Cracker Barrel Old Country Store Executive Insights: Retail, Food Inflation

On Tuesday, Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Retail

Jeffrey Omohundro – Davenport & Company: My first question is related to the tenor of sales by month that was reported in the quarter and the deceleration. I’m just wondering, in particular, in April, if you can comment on that? What’s the retail drop there, in particular, due to the prior year comparison or some promo timing, that’s my first question, I have a follow up.

Lawrence E. Hyatt – SVP, CFO: The tenor of sales and in particular the tenure of comparable restaurant traffic was – February was a very strong month to some extent we were going up against weather in February last year and some mild weather in February this year. The tenor of sales between March and April was to some extent the shift in the Easter holiday and bring break and things of that nature. Third quarter retail sales, as Sandy noted, and I’ll ask her if she has any additional comments. We had a number of things that worked very well. Apparel worked well, accessories work well. Some of these specific seasonal holiday things worked a little less well, Jeff.

Sandra B. Cochran – President, CEO: Just, let me add a little bit to that, Jeff. I think that it was, as Larry said, it’s a choppy quarter, a lot was going on from month-to-month on the retail side. Nearly, Easter is always tough, we thought it would be and we just weren’t able to overcome it with the rest of our assortment. What we were pleased with was that throughout the quarter we had a consistent outperformance to Knapp-Track.

Jeffrey Omohundro – Davenport & Company: And then as a follow-up, with the reduced CapEx target of $85 million to $90 million, I just wonder if you could talk to spending going into 2013, is you outlook there shifting a little bit as some moving there. And then maybe, visibility in cash, remind us once again about the priorities around deployment?

Lawrence E. Hyatt – SVP, CFO: Yeah. As far as CapEx spending, Jeff, we noted in the Analyst and Investor Day meeting that we anticipate CapEx spend over the next three years to be in the range of $325 million to $350 million. With that falling roughly evenly across those three years and the numbers that you may recall for 2013 was in a range of about $105 million to $115 million. Couple of things, one is as you may recall, two store openings that we had anticipated for the current fiscal year have now moved into the subsequent fiscal year. We anticipate some additional spending on various of our initiatives, which Sandy has been speaking about for the last year. As far as returning capital to shareholders, as we noted, our model anticipates a gradual increase in the dividend payout beyond our recently announced $1.60 a year. We additionally anticipate over the three years that we’ll both retire some debt and stay within our targeted leverage ratio and additionally buy back shares.

Food Inflation

Steven Barlow – Bank of America Merrill Lynch: It’s actually (Steven Barlow) for Joe. I guess I’m curious on the fourth quarter implied retail same-store sales guidance, I guess it assumes kind of a pretty nice acceleration. Could you talk about some of the drivers and just your general thoughts there?

Sandra B. Cochran – President, CEO: Well, last year some of you’ll may recall that we were particularly disappointed by our travel business in the fourth quarter, which has a higher portion of retail sales in our local guest. So what we’re looking for this fourth quarter is some recovery with our that portion of the business, which we hope will result in disproportionate retail sales.

Steven Barlow – Bank of America Merrill Lynch: Then just any preliminary thoughts on food inflation for 2013, have you a lot a sizeable portion of your basket?

Lawrence E. Hyatt – SVP, CFO: Yeah. As you may recall in our Analyst and Investor Day presentation, we were saying that we expected to see commodity inflation in the 4% to 6% range for fiscal ’13. We’re still thinking we will be in that 4% to 6% range, although as a result of some commodity deacceleration over just the past 30 days we will likely be a little closer to the (indiscernible) than we even anticipated at the time of our analyst and investor day.