Consumers significantly cut back their visits to Cracker Barrel Old Country Stores in April and May, with the underlying causes signaling a rough stretch ahead for the entire casual-dining market, executives told financial analysts Tuesday.
They explained that sales and traffic for the chain had tracked as expected through February and most of March. Then, to their admitted surprise, traffic fell “meaningfully” and stayed at depressed levels through April and May, recounted company CEO Sandy Cochran.
“In our view, this reflects weaker consumer sentiment and economic pressures,” Cochran said.
She and her colleagues say the downturn is evident across Cracker Barrel’s competitive set, which they framed as all of casual dining.
Economists have warned that a recession could materialize as consumers taper their spending in the face of economic uncertainty, lingering inflation and having few dollars remaining from what they saved while spending little during the pandemic.
According to Cochran and her team, Cracker Barrel patrons spent as usual when they visited, even with prices running about 8.8% above where they were a year ago.
“We believe they’re cutting back not on checks but rather on the number of visits they opt to spend in our category,” said CMO Jennifer Tate. “That seems to be where they’re pulling back.”
CFO Craig Pommells pegged the traffic decline for the third quarter ended April 28 at 3.2%. Price increases, coupled with a 1.8% favorable shift in menu mix, pushed Cracker Barrel’s same-store restaurant sales into positive territory, with a gain of 7.4%.
Tate said the traffic fall-off was pronounced among the chain’s younger guests, “which coincides with a sharp downturn in consumer sentiment among those younger cohorts,” a group the concept has been courting.
It was a reversal, she said, of the situation faced by Cracker Barrel a year ago.
“Last third quarter, it was really our older guests that were pulling back, with concerns about issues like the Ukraine war and the big spike in gas prices,” Tate said. “This year, it's a different story. We've actually seen a nice rebound in visitation from those older guests.”
The leadership team was repeatedly pressed during the quarterly analysts’ call for its prediction on how long the traffic downturn will last.
“Although we expect continued pressures and choppiness in the short term, we feel good about our positioning over the medium and longer term,” said Cochran.
She and her associates on the call said they expect the situation to ease as summer travel ramps up in the next few months.
Overall, the company posted a net income for Q3 of roughly $14 million, a 49% drop from the year-earlier quarter, on revenues of $832.7 million, up 5%. Cracker Barrel attributed the steep decline in profits to higher administrative costs and expenses related to the closing of several Cracker Barrel stores in the Portland, Ore., area. Many retail establishments have closed there because of crime concerns and weak sales.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.