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Richard Tarjeft
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entrepreneur, investor, future hedge fund manager.
  • Cracker Barrels Mounting Returns Make It A Good Addition To Your Portfolio 0 comments
    May 31, 2013 2:55 PM | about stocks: CBRL

    Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) is a popular provider of down-home cooking in its restaurants, as well as country store merchandise in its adjacent gift shops. Cracker Barrel locations deliver to guests a welcoming home-away-from-home atmosphere and home-style country food.

    The very first Cracker Barrel was founded in Lebanon, TN by Dan Evins on September 19, 1969 as a result of Dan's vision of helping people on the road to escape the fast food frenzy and get home-cooked meals in a comfortable homey setting. His vision also included a country store atmosphere where travelers could indulge in such comforts as treats from jars of candy, homemade jams and jellies, and a myriad of unique gifts. The company also offers its exclusive line of country store merchandise on-line at http://shop.crackerbarrel.com/.

    The company went public in 1981 and became one of Money Magazine's top ten stock offerings in the U.S. as well being named as one of the country's leading growth chains by Institutions Magazine. Cracker Barrel opened 84 new locations nationwide from 1980 to 1990 and by mid-1996 the company had 257 locations. The company's goal to preserve the nostalgia of a bygone era spelled success over the years and the board of directors' choice to keep all stores company-owned without offering any franchising has helped Cracker Barrel to maintain a consistent image and food quality that consumers can count on. WD Partners and Nations Restaurant News have both awarded Cracker Barrel top honors in their Consumer Picks surveys' family dining segments for reputation, atmosphere, cleanliness, service, menu variety, food quality, craveability, likely to recommend, and likely to return, overall outscoring its competitors by more than 6 percentage points.

    Today the company employs approximately 70,000 people at 622 locations in 42 states, generating close to $2.6 billion in revenue as of the end of 2012. The Cracker Barrel Old Country Store, Inc still has its home office in Lebanon, TN where it all began. Much of Cracker Barrel's rapid growth in popularity and profits over recent years is due to:

    • Prime locations nationwide near interstates
    • New restaurant technology
    • Innovative staffing
    • A rigorous recruitment strategy
    • New highway billboard designs
    • NASCAR Atlanta 500 sponsorship
    • Grand Ole Opry sponsorship
    • Celebrity partnerships with-
      Alabama
      Kenny Rogers
      Alan Jackson
      Dolly Parton
      Alison Krauss
      Josh Turner
      Charlie Daniels
    • Cracker Barrel licensed products in retail stores
    • Restaurant check amount increases of 2.6 percent annually

    The 52 week low for CBRL was $57.99 and the high $87.81 and, as of the date of this review, the last price was $88.37 on 5/28/13, which was up by $1.40 over the previous day's close with a volume of 83,000. The company made a regular common shareholder dividend distribution of $0.50 per share on 5/6/13.

    CBRL has a sound payout ratio of 34 percent with an extremely solid 2.6 percent dividend yield. The company's PEG is 1.6 and its dividends have grown consistently over the past five years by a stable annual 23 percent. The S&P is expecting growth of one to two percent for the coming year in comparable sales in the full-service restaurant industry and a 0.5 percent increase in customer traffic for this year. Fellow SA contributor Marshall Hargrave reviewed five undervalued safe dividends stocks with "less than 60 percent payout ratio and a less than 2 percent PEG, all of which have grown the companies' dividend payments by more than 20 percent annually for the past five years." CBRL is one of those five stocks chosen with an expectation of dividend payments continuing to increase along with CBRL's stock price

    CBRL yields 2.5 percent and trades @ 17.70 times earnings. Making CRBL still a good value. The company has raised annual distributions by just under 53 percent per year over the past ten year period. In view of Cracker Barrel's rapidly growing popularity, along with its ever-increasing number of locations nationwide, CBRL seems to be more appealing with each passing day. With increasing dividends and related growth, both in physical restaurant/general store locations as well as online sales, CBRL is sure to continue growing its performance.

    Strong Management leads the charge, under James W. Bradford Jr., Chairman, and President/CEO, Sandra B. Cochran, returns mounting dollar amounts in the form of healthy dividends to shareholders. Even during the recession, CBRL returned an average of 19.8 percent annually. Although payout growth lagged a bit during 2009 and 2010 at 8.15 percent and 2.5 percent respectively, CBRL's big comeback was 11 percent in 2011 and a whopping 53.8 percent in 2012 plus 42.9 percent so far for 2013. So, obviously CBRL's growth is ever-increasing every year since 2011 at a more than respectable rate.

    One more reason for liking Cracker Barrel is the existence of a major 20 percent investor @ $355 million, who is also an activist, constantly compelling continued growth within the company and propelling them toward improved performance. His name is Sardar Biglari and he manages the Lion Fund, as well as Biglari Holdings, which owns the Western Sizzlin and Steak 'N Shake restaurant chains.

    In recent news, James W. Bradford Jr., Chairman of Cracker Barrel, made Biglari an offer to buy back his CBRL holdings at market price. This sale would have made Biglari approximately $70 million in appreciation on his shares, however he flatly refused the offer. Experts say that this action illustrates that Biglari is seeing an upside to CBRL and this could add increased value to the stock. I'd be happy to own a solid company along-side such a successful institutional investor as Biglari.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Stocks: CBRL
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