by Ian Harvey
September 21, 2020
Cracker Barrel reported fourth-quarter fiscal 2020 (ended Jul 31, 2020) results last week, where earnings missed the Consensus Estimate, but revenues were up; however, both the metrics declined on a year-over-year basis.
CBRL reported fourth-quarter fiscal 2020 (ended Jul 31, 2020) earnings before the market opened last Tuesday, September 15, 2020.
As of yesterday’s close the price of the options trade had climbed to $13.10, providing a potential profit of 185%; more is likely.
Barrel had an adjusted loss (excluding the impairment charges related to store
assets, expenses related to COVID-19, the impairment charge related to Punch
Bowl Social, and the related tax effects) was 85 cents per share during the
quarter. This figure was 54.5% wider than the Consensus Estimate of a loss of
55 cents. In the prior-year quarter, the company reported earnings per share of
Revenues of $495.1 million beat the consensus mark of $484 million by 2.3%. However, the figure declined 37.1% on a year-over-year basis, primarily due to lower traffic owing to the social-distancing protocols. Of revenues, 81.1% was contributed by the Restaurant segment and 18.9% was added by Retail supply chain.
Stock Options Recommended Trade…..
“Earnings Predictions” Members executed a put options trade on Cracker Barrel on Monday, September 14, 2020, and are now up potential profits of 185%.
More profit might be available for those traders that wish to continue to hold as there are still 24 days to go before expiry.
The recommended options trade for “Earnings Predictions” Members.....
** Option trade to consider: Buy the CBRL OCT 16 2020 130.000 PUT at approximately $2.50.
Note: Members were able to buy in at $4.60
The Reasons Behind the Recommended Trade…..
“Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL), a casual dining chain, will report earnings before the market opens. The consensus estimate is for a loss of $0.55 per share on revenue of $483.68 million; but the Whisper number is a little better at ($0.49) per share.
Consensus estimates are for earnings to decline year-over-year by 120.37% with revenue decreasing by 38.55%.
The coronavirus pandemic has negatively impacted the company’s operations during the third quarter of fiscal 2020.
During the fiscal third quarter (ended May 1, 2020), the company’s comparable restaurant sales and comparable store retail sales declined 41.7% and 45.5%, respectively, on a year-over-year basis. Moreover, the company’s results in fiscal fourth quarter are likely to have been impacted by the coronavirus pandemic.
Although some of the restaurants have reopened their dining rooms, the company’s saw dismal traffic owing to social-distancing protocols, shelter-in-place orders and capacity restrictions.
Decline in traffic continues to be a major concern for companies in this space. In fiscal 2019, traffic declined 0.7%. The downtrend continued in the first and second quarter of fiscal 2020, with traffic declining 1.5% and 0.2%, respectively. During the third quarter of fiscal 2020, comparable store restaurant traffic declined 43.6%. Dismal traffic in the fourth quarter of fiscal 2020 is likely to have continued due to the social-distancing protocol.
Despite cost-saving initiatives, higher labor costs due to increased wages are expected to keep profits under pressure. Also, the company is apprehensive about inflationary costs. Meanwhile, management is making significant investments to support the training and launch of several initiatives as well as its value testing. Although these initiatives are expected to drive Cracker Barrel’s top line during fiscal 2020, initial investments might dent margins. Moreover, expenses for opening units are expected to hurt margins.
At the end of May 1, 2020, the company’s long-term debt stood at $940 million, compared with $460 million on Jan 31, 2020. As a result, the company’s debt-to-capitalization was 78.6% compared with 60.6% as on Jan 31. As well, the company ended third-quarter fiscal 2020 with cash and cash equivalents of $363.3 million, which may not be enough to manage the high debt level.
Six analysts have rated the stock with a hold rating and five have given a buy rating to the company. The stock currently has a consensus rating of "Hold" and an average price target of $136.43.
Owing to the uncertainty of the crisis, CBRL has withdrawn its 2020 guidance.
So far this year, shares of the company have declined 11.2% against the industry’s 6.9% growth.”
BidaskClub lowered shares of Cracker Barrel Old Country Store from a buy rating to a hold rating in a research note published last Thursday morning.
However, several analysts see Cracker Barrel recovering over the next twelve months…..
It will be interesting to see which analysts are correct in this matter!
Owing to the coronavirus crisis, the company expects operations to be
significantly impacted by factors such as capacity restrictions, jurisdictional
regulations and state of economy re-openings. Cracker Barrel expects the
pandemic scenario to continue in the foreseeable future. Therefore, owing to
the uncertainty tied to the crisis, the company is not providing any customary
However, the company stated that it anticipates capital expenditures of approximately $100 million for fiscal 2021.
Where Is Cracker Barrel Share Price Headed Now?
Is It Too Late To Get In On The Action?
Will Cracker Barrel Shares Start to Rise Again?
Will We Recommend Another Cracker Barrel Trade?
What Other Trades Are We Anticipating?
Do You Wish To Be Part Of This Action?
Join us here at Stock Options Made Easy, and find out our trades moving forward.
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!