising and the guest experience. They have suffered inconsistency on this front, with the departure of two marketing executives in 2023, one of whom — Taco Bell alum Julie Fells Masino — vacated the role to replace outgoing CEO Sandra Cochran.

Cracker Barrel is in the process of transforming its menu, taking an ‘out with the old, in with the new’ approach as its swaps outdated items for innovative offerings. This initiative includes a recently introduced fresh summer menu featuring Golden Carolina BBQ Chicken Tenders and a Fresh Berry French Toast Bake, along with free biscuits to lure people in. As part of its foray into digital, Cracker Barrel has launched a loyalty program, where it’s seeing some traction. Separately, they’ve introduced an ‘early dinner deals’ menu for price-conscious guests.

Margins remain under pressure, a trend that’s persisted in recent years owing to inflation including wages. In response, Cracker Barrel recently raised its menu prices

Based on fiscal Q2 results, this restaurant will need more than free biscuits to bring foot traffic back, especially with fast-casual concepts like Chipotle (NYSE: CMG | CMG Price Prediction) stealing the show. Revenue is basically flat, growing 0.2% year-over-year in Q2. Meanwhile, comparable store restaurant sales marched modestly higher, up 1.2%, but that follows Q1 decline of 0.5%. And Cracker Barrel’s comparable store retail sales moved in the wrong direction in the quarter, falling over 5%.

The worst apparently isn’t over as the company predicts “industry traffic to remain pressured for the remainder of the fiscal year,” according to CFO Craig Pommells.

Is Cracker Barrel Stock a Sell in 2024?

Wall Street isn’t too keen on Cracker Barrel stock. Only a handful of analysts cover the stock, most of whom have assigned “sell” or “hold” ratings on shares. On the flip side, an average price target of $74 reflects optimism in the near-term performance of the stock. But it’s hard to ignore the fact that Cracker Barrel stock is trading near its pandemic-era lows.

Cracker Barrel will host a strategic transformation call on May 16, at which time investors will surely be looking for some answers to their questions.