On Wednesday, Truist Securities adjusted its outlook on Cracker Barrel (NASDAQ:CBRL) Old Country Store, Inc. (NASDAQ:CBRL), decreasing the price target to $68 from the previous $72, while retaining a Hold rating on the stock. The revision comes in the wake of recent permanent store closures observed by the firm.
Cracker Barrel has seen four of its namesake restaurants close permanently in the past week, alongside two Maple Street closures within the third fiscal quarter of 2024, which concludes on April 26, 2024.
Although these closures represent a small fraction of the overall store count of 658, the cumulative total of ten closures during fiscal years 2023 and 2024 signals a departure from the brand's historically low closure rate, which saw only five closures in the eleven years leading up to fiscal year 2019.
The closures within the Maple Street chain are particularly concerning for Truist Securities, as they impact Cracker Barrel's growth strategy for the brand. With two closures already in the fiscal year 2024, following four in fiscal year 2023, this trend poses questions for the future expansion of the 63-store concept.
In response to these developments, Truist Securities has slightly lowered its earnings estimates for Cracker Barrel. The new price target is based on a 14x target price-to-earnings (P/E) multiple, a reduction from the previous 15x. This adjustment reflects the firm's cautious stance on the stock in light of the recent operational changes.
InvestingPro Insights
In the wake of Truist Securities' revised outlook on Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), current metrics from InvestingPro show a Market Cap of approximately $1.33 billion and a P/E Ratio standing at 15.93. Notably, the adjusted P/E ratio for the last twelve months as of Q2 2024 is slightly lower at 14.08. This aligns with Truist Securities' application of a 14x target P/E multiple in their recent price target adjustment.
InvestingPro Tips indicate that Cracker Barrel pays a significant dividend to shareholders, with a compelling Dividend Yield of 7.83% as of April 11, 2024. This is particularly noteworthy for income-focused investors, especially considering the company's track record of maintaining dividend payments for 43 consecutive years. However, it is important to note that the company's short-term obligations currently exceed its liquid assets, which could be a point of concern for potential investors.
Despite the recent store closures and a conservative outlook from analysts, the company is predicted to remain profitable this year, with a healthy Gross Profit Margin of 32.32% over the last twelve months as of Q2 2024. For investors seeking further insights and additional InvestingPro Tips, there are more available at: https://www.investing.com/pro/CBRL. Make sure to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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