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Over a Barrel
September 22, 2006
Once upon a time, Cracker Barrel—aka CBRL Group—was the darling of Wall Street. Company execs drew big audiences when they showed up at securities conferences. It seemed that everyone—especially the operators in the crowd—wanted to know how the Lebanon, Tenn.-based chain cranked out $3.8 million annually per unit (hint: Retail helped).
Founder and then-CEO Dan Evins, always dressed in a conservative suit and tie, patiently explained that the restaurant and store harkened back to a day before plastic and fast food. Plates were china, furnishings were wood and hospitality was genuine. And that people who were traveling the interstates—where, incidentally, the company had planted nearly every Cracker Barrel—appreciated such things.
Folks probably still do; it’s just that they haven’t been showing up in the same numbers at 543-unit chain, which turned 37 on Sept. 19, for a long time. Traffic counts have tumbled 13 of the last 14 quarters—in other words, for more than three years. The count dropped 4 percent in the most recent quarter along with same-stores sales, which fell 3 percent.
What’s wrong? To listen to today’s executives, not all that much. “We believe we are affected by the overall impact of the economy on the industry as whole,” CEO Michael Woodhouse declared during a Sept. 20 conference call. Nonetheless, he ticked off a long list of initiatives, including a new radio campaign, labor management efforts, new-unit opening improvements, kitchen display system and speed of service (“seat-to-eat time”)—all under the rubric of “simplify and focus.”
That should give analyst Barry Stouffer of BB&T Capital Markets hope. In a recent note, he offered a list of possible explanations as to why trends are so weak:
- The concept has gone stale.
- Execution is suffering.
- Highway competition has increased.
- Deterioration of price and value.
- Economic pressure on customers.
All of which, alas, sound plausible.
Posted by David Farkas on September 22, 2006 | Comments (0)