Cracker Barrel to open 'fusion prototype'Cracker Barrel to open 'fusion prototype'

Cracker Barrel Old Country Store Inc. will open its new “fusion prototype,” a new-equipment version of its full-service, family-dining restaurant, on June 22, in Morganton, N.C., executives said Tuesday.

Construction of the restaurant, which was revealed earlier this year, has gone well, and the location will open in the community northwest of Charlotte, N.C., Sandra Cochran, president and CEO of Lebanon, Tenn.-based Cracker Barrel, said in a call with analysts discussing third-quarter earnings.

“We’re really excited about the learnings that are going to come from the new design,” Cochran said. “That will give us an opportunity to improve new stores going forward. But it will allow us to begin to understand better potential retrofit opportunities.” Part of the new equipment package is aimed at reducing food waste.

A company spokeswoman said the fast-casual Cracker Barrel concept, reported earlier this year, is still under development, with the first units opening at the end of fiscal year 2016.

For the third quarter ended May 1, Cracker Barrel reported an increase in net income of 22.9 percent, to $35.3 million, or $1.47 per share, compared with $28.7 million, or $1.20 a share, the previous year. Revenue rose 6.3 percent, to $683.7 million, from $643.3 million the previous year.

Same-store sales rose 5.2 percent during the quarter, including a 3.4-percent increase in average check. Menu prices increased 2.5 percent from the previous year.

Cracker Barrel benefited from a general increase in consumer spending during the quarter, the brand’s strong value positioning and the continued success of marketing initiatives, Cochran said.

Seasonal menu promotions during the quarter included several new Wholesome Fixin’s lighter menu offerings, weekday-only lunch specials and a rib platter priced at $10.99.

Cracker Barrel was quiet in traditional marketing, such as television advertising, during the quarter, Cochran said.

“We continue to work on strengthening our relationships with guests through alternative channels, such as always-on billboard advertising, digital and social media, and our music program,” she said.

The company also added new retail grocery items in a deal with Continental Mills, including pancake mixes and three flavors of dried gravy mix.

Cracker Barrel chief financial officer Lawrence Hyatt said the breakfast-heavy brand hasn’t yet seen a significant impact from rising egg prices, such as those reported by Whataburger Monday, which forced that chain to reduce its breakfast hours.

“We contract for shell eggs, liquid eggs and hard-boiled eggs under multi-year contracts,” Hyatt said.

“Those contracts tend to feature rolling quarterly pricing locks that are based on the prior year’s quarter market prices,” he said. “Our prices on shell and liquid eggs are locked through fiscal year end.” As the company moves into fiscal 2016, the price increases will likely be “significantly higher,” he said.

“As to whether that drives changes in menu or changes in specific–item menu pricing, I think it’s a little premature to say,” Hyatt added.

The company has seen some commodity prices ease this year, such as for pork belly, which is linked closely to bacon prices, he said.

Cochran noted that eggs are an ingredient in other items, such as meat loaf, biscuits and cornbread.

“It’s going to affect us, we just don’t know how broadly in other ways,” she said.

In guidance, Cracker Barrel said it expects full-year earnings in the range of $6.60 to $6.70 per share, with revenue ranging from $2.8 billion to $2.85 billion.

The company increased its quarterly dividend to $1.10 per share, marking a 10-percent increase from $1 per share. It also declared a special dividend of $3 per share.

Cracker Barrel has 634 restaurant-retail units in 42 states.

This story has been revised to reflect the following correction:

Correction: June 3, 2015 A previous version of this story incorrectly described Cracker Barrel's full-service, “fusion prototype” restaurant.

Contact Ron Ruggless at [email protected]
Follow him on Twitter: @RonRuggless