Cracker Barrel Old Country Store, Inc. CBRL shares have fallen 21.9% year to date (YTD), significantly underperforming the Zacks Retail - Restaurants industry’s 3.4% growth. Over the same period, the stock has trailed the broader Zacks Retail-Wholesale sector’s 1.5% dip and the S&P 500 index’s 4.1% decline.

The CBRL stock has struggled to gain investor confidence despite beating earnings and sales estimates in second-quarter fiscal 2025 and providing a strong outlook for the year. The recent dip in the CBRL share price can be primarily attributed to market volatility, rising costs and weaker customer traffic. Although both top and bottom lines improved from the prior-year quarter, guest traffic declined 2.7% due to inflation, higher consumer debt and lower savings.

The Cracker Barrel stock has underperformed some industry players YTD, including BJ's Restaurants, Inc. BJRI, Darden Restaurants, Inc. DRI and Brinker International, Inc. EAT. During the said time frame, BJRI, DRI and EAT shares have rallied 1.9%, 12.3% and 17.4%, respectively.

CBRL Stock’s YTD Price Performance

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Although Cracker Barrel’s stock has faced challenges, its strong fiscal 2025 outlook and solid earnings growth indicate a promising path ahead.

Strength in Fundamentals Points to Growth

Steady Sales Growth: CBRL has achieved positive momentum in restaurant and retail sales, driven by improved guest traffic and operational enhancements. The company’s focus on strengthening key segments, including catering and seasonal offerings, has contributed to profitability gains and better customer experience metrics.

In the fiscal second quarter, comparable-store restaurant sales increased 4.7% year over year, marking the third consecutive quarter of growth. Key operational and guest experience metrics showed meaningful improvements in the quarter.

Menu Innovation: Cracker Barrel is focused on enhancing its menu by introducing the latest offerings, improving execution and strengthening its value proposition. The company aims to balance tradition with innovation, making its menu more appealing to both existing and new guests while ensuring efficiency in operations. Recent menu updates feature new seafood and breakfast options, expanding choices while maintaining affordability.

The company’s Back-of-House Optimization Initiative is helping streamline kitchen operations, improve food quality and enhance efficiency. These efforts have led to improvements in key customer satisfaction metrics, reflecting positive responses to the menu changes.

Strategic Expansion: CBRL continues to strengthen its presence through expansion efforts, including store openings and brand development. In fiscal 2024, the company added two Cracker Barrel stores and nine Maple Street Biscuit Company (“MSBC”) locations. Its focus on growing its footprint is expected to drive long-term growth and enhance its market position. For fiscal 2025, CBRL plans to open one or two Cracker Barrel stores and four MSBC units.

Cost Optimization Strategies: Cracker Barrel is focused on reducing costs through targeted cost-saving initiatives. The company has implemented measures to streamline labor management, improve food waste control, and enhance operational efficiency. These efforts aim to mitigate inflationary pressures, improve profitability and support long-term financial stability.

CBRL has also advanced its food management program by improving back-of-the-house processes, refining food reporting and analytics, and introducing a food auditing system. With the first phase of analysis completed, the company has moved into the testing phase. These initiatives are expected to drive significant cost savings in fiscal 2025 and beyond while maintaining the quality of its scratch-made food.

CBRL Shares Trade at a Discount

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Cracker Barrel is currently trading at a discount compared with the industry, with a forward 12-month price-to-sales (P/S) ratio of 0.26X. This is significantly lower than the industry average of 4.21X, indicating that the stock may be undervalued. The lower valuation suggests a potential upside, making it an appealing opportunity for investors looking for value in the restaurant sector.

Analysts See Upside for CBRL Despite Recent Decline

Analysts are becoming more optimistic about CBRL’s earnings outlook. Over the past 30 days, the Zacks Consensus Estimate for Cracker Barrel’s fiscal 2025 EPS has increased from $2.76 to $2.88, indicating a positive shift in sentiment. The momentum is set to continue into fiscal 2026, with earnings anticipated to climb to $3.27 per share, implying a 13.8% year-over-year increase.

CBRL's EPS Movement Chart

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Right Time to Buy CBRL?

Despite the recent stock performance challenges, Cracker Barrel's strong fundamentals, steady sales growth and cost-saving initiatives reinforce its long-term potential. The company's focus on menu innovation, operational efficiencies and expansion supports its growth strategy.

With analysts raising earnings estimates and shares trading at a discount, CBRL presents a compelling opportunity for value-focused investors. Given its Zacks Rank #2 (Buy), the stock remains an attractive option in the restaurant sector.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Cracker Barrel Old Country Store, Inc. (CBRL) : Free Stock Analysis Report

BJ's Restaurants, Inc. (BJRI) : Free Stock Analysis Report

Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report

Brinker International, Inc. (EAT) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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