Cracker Barrel Old Country Store, Inc. has reported its financial results for the fourth quarter and for the fiscal year ending July 29, 2011. The Company also provided guidance for its 2012 fiscal year.
Fourth Quarter Fiscal 2011 Highlights
- Revenue increased 0.1% to $612.9 million, on a decline in comparable store restaurant and retail sales of 1.4% and 0.7%, respectively.
- Earnings per diluted share of $0.75 compared with $1.14 in the prior-year quarter. Charges for organizational changes and new bank facility reduced earnings per diluted share by $0.25 in the quarter.
- Operating income margin of 6.2% of total revenue compared with 7.4% in the prior-year quarter. The charges reduced operating income margin by 0.5% in the quarter.
Full Year Fiscal 2011 Highlights
- Revenue increased 1.2% to $2.43 billion reflecting comparable store increases in restaurant and retail sales of 0.2% and 0.7%, respectively.
- Fully diluted earnings per share of $3.61, compared with $3.62 in the prior year.
- Operating income margin of 6.9% of total revenue compared with 6.8% in fiscal 2010.
- Fourth quarter charges reduced full year operating income margin by 0.1%, and full year EPS by $0.25.
- Capital expenditures were $78 million. The Company reduced debt by $30.3 million, repurchased $33.6 million of common stock, paid $19.8 million in dividends, and increased its cash balance by $4.6 million.
Fourth-Quarter Fiscal 2011 Results
Revenue
Comparable store restaurant traffic, average check and comparable store restaurant and retail sales for the fiscal months of May, June and July and the fourth quarter were as follows:
| May |
June |
July |
Fourth Quarter | |||||
| Comparable restaurant traffic | -3.4% | -5.0% | -4.2% | -4.2% | ||||
| Average check | 2.9% | 2.8% | 2.8% | 2.8% | ||||
| Comparable restaurant sales | -0.5% | -2.2% | -1.4% | -1.4% | ||||
| Comparable retail sales | -1.4% | -0.7% | 0.1% | -0.7% |
Operating Income
Operating income in the fourth quarter was $38.1 million, or 6.2% of total revenue, compared with $45.5 million, or 7.4% of total revenue in the prior year fourth quarter. An increase in cost of goods sold as a percentage of revenue, primarily as a result of increases in food commodity prices, was partially offset by lower store operating expenses and general and administrative expenses. Severance and other charges associated with the previously announced organizational changes increased general and administrative expenses by $1.8 million or 0.3% of revenue and increased impairment charges by $1.0 million or 0.2% of revenue in the fourth quarter.
Commenting on the fourth-quarter results, Cracker Barrel President and Chief Executive Officer Sandra B. Cochran said, “We are not satisfied with our sales and traffic results for the quarter. The economic environment continues to be challenging, and we believe it contributed to weak summer travel and declines in customer traffic. To continue to compete successfully in this environment, we plan to introduce more accessible entry price points on our menu and reinforce our affordability with more price-oriented marketing messages. We also are improving the guest experience through changes to the operating platform that address the order accuracy and server friendliness issues that emerged in our guest research this year. We remain committed to providing a genuine Cracker Barrel experience to each guest at every visit.”
Fiscal 2011 Results
Total revenue for fiscal 2011 was $2.43 billion, an increase of 1.2% over the prior fiscal year. Full year comparable store restaurant sales increased 0.2%, as a 2.2% increase in average check was partially offset by a 2.0% decline in traffic. Comparable store retail sales increased 0.7%, and total retail sales increased from 20.5% to 20.6% of total revenue.
Operating income for the year was $167.2 million, or 6.9% of sales, compared to $164.7 million, or 6.8% of sales in the prior year, while pretax income was $115.7 million in both years. Charges relating to the Company’s organizational changes and new financing facility reduced pretax income in the current fiscal year by $2.8 million, and $5.1 million, respectively, and reduced earnings per diluted share by a total of $0.25. Net income in fiscal 2011 was $85.2 million, or $3.61 per diluted share, compared with net income of $85.3 million, or $3.62 per diluted share, in the prior fiscal year.
Net cash flow provided by operating activities was $138.2 million, compared with $212.1 million in fiscal 2010, reflecting higher bonus payments in the current year for the prior year’s performance and timing differences in accounts payable and income taxes. During fiscal 2011, the Company repurchased 676,600 shares of stock for a total of $33.6 million and paid down $30.3 million of long-term debt.
Fiscal 2012 Outlook
The Company reminds investors that its outlook for fiscal 2012 reflects many assumptions, the accuracy of which is not yet known. The Company expects total revenue for fiscal 2012 of between $2.55 billion and $2.6 billion, and earnings per diluted share of between $4.05 and $4.20. The Company’s 2012 fiscal year is a 53-week year. The Company estimates the impact of the 53rd week, which is included in its guidance, to be additional revenue of approximately $50 million, and additional earnings per diluted share of approximately $0.25. The revenue projection for fiscal 2012 reflects the expected opening of 15 new Cracker Barrel stores, and projected comparable store restaurant and retail sales in a range of flat to up 1.5%. The Company expects increases in food commodity costs of between 5.5% and 6.5% for the year.
The Company projects an operating income margin of between 6.9% and 7.1% of revenues; depreciation expense between $66 million and $68 million; net interest expense of approximately $45 million; and an effective tax rate of between 28% and 29%. The Company expects capital expenditures during fiscal 2012 to be between $90 million and $100 million. Given its stronger financial results in the first half of 2011 compared to the second half of the year, the Company expects its year-over-year financial performance to improve as the 2012 fiscal year progresses. Although the Company does not offer specific quarterly guidance, it stated that it expects earnings per diluted share in the first quarter of 2012 to be below the prior year quarter. The Company also noted that its guidance does not reflect any provision for expenses related to a potential proxy contest.
Commenting on the Company’s plans for 2012, Ms. Cochran said, “As we look forward to the 2012 fiscal year, we believe that we are well positioned with a strong brand, a talented management team, and engaged employees committed to providing great guest service. However, we face several challenges, including a difficult economic environment for our guests, high commodity prices, and a competitive environment with heavy discounting and promotional activity. Our major priorities for 2012 are focused on increasing customer traffic, growing retail sales as a percent of total sales, and controlling costs. We believe our traffic will build throughout the year as we continue to improve our menu and make it more accessible to price-sensitive customers and we improve the guest experience through changes to our operating platform.”
Dividend Increase and Share Repurchase Authorization
The Board of Directors declared a quarterly dividend of $0.25 per share on the Company’s common stock payable on November 7, 2011 to shareholders of record as of October 21, 2011. This represents a 13.6 percent increase in the Company’s quarterly dividend. In addition, the Board approved a new share repurchase program for up to $65 million of the company’s outstanding common stock. The share repurchase authorization, which is effective immediately, permits the Company to effect repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions, and/or other derivative transactions.
Cracker Barrel Old Country Store restaurants provide 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.