Eleventh Consecutive Quarter of Positive Comparable Restaurant Sales Growth
Second Quarter Operating Income Margin increased 150 basis points
Cracker Barrel Old Country Store, Inc. ("Cracker Barrel" or the "Company") (Nasdaq: CBRL) today reported its financial results for the second quarter of fiscal 2017 ended January 27, 2017.
Second Quarter Fiscal 2017 Highlights
- Compared to the prior year second quarter, comparable store restaurant sales increased 0.6%, marking the Company's eleventh consecutive quarter of positive comparable store restaurant sales.
- Operating income as a percent of total revenue increased 150 basis points, over the prior year quarter, to 10.7%.
- Earnings per diluted share were $2.19, compared to GAAP earnings per diluted share of $2.01 in the prior year quarter, an increase of 9.0%. Adjusted for the impact of the prior year retroactive reinstatement of the Work Opportunity Tax Credit ("WOTC"), earnings per diluted share increased 15% from adjusted EPS of $1.91 in the prior year quarter. (See non-GAAP reconciliation below.)
Commenting on the second quarter, Cracker Barrel President and Chief Executive Officer Sandra B. Cochran said, "I am pleased to report another significant increase in earnings per diluted share. We delivered second quarter operating margin growth largely driven by continued commodity favorability and the success of our cost reduction initiatives. As we look to the second half of this fiscal year, our teams remain focused on executing at the store level, providing the great food, friendly service, welcoming atmosphere and retail shopping experience that differentiates our brand from our competitors."
Second Quarter Fiscal 2017 Results
The Company reported total revenue of $772.7 million for the second quarter of fiscal 2017, representing an increase of 1.1% over the second quarter of the prior year. Comparable store restaurant sales increased 0.6%, including a 2.7% increase in average check partially offset by a 2.1% decrease in comparable store restaurant traffic. The average menu price increase for the quarter was approximately 2.1%. Comparable store retail sales decreased 2.2% from the prior year quarter.
Comparable store restaurant traffic, average check and comparable store restaurant sales and retail sales for the fiscal months of November, December and January and the second quarter were as follows:
Operating income in the second quarter was $82.7 million, or 10.7% of total revenue, an increase over the prior year quarter result of $70.5 million, or 9.2% of total revenue. As a percentage of total revenue, reductions in cost of goods sold, other store operating expenses, and general and administrative expenses were partially offset by an increase in labor and related expenses.
Diluted Earnings per Share
Earnings per diluted share were $2.19, compared to GAAP EPS of $2.01 in the prior year quarter, an increase of 9.0%. Adjusted for the impact of the prior year retroactive reinstatement of the Work Opportunity Tax Credit, earnings per diluted share increased 15% from adjusted EPS of $1.91 in the prior year quarter. (For a reconciliation of GAAP to non-GAAP financial measures, please see the tables accompanying this release.)
Fiscal 2017 Outlook
The Company reaffirmed its previous earnings guidance and expects to report earnings per diluted share for the 2017 fiscal year between $8.10 and $8.25. The Company now expects total revenue of approximately $2.95 billion, reflecting the expected opening of eight new Cracker Barrel stores and four new Holler & Dash Biscuit House restaurants. The Company now expects comparable store restaurant sales of between 0.5% and 1.0% and comparable store retail sales of approximately -2.0%, reflecting the Company's more cautious expectations for the second half of the fiscal year. The Company expects food commodity deflation of approximately 4.0% for the year. The Company projects an operating income margin in the range of 10.0% and 10.5% of total revenue for fiscal 2017. The Company expects depreciation expense between $85 million and $87 million; net interest expense of approximately $15 million; and capital expenditures of approximately $125 million. The Company anticipates an effective tax rate for fiscal 2017 of approximately 32%.
The Company expects to report earnings per diluted share for the third quarter of 2017 of between $1.75 and $1.85. The Company reminds investors that its outlook for fiscal 2017 reflects a number of assumptions, many of which are outside the Company's control.
Fiscal 2017 Second Quarter Conference Call
As previously announced, the live broadcast of Cracker Barrel's quarterly conference call will be available to the public on-line at investor.crackerbarrel.com today beginning at 11:00 a.m. (ET). The on-line replay will be available at 2:00 p.m. (ET) and continue through March 7, 2017.
About Cracker Barrel Old Country Store®
Cracker Barrel Old Country Store 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.
Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL) was established in 1969 in Lebanon, Tenn. and operates 641 company-owned Cracker Barrel locations and four company-owned Holler & Dash Biscuit House locations across 43 states. Every Cracker Barrel store is open seven days a week with hours Sunday through Thursday, 6 a.m. - 10 p.m., and Friday and Saturday, 6 a.m. - 11 p.m. For more information, visit: crackerbarrel.com.
Except for specific historical information, certain of the matters discussed in this press release may express or imply projections of revenues or expenditures, statements of plans and objectives or future operations or statements of future economic performance. These, and similar statements are forward-looking statements concerning matters that involve risks, uncertainties and other factors which may cause the actual performance of Cracker Barrel Old Country Store, Inc. and its subsidiaries to differ materially from those expressed or implied by this discussion. All forward-looking information is subject to completion of our financial procedures for Q2 FY 2017 and is provided pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in the context of these factors. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "trends," "assumptions," "target," "guidance," "outlook," "opportunity," "future," "plans," "goals," "objectives," "expectations," "near-term," "long-term," "projection," "may," "will," "would," "could," "expect," "intend," "estimate," "anticipate," "believe," "potential," "regular," "should," "projects," "forecasts," or "continue" (or the negative or other derivatives of each of these terms) or similar terminology and include the expected effects of operational improvement initiatives, such as new menu items and retail offerings. Factors which could materially affect actual results include, but are not limited to: the effects of uncertain consumer confidence, higher costs for energy, general or regional economic weakness, weather on sales and customer travel, discretionary income or personal expenditure activity of our customers; our ability to identify, acquire and sell successful new lines of retail merchandise and new menu items at our restaurants; our ability to sustain or the effects of plans intended to improve operational or marketing execution and performance; changes in or implementation of additional governmental or regulatory rules, regulations and interpretations affecting tax, wage and hour matters, health and safety, pensions, insurance or other undeterminable areas; the effects of plans intended to promote or protect our brands and products; commodity price increases; the ability of and cost to us to recruit, train, and retain qualified hourly and management employees in an escalating wage environment; the effects of increased competition at our locations on sales and on labor recruiting, cost, and retention; workers' compensation, group health and utility price changes; consumer behavior based on negative publicity or concerns over nutritional or safety aspects of our food or products or those of the restaurant industry in general, including concerns about pandemics, as well as the possible effects of such events on the price or availability of ingredients used in our restaurants; the effects of our indebtedness and associated restrictions on our financial and operating flexibility and ability to execute or pursue our operating plans and objectives; changes in interest rates or capital market conditions affecting our financing costs and ability to refinance all or portions of our indebtedness; the effects of business trends on the outlook for individual restaurant locations and the effect on the carrying value of those locations; our ability to retain key personnel; the availability and cost of suitable sites for restaurant development and our ability to identify those sites; our ability to enter successfully into new geographic markets that may be less familiar to us; changes in land, building materials and construction costs; the actual results of pending, future or threatened litigation or governmental investigations and the costs and effects of negative publicity associated with these activities; practical or psychological effects of natural disasters or terrorist acts or war and military or government responses; disruptions to our restaurant or retail supply chain; changes in foreign exchange rates affecting our future retail inventory purchases; implementation of new or changes in interpretation of existing accounting principles generally accepted in the United States of America ("GAAP"); and other factors described from time to time in our filings with the Securities and Exchange Commission, press releases, and other communications. Any forward-looking statement made by us herein, or elsewhere, speaks only as of the date on which made. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.
Reconciliation of GAAP basis operating
results to adjusted non-GAAP operating results
(Unaudited and in thousands)
In the accompanying press release the Company makes reference to As Adjusted provision for taxes and net income per share before the impact of the retroactive restatement of the Work Opportunity Tax Credit. The Company believes that excluding this item and its related tax effects from its financial results reflects operating results that are more indicative of the Company's ongoing operating performance while improving comparability to prior periods, and, as such may provide investors with an enhanced understanding of the Company's past financial performance and prospects for the future. This information is not intended to be considered in isolation or as a substitute for operating income or earnings per share information prepared in accordance with GAAP.