Financing

Cracker Barrel admits it worsened Q4 traffic with marketing misfires

The company acknowledged that its messaging failed to deliver, but believes a loyalty program will greatly help.
Cracker Barrel earnings
The quarterly earnings report was Cracker Barrel's last under CEO Sandy Cochran. | Photo: Shutterstock

In a rare downbeat financial accounting, Cracker Barrel Old Country Stores acknowledged that its marketing and media efforts likely worsened a traffic drop-off during the fourth quarter ended July 28.

Although management previewed a number of initiatives aimed at drawing more visits, particularly from hardcore fans, officials acknowledged that traffic will likely continue to fall through Cracker Barrel’s first quarter. 

Those efforts to boost visits include the launch near-term of a loyalty program, along with menu innovation, a focus on value and a continuing effort to improve operations.

CEO Sandy Cochran also revealed that the brand will conduct “a deeper-dive review of our store base,” corporate-speak for a portfolio pruning, as well as extensive third-party research into the brand’s perception and market positioning.

The initiatives were revealed during Cracker Barrel’s fourth-quarter review of financial results with Wall Street analysts—Cochran’s last as CEO. She’ll be surrendering the post next month to Julie Masino, who joined the family dining chain from Yum, the parent of Taco Bell, KFC and Pizza Hut.

Cochran acknowledged upfront that her charge was surprised by a significant drop-off in dining out during the quarter across casual dining, the segment where Cracker Barrel believes it competes.

“We had expected the traffic would improve in June and July with the onset of the summer travel season,” said Cochran. “Unfortunately, this didn't materialize, and our restaurants and retail sales performance came in below our expectations.

Overall, same-store sales for the quarter rose 2.4%, but prices were 8.7% higher than they were a year earlier. The numbers indicate that pricing fell by more than six percentage points.

“We believe these fourth quarter traffic trends will continue through most of the first quarter as well,” Cochran added.

She attributed Cracker Barrel’s decline in traffic in part to “a challenged consumer environment,” explaining that diners showed considerable price-sensitivity across the spectrum of restaurants they visit.

But, Cochran acknowledged, “we also believe [those behaviors] were exacerbated by our marketing and media strategy. The volume and substance of our marketing messages in the fourth quarter were not as effective as we wanted, particularly against the backdrop of a highly competitive and promotional marketplace.

“Although we focused our messaging on value, our message did not break through against the highly promotional advertising we saw from our competitors,” she continued.

Cochran stressed that there were some bright spots to the quarter. She noted that a tight control of costs yielded a rise in margins from a year ago.

The brand also cut costs by $30 million, and its catering sales topped $100 million.

In addition, according to Cochran, the company opened two Cracker Barrels and 12 units of Maple Street Biscuit Co., its secondary brand.

Overall, Cracker Barrel reported a net income for the quarter of $37.5 million, a 12% increase from the prior-year quarter, on revenues of $836.7 million, up 1%.

 

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