Today, Cracker Barrel (CBRL, Financial) saw its shares drop to a five-year low, dipping below levels seen during the pandemic. The company, known for its locations off interstate exits, has cut its quarterly dividend significantly, from a 9.1% annual yield to just 2.1%. This comes as CBRL struggles to attract younger customers, with its traditional older demographic proving less lucrative in the current economic climate. Despite these challenges, the company is taking more aggressive steps to enhance its relevance, customer experience, and profitability.
Last year, Cracker Barrel maintained a high dividend despite a declining share price, which was unexpected by many. CEO Julie Masino emphasized in February during the Q2 earnings call that while focusing on strategic brand initiatives, returning capital to shareholders remained a priority. However, the recent drastic cut in dividends was a surprise to investors.
The company also faces declining traffic, expecting weaker Q3 (April) and Q4 (July) results than previously forecasted. This contrasts with last quarter's traffic, which had improved significantly. Despite these challenges, CBRL's long-term guidance up to FY27 only anticipates a modest growth, relying heavily on a significant demand increase in FY27.
Cracker Barrel is also revamping its marketing strategy to enhance its appeal, especially among the 25-44 age group, which showed promising growth last quarter. The company plans to increase marketing spending to 3% of total sales, up from 2%, focusing on menu optimization and competitive pricing. However, these efforts have yet to significantly impact sales.
In the face of inflation, Cracker Barrel aims to position itself as a value-centric dining option, with many meals priced under $12.00. Despite these efforts, the company has significant ground to cover if it wants to reverse its declining stock trend and regain market relevance.
