Outdated Formats Will Crumble Amid New Hospitality Trends

Key Takeaways

• Outdated store formats and menu offerings reduce relevance amid shifting consumer preferences and rising operational costs, constraining revenue and margin growth.
  
• Slow digital adaptation and supply chain instability expose the company to market share losses and profit pressures within a rapidly evolving industry landscape.
  
• Structural cost reductions, marketing innovation, digital loyalty growth, and tech-driven efficiency are revitalizing the brand and supporting ongoing revenue and margin expansion.

Catalysts

Develops and operates the Cracker Barrel Old Country Store concept in the United States.

• Cracker Barrel's highway and rural-focused store base faces mounting risk as ongoing urbanization and a decline in interstate travel reduce exposure to its target demographic, threatening long-term traffic growth and suppressing comparable store sales in the years ahead.
  
• The brand's Southern comfort food focus is poorly aligned with a rapidly aging population that is increasingly seeking healthier, plant-based, or international cuisine options, which is likely to erode customer relevance and drive down dine-in revenue over time.
  
• Persistent labor shortages and rising wage pressures across the hospitality industry continue to elevate fixed operating costs, while Cracker Barrel's large-format stores and inflexible footprint limit its ability to quickly adapt, thereby structurally compressing net margins and handicapping earnings growth.
  
• The company's slow adaptation to fast-casual and delivery-friendly formats leaves it vulnerable to the accelerating shift toward online and mobile food delivery, risking permanent loss of market share and downward pressure on both revenue and long-term earnings.
  
• Heightened inflation in food and commodity inputs, unpredictable supply chain costs, and exposure to tariffs-particularly given heavy reliance on Chinese-sourced retail inventory-pose ongoing threats to cost containment and gross margin sustainability, undermining profitability in the foreseeable future.

Cracker Barrel Old Country Store Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Cracker Barrel Old Country Store compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Cracker Barrel Old Country Store's revenue will decrease by 0.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 1.6% today to 2.4% in 3 years time.
• The bearish analysts expect earnings to reach $86.1 million (and earnings per share of $3.8) by about August 2028, up from $57.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 15.7x on those 2028 earnings, down from 22.8x today. This future PE is lower than the current PE for the US Hospitality industry at 23.1x.
• Analysts expect the number of shares outstanding to grow by 0.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.97%, as per the Simply Wall St company report.

Cracker Barrel Old Country Store Future Earnings Per Share Growth

Risks

• Cracker Barrel has delivered four consecutive quarters of positive comparable store restaurant sales growth, and both leadership and guidance point to an ongoing successful transformation plan, suggesting that revenue and earnings may continue to rise rather than decline.
  
• The company is achieving structural operating improvements through back-of-house optimization, leading to lasting reductions in labor expenses and improved productivity, which could enhance net margins over the long term.
  
• Brand refinement initiatives, a refreshed marketing approach-including partnerships like the NASCAR event-and a successful relaunch of heritage menu items (such as Campfire meals) are revitalizing customer engagement, potentially driving higher guest frequency and revenue.
  
• The growing Cracker Barrel Rewards loyalty program, now with 8 million members, is tied to over one-third of tracked sales and early AI-driven personalization efforts have produced a mid-single-digit lift in average revenue per member, suggesting robust long-term sales growth.
  
• The company is investing in technology and AI for forecasting, customer engagement, and cost management, supporting operational efficiency and margin gains, while ongoing remodels and store refreshes are positively impacting customer experience and employee morale, further supporting future earnings potential.

Valuation

• The assumed bearish price target for Cracker Barrel Old Country Store is $45.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Cracker Barrel Old Country Store's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $69.0, and the most bearish reporting a price target of just $45.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $3.6 billion, earnings will come to $86.1 million, and it would be trading on a PE ratio of 15.7x, assuming you use a discount rate of 11.0%.
• Given the current share price of $59.02, the bearish analyst price target of $45.0 is 31.2% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.