Cracker Barrel Old Country Store Inc. customers’ uncertainties were compounded by inflation and gas price increases in the third quarter, executives said Tuesday.
The Lebanon, Tenn.-based family-dining brand, which also owns the 50-unit fast-casual Maple Street Biscuit Co., reported its earnings for the third quarter ended April 29, noting pressures from both commodity inflation and top-line sales.
The third-quarter challenges, said Sandra Cochran, Cracker Barrel CEO and president, on an earnings call with analysts, “are likely to continue to one degree or another for the balance of our fiscal year.”
Craig Pommells, Cracker Barrel’s chief financial officer, added, “We anticipate the near-term pressures we faced on both our top and bottom lines in the third quarter to persist.
“Clearly we plan to offset some of our cost pressures over the remainder of the calendar year,” Pommells said, “While we've seen some guests managing check, our plan is to take price increases in a staged and thoughtful manner. We will take an increase in late June followed by another in early August.”
Together, those planned price increases will total about 7% in year-over-year price increases, Pommells said. “We will continue to monitor the consumer and inflation environment and maintain the flexibility to take additional pricing if we believe it would be prudent to do so,” he added.
Cochran said the company remains focused on growing the fast-casual Maple Street Biscuit Co., which it acquired in October 2019. The division recently opened its 50th location, Cochran said, “and has continued to perform above our expectations, despite dealing with its own inflationary pressures.”
She said the fast-casual breakfast and lunch space “is an attractive one we've been focused on.” Cochran announced that earlier in May the company named John McGuire as president of Maple Street. McGuire has more than 30 years of experience in restaurants, including such brands as Panera Bread, MOD Pizza, Johnny Rockets and Friendly’s Ice Cream LLC.
Jennifer Tate, Cracker Barrel’s chief marketing officer, said the family-dining brand recently conducted a “six-month segmentation study that has given us a greater level of insight about key groups we can newly attract or from whom we can increase visitation.”
A number of guests older than 65 had been slow to return to normal dining patterns as the pandemic eases, she said, but 30% of the brand’s guests are Millennials, between the ages of 25 and 44.
The Millennial group expressed interest in technology, Tate said, and the company is looking at expanding its digital offerings, including mobile payments and a loyalty program.
“We're pursuing initiatives where we lean into our strengths of strong value perception and delicious food to grow check and attract visits while also addressing our opportunities in technology and digital, including a new loyalty program,” Tate said.
And among check drivers, Cracker Barrel continues to focus on its beer and wine program, Tate said. “We're making great progress toward our 2% dine-in mixed target through enhanced selling in-store marketing and new seasonal offerings,” she said, and the brand developing and testing other drink concepts “to further enhance our appeal to our guests and deliver the additional items they're telling us they want.”
The brand will continue to protect its value-based price points, Tate added, but research indicated some customers want more.
“There is a group of consumers who may be cutting back on some more luxury items or trips or vacations,” Tate said. “When they come to Cracker Barrel, they actually want to splurge a little bit. They want a treat and indulgence and that is why we are adding some higher priced, more premium entrees and add-on items so that they can indulge a little bit more.
For the third quarter ended April 29, Cracker Barrel’s net income slipped to $27.5 million, or $1.19 a share, from $33.5 million, or $1.41 a share, in the prior-year period. Third-quarter total revenue was $790.2 million, up 10.8% from $713.4 million in the same period last year.
Total same-store sales rose 10.7% in the third quarter as compared to the same period in 2021. Same-store restaurant sales increased 10.9%, while same-store retail sales increased 9.7%.
Cracker Barrel and its affiliates operate more than 660 company-owned Cracker Barrel Old Country Store locations in 45 states and own the 50-unit fast-casual Maple Street Biscuit Co.
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