3 Important Earnings Takeaways from Cracker Barrel

Key Points

• Net income is taking a beating recently.

• An attempt to change and remodel stores prompted a backlash.

• Expectations for fiscal 2026 aren't too promising, with revenue expected to decline.

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Cracker Barrel (NASDAQ: CBRL) shares began a decline after the company reported some mixed results for the end of its fiscal year 2025. Cracker Barrel has been going through a bit of an identity crisis, as it attempted to rebrand itself with new logos and store setups. Unfortunately for the company, there was overall backlash against the move, and Cracker Barrel is in the steps of going back to what it was before.

Overall, the need to create new demand for the restaurant chain has been a challenging task for the company. Revenue growth slowed in 2023, and it's been running slow ever since then. Overall, I don't see anything that is going to change the current pattern. Expectations for fiscal 2026 don't paint a grand picture, and I think this is a stock to avoid.

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1. Financial results

For the fiscal year-end results, things are a bit tricky. The company had an additional 53rd week, which skews financial results. On a 52-week basis, revenue declined 2.9% to $868 million. On a 53-week basis, revenue was up 4.4%. All this is sort of moot relative to net income, which caused a big headache.

On a 52-week basis, GAAP net income declined 62.8% to $6.75 million. To drive the problem home, net income declined 46.6% on a 53-week basis. As the evidence shows, this is a company that's struggling to grow efficiently. Full fiscal year results were relatively stagnant at $3.48 billion versus $3.47 billion the year prior.

This isn't to say that all was gloom and doom. While the company missed estimates on earnings for the fiscal fourth quarter, it beat revenue estimates. Total revenue came in at $868 million compared to estimates of $855 million. Still, this marked a decline from fiscal 2024, and indicates that Cracker Barrel has some things to figure out. Comparable store restaurant sales increased 5.4% year over year in the fourth quarter, and retail store sales decreased 0.8%.

2. Store revisions

Cracker Barrel ended up in the news over the negative response to its rebrand, which involved a new logo and changes to its stores. The changing of its stores was an attempt to revamp what has been a slow business. The backlash was part of a miscalculation that proved inconsequential to driving up sales. In fact, the initiative barely got started before strong pushback caused the company to issue a statement, saying that it would not be moving forward with its store changes, and would be taking things back to the way they were.

Seeing as this was one of the company's main moves for revamping the business, one has to wonder what moves the company has left. Menu changes? That would likely alienate the same audience who didn't like logo and restaurant changes.

3. Outlook

With fiscal 2025 ended, observers are now looking into fiscal 2026. The company's outlook isn't that promising. Expectations are calling for a decline in store traffic of 4% to 7%, which would bring revenue into a range of $3.35 billion to $3.45 billion. Conservatively, that would mark a decline of 3.7% from fiscal 2025's revenue of $3.48 billion.

After the backlash over restaurant changes, CEO Julie Masino said Cracker Barrel is shifting focus to improving the guest experience. Part of this was in reference to the kitchen. Other than that, it's a bit unclear to me how the restaurant changes the experience. Its more loyal customer base doesn't seem keen on changes.

Given these takeaways, it's tough to be overly bullish on the stock. Cracker Barrel has a place in American culture, but it seems to be at a bit of a crossroads. Until there's a more clear path for the company's growth, this seems like a stock to avoid, even after the pullback in the share price.

Current analyst price targets are around $47 per share. That doesn't leave a lot of upside from the stocks current position. When you consider that estimates for fiscal 2026 are calling for earnings of $1.02 per share, investors are looking at a steep decline from fiscal 2025, and it doesn't give a lot of reason for the stock to climb.

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David Butler has no position in any of the stocks mentioned. The Motley Fool recommends Cracker Barrel Old Country Store. The Motley Fool has a disclosure policy.