SAN ANTONIO - Biglari Capital Corp., a major shareholder in Cracker Barrel (NASDAQ:CBRL) Old Country Store Inc. (NASDAQ:CBRL), has called for significant changes at the restaurant chain, citing a substantial loss in shareholder value. The investment firm, which owns a 9.3% stake in Cracker Barrel, highlighted a decline in the company's market value exceeding $2.9 billion since 2019 and a 50.9% drop in share price since the current CEO, Julie Felss Masino, took the helm in August 2023.
In a detailed letter to shareholders, Biglari criticized the Cracker Barrel Board for its strategic decisions, including capital expenditures on new stores and brands that have not yielded positive returns. The letter pointed to the company's poor performance compared to its proxy peer group and the S&P 500 Index, emphasizing a 70.2% loss in shareholder value over the past five years.
Biglari attributed the company's underperformance to the Board's approval of capital expenditures for new stores and brands, which have failed to increase operating income. Despite these investments, Cracker Barrel's annual operating income decreased from $167 million in fiscal 2011 to $121 million in fiscal 2023. The letter also noted that the company's recent transformation plan, which includes a high level of capital expenditure, has not been well-received by investors, as evidenced by a further 29.2% decline in the stock price since its announcement.
The investment firm outlined a low-capital-expenditure strategy focused on improving store-level economics, divesting non-core brands, halting new store openings, and returning cash to shareholders through debt repayment and dividends. Biglari emphasized the importance of focusing on the core business and improving the customer experience at existing stores.
Biglari is seeking positions on the Cracker Barrel Board to bring a diverse perspective and address the company's challenges. The firm believes that a change in the Board's composition is urgently needed to prevent further value destruction and to ensure a successful turnaround.
The information for this article is based on a press release statement from Biglari Capital Corp.
In other recent news, Cracker Barrel Old Country Store, Inc. has reported its fiscal 2024 fourth-quarter earnings, revealing a total revenue of $894.4 million, a 6.9% increase from the previous year. However, the adjusted EBITDA decreased to $57.4 million. The company's earnings per share (EPS) for the quarter fell short of both Loop Capital's estimate of $1.12 and the consensus estimate of $1.10.
Both Truist Securities and Loop Capital maintained their Hold rating on Cracker Barrel's shares, with Loop Capital reducing its price target for the company to $45.00 from $50.00, and Truist Securities increasing its price target to $44.00 from $42.00. These adjustments were made in light of Cracker Barrel's fiscal 2024 results and future plans, which include 25 to 30 store remodels and the opening of new Cracker Barrel and Maple Street locations in fiscal 2025.
Cracker Barrel also projects a revenue of $3.4 billion to $3.5 billion for the upcoming fiscal year. Despite these developments, both Loop Capital and Truist Securities anticipate that customer traffic to Cracker Barrel may continue to face challenges. These are the recent developments for the company.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Cracker Barrel's financial situation, providing context to Biglari Capital's concerns. The company's market capitalization stands at $985.87 million, reflecting the significant decline in shareholder value highlighted in the article.
InvestingPro Tips reveal that Cracker Barrel has maintained dividend payments for 43 consecutive years, demonstrating a commitment to shareholder returns despite recent challenges. However, this consistency is juxtaposed with the fact that short-term obligations exceed liquid assets, potentially adding pressure to the company's financial position.
The stock's performance aligns with Biglari's critique, as InvestingPro data shows a 31.33% decline in the six-month price total return. This drop is even more pronounced in the year-to-date figure, with a 39.76% decrease. These metrics underscore the urgency of the turnaround strategy proposed by Biglari.
Interestingly, despite the overall negative trend, Cracker Barrel has seen a strong return over the last month, with an 18.94% price total return. This recent uptick could suggest that investors are beginning to respond to potential changes or are anticipating improvements in the company's performance.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights beyond those mentioned here. The platform currently lists 7 more tips for Cracker Barrel, providing a deeper understanding of the company's financial health and market position.
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