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Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL) reported fourth quarter 2011 adjusted earnings of 99 cents per share, beating the Zacks Consensus Estimate of 90 cents. Quarterly earnings exclude a charge of 25 cents related to organizational changes and a new bank facility.

On a GAAP basis, the company reported earnings of 75 cents per share, lower than the year-ago quarter earnings of $1.14 per share. The year-over-year results declined mainly due to higher commodity costs and lower traffic. During the fourth quarter of 2011, total revenue inched up 0.1% year over year to $612.9 million.

In fiscal 2011, earnings per share were $3.61 as against $3.62 in the prior fiscal year. Total revenue rose 1.2% to $2.43 billion in fiscal 2011 based on a 0.2% and 0.7% jump in same-store sales and retail sales, respectively.

Quarter Performance

Restaurant revenues fell 0.1% to $497.3 million while retail revenues increased 0.7% to $115.7 million.

On a comparable basis, restaurant sales dropped 1.4% due to a 4.2% decline in traffic, partially offset by higher average check of 2.8%. The upside in average check was driven by a 2.1% spike in menu prices and a favorable mix impact of 0.7%. However, guest count remained low due to prevailing economic challenges and weak summer travel. Comparable retail sales in the quarter also fell 0.7%.

Gross margin in the quarter plunged to 68.4% from 70.1% in the year-ago quarter, based on higher cost of goods sold (up 1.7%). Moreover, operating margin slipped 120 basis points (bps) year over year to 6.2% in the quarter, attributable to a 5.4% rise in food cost prices, but partially offset by lower general and administrative expenses and other store operating expenses.

Store Update

During the quarter, Cracker Barrel opened 3 new restaurants and closed 1 restaurant. Thus, at the end of the fiscal year, the company had 603 owned locations.

Financial Position

At the end of 2011, Cracker Barrel had cash and cash equivalents of approximately $52.3 million compared with $47.7 million in fiscal 2010. The company also reduced its long-term debt to $550.1 million from $573.7 million in 2010. In 2011, the company also repurchased 676,600 shares for $33.6 million.

In order to boost shareholders’ value, the company’s board approved a dividend hike of 13.6% to 25 cents per share and a new share buy back program of up to $65 million during the quarter.

Outlook

For 2012, the company expects total revenue in the range of $2.55 billion to $2.6 billion and earnings per share in the range of $4.05 to $4.20. The guidance is premised on the opening of 15 new units in the year. Comparable restaurant and retail sales are estimated to increase within the range of flat to 1.5%. The commodity cost pressure is expected to continue in 2012, and increase by 5.5%-6.5%.

Our Take

We expect estimates to go down in the coming days, based on continuing pressure from cost inflation and uncertain economic environment resulting in lower traffic. However, Cracker Barrel is taking several initiatives like media spending, refined menu and pricing strategies to combat these challenges. The Zacks Consensus Estimates for 2011 and 2012 are pegged at $4.12 and $4.79 per share, respectively.

One of Cracker Barrel’s primary competitors, Red Robin Gourmet Burgers Inc. (NASDAQ:RRGB) reported second quarter 2011 adjusted earnings of 48 cents per share, handily beating the Zacks Consensus Estimate of 36 cents and the year-ago quarter earnings of 29 cents per share.

Source: Cracker Barrel Beats, Restaurant Sales Decline