Cracker Barrel 2Q Revenue Rises 5%, Net Income Drops

Cracker Barrel Old Country Store Inc. Tuesday said revenue and same-store sales were higher for the second quarter ended Jan. 27, but net income was driven lower by the cost of its recent proxy battle with investor Sardar Biglari.

Lebanon, Tenn.-based Cracker Barrel said total revenue for the quarter increased by 5.1 percent, to $673.2 million, from a year earlier, as the company operated 608 restaurants at the end of the latest quarter, compared with 597 at the end of the same 2011 quarter.

Same-store restaurant and retail sales grew by 3.5 percent and 3.4 percent, respectively.

The gain in same-store sales resulted from a 1.1-percent increase in comparable restaurant traffic and 2.4-percent growth in average check, Cracker Barrel representatives said. The average menu price increase for the quarter was approximately 2.2 percent.

Cracker Barrel, which currently operates 610 family restaurants, said second quarter net income declined 11.1 percent to $25.6 million, or $1.10 per share, compared with $28.8 million, or $1.20 a share, in the same 2011 period.

Second quarter net income would have been flat on a year-over-year basis, or $1.20 per share, if the company had factored out costs associated with management's efforts to keep Biglari off the company's board of directors during an annual shareholders meeting election in December, Cracker Barrel officials said.

Biglari is chief executive of Biglari Holdings Inc. of Austin Texas. Since his December election defeat, Biglari Holdings or its affiliated companies twice purchased additional Cracker Barrel shares to control approximately 14.5 percent of the company's stock as of the end of January.

Despite the one-time earnings setback from the proxy fight, Cracker Barrel said recent results have caused it to raise its guidance for full-year earnings per share to between $4.04 and $4.19, compared with earlier guidance of EPS of $3.96 to $3.99 and $4.11 and $4.14.

It said it now expects to open 13 instead of 15 restaurants during the current fiscal year.

For the first six months of fiscal 2012, Cracker Barrel said net income, including the cost of the proxy fight, was down 5.9 percent to $49.4 million or $2.13 per share, compared with $52.5 million, or $2.21 per share a year earlier.

First-half revenue increased 2.6 percent, to $1.27 billion, the company said, as it ended the period with 1.8 percent more restaurants, on a year over year basis, and realized same-store restaurant and retail sales growth of 1.0 percent and 1.4 percent, respectively.

"Driven by our strong sales and traffic performance, particularly in January, our financial results for the second quarter exceeded our expectations," Sandra B. Cochran, Cracker Barrel president and chief executive, said in a statement.

She added that Cracker Barrel was "pleased to report positive traffic for the first time in the past five quarters," and noted that it was "seeing the expected benefits from our cost reduction initiatives."

"Our diluted earnings per share, adjusted for proxy contest expenses, were in line with the prior year quarter, despite the change in our marketing strategy and resulting change in the timing of our advertising spend, and the expected timing of increases in commodity costs," Cochran said.

Contact Alan J. Liddle at alan.liddle@penton.com.
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