Cracker Barrel Old Country Store had aired the particulars of a sweeping recast for its namesake brand just two weeks earlier, but executives still had news for Wall Street during their discussion Thursday of the company’s third quarter ended April 26, including a change in the plan for its secondary concept, Maple Street Biscuit Co.
While Cracker Barrel is being retooled, expansion of Maple Street will be ratcheted back, with more attention given to readying the small regional venture for a rollout before the “go” signal is given, CFO Craig Pommells told financial analysts.
Neither he nor Cracker Barrel CEO Julie Masino aired any dissatisfaction or concern about Maple Street, which the company acquired in 2019 as a growth vehicle and a means of reaching young urban consumers, whom the Cracker Barrel brand has struggled to attract. Indeed, they said nothing about Maple Street other than just two to four stores will be added this fiscal year to the six that have already opened. Sixty-three Maple Streets were open at the start of the fourth quarter.
As management had warned in announcing the transformation plan for Cracker Barrel on May 16, the company posted lackluster Q3 results for its namesake brand. Same-store restaurant sales slid 1.5% despite a pricing lift of 4%. Masino said in an aside that Cracker Barrel’s traffic for the fiscal year to date is down about 20%.
“What we’re seeing is the lower-income consumer is more pressured, particularly the under $60,000 [per household] consumer,” said Pommells. “I’m not sure it’s frequency, but that would make sense.”
The plan revealed two weeks ago aims to stem that decline by updating Cracker Barrel’s menu, operations and appearance.
“It really came out in our research that we needed to work on the store experience,” said Masino, referring to the comprehensive study that underlies the turnaround effort. The overall goal, she stressed, is restoring the concept’s relevance.
During Thursday’s conference call, she revealed that the research had cost the company $16 million. It anticipates spending as much as $700 million over the next three years to revitalize the 660-store brand.
The effort extends to simplifying Cracker Barrel’s menu, streamlining operations, providing long-delayed maintenance to existing stores, and developing a new interior look for the brand.
Consumers’ reaction to two units sporting a new interior design has been extremely positive, Masino said, though adding, “they’re very much lab stores at the moment.”
She indicated that a variety of designs will be given a more vigorous test near-term at 20 or more stores. The retrofits will vary both in cost and final appearance, the CEO said.
Masino, who assumed the CEO’s responsibilities on Nov. 1, told analysts she was curtailing her quarterly comments because the transformation plan had been revealed just two weeks earlier.
Overall, the company posted a net loss for the quarter of $9.2 million, compared with a year-ago profit of $22.8 million. Revenues decreased 2%, to $817.1 million.
“Our financial performance remains challenged by the factors we’ve previously described,” said Masino.
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