CBRL - Embedded Expectations Analysis - 2021 03 12
Cracker Barrel Old Country Store, Inc. (CBRL:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 14.0x Uniform P/E. At these levels, markets are pricing in modest expectations for the firm. Although management may have concerns about the pace of sales recovery, elevated costs, and liquidity, market expectations are still overly pessimistic, suggesting long-term outperformance remains warrantedSpecifically, management may lack confidence in their ability to improve the productivity of their new off-premise offerings, introduce additional offerings when catering demand recovers, and sustain improving sales trends. Furthermore, they may have concerns about elevated cost of goods sold due to their sales mix, higher rent expenses from sales-leaseback transactions, and ongoing healthy and safety spending related to the pandemic. Also, management may lack confidence in their ability to mitigate the impact of seasonal headwinds and maintain a healthy liquidity position. Finally, they may be overstating the growth potential of individually packaged meals and they may be concerned increases in net interest expense and the impact of key initiatives on Q3 margins
Although management may have concerns about sales recovery, costs, and liquidity, market expectations are still overly pessimistic given the firm's strong fundamentals and unique growth opportunities, suggesting long-term outperformance remains warranted
Cracker Barrel Old Country Store is principally engaged in the operation and development of the Cracker Barrel Old Country Store? concept. The format of the company's stores consists of a trademarked rustic old country-store design providing a restaurant menu that features home-style country food and a variety of items such as rocking chairs, holiday and seasonal gifts, toys, apparel, cookware and foods. The company's restaurants serve breakfast, lunch and dinner daily. Lunch and dinner items include southern fried chicken, chicken and dumplings, chicken fried chicken, meatloaf, country fried steak, pork chops, fish, steak, roast beef, vegetable plates, sandwiches and a variety of salads.
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