Traffic at Cracker Barrel Old Country Store Inc. fell noticeably in April and May as consumers faced economic pressures, executives said Tuesday, but the company is looking to increase frequency among consumers with continued value messages and a planned loyalty program beta launch in July.
The Lebanon, Tenn.-based company, which also owns the fast-casual Maple Street Biscuit Co. brand and reported earnings for its third quarter ended April 28, said traffic was negative 2.3% in the period.
The “meaningful” traffic declines, said Sandra Cochran, Cracker Barrel’s CEO and president, “negatively impacted our sales and profits, both of which came in a bit below our expectations.
“This softer trend has continued fourth quarter to date,” Cochran said, “both for restaurant and retail sales. In our view, this reflects weaker consumer sentiment and economic pressures, although we are cautiously optimistic that as the summer travel season unfolds we will see some improvement to trends in June and July. Our experience in April and May largely mirrors what we've seen across the full-service casual-dining” segment.
Jennifer Tate, Cracker Barrel’s chief marketing officer, said consumers appear to be managing their checks as they face economic uncertainty and the most-impacted customers are reducing frequency.
“Especially with guests that are particularly impacted by economic insecurity,” Tate said, “we believe they're cutting back not on check but rather on the number of visits.” Promotion of “20 Meals Under $12” and “$5 Take Home Meals” will remain part of the value messaging, she said.
Cochran said Cracker Barrel is set to launch the beta test in July of its loyalty program, which is aimed at increasing frequency.
“While we believe the loyalty program will appeal to all guests,” she said, “we think it will especially resonate with our growth segments. We've made significant progress in the development of the program and to support the successful implementation of this large-scale complex initiative.
She said the loyalty program will incorporate all of Cracker Barrel’s sales channels, including retail and catering, and features "fun gaming” elements.
“We believe the loyalty program will drive higher frequency, increased brand loyalty and customer lifetime value and provide robust actionable guest data,” Cochran said.
As a differentiator from other restaurant loyalty programs, Tate added that “guests are going to be able to earn points whether they're in the restaurant or shopping in our retail and, of course, be able to redeem points you know across both sides of our business.”
Cracker Barrel opened three new locations in the third quarter of its fast-casual Maple Street Biscuit Co. brand, which ended the period with 56 units, or flat on growth as it closed three.
Craig Pommells, Cracker Barrel’s chief financial officer, said the company plans to open five to seven Maple Street locations in the fourth quarter. “Our updated expectation reflects the possibility that a couple may slip into early fiscal 2024 due to permitting or equipment delays,” he said.
Pommells added that Cracker Barrel continued to refine the Maple Street business model.
“We had a handful of stores that were under a type of franchise agreement that was not a part of the near-term business model,” he told analysts. “It may be a part of the long-term business model — but we would do it differently — so we decided to purchase those stores — all of them — and then some of them were particularly challenged and we decided to exit in that case,” he said.
Cracker Barrel acquired the Maple Street brand in 2019, when it had 33 units.
Cochran said the company has a new labor management system in place at more than 460 of its restaurants and was please with its turnover and retention rates.
For the third quarter ended April 28, Cracker Barrel’s net income was $14 million, or 63 cents a share, compared to $27.5 million, or $1.19 a share, in the same period last year, reflecting store closure-impairment costs of $13.9 million. Revenues increase to $832.7 million, up 5.4% from $790.2 million in the prior-year quarter.
Same-store restaurant sales increased 7.4% in the third quarter; same-store retail sales declined 4.6%.
Cracker Barrel, founded in 1969, has 660 company-owned Old Country Store locations in 45 states and owns the fast-casual Maple Street Biscuit Co.
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