Cracker Barrel Old Country Store (NASDAQ:CBRL) executives said they are seeing “green shoots” in traffic and guest experience metrics as the company works to improve operations, reconnect with customers through menu and marketing changes, and deliver cost savings to support profitability.
For the fiscal 2026 second quarter ended Jan. 30, the company reported total revenue of $874.8 million and adjusted EBITDA of $38.2 million. Management emphasized that recent operational and guest satisfaction improvements have continued into the third quarter, while acknowledging uncertainty around the timing and magnitude of traffic recovery.
Guest experience metrics improve as traffic remains pressured
CFO Craig Pommels reported that comparable store restaurant sales fell 7.1% in Q2, including a 10.1% decline in traffic. Restaurant average check increased 3.4%, including pricing of 4.2%, while menu mix was negative “driven primarily by higher discounts.” From a monthly standpoint, traffic declines were between 10% and 11% in November and December, improving to a 9% decline in January, which included about a 50-basis-point unfavorable impact from weather. Pommels said February trends improved further, while noting that the year-ago February period was also affected by weather and macroeconomic issues.
In response to analyst questions, Masino said the company views these guest experience measures as leading indicators but does not have a precise formula for how quickly traffic follows improved scores. She added that the company’s traffic among loyalty members has held up better than non-members since August.
Menu strategy mixes returning favorites, new items, and value messaging
Masino said the company’s menu approach includes returning guest favorites, introducing new offerings, improving quality, and “leaning into value.” She highlighted the holiday promotion featuring Country Fried Turkey, which she said again sold out. Other returning items cited included Hamburger Steak and Eggs in The Basket in January and the return of Sugar Cured Ham and Country Ham dinners to the core menu with the spring menu launch in mid-February, along with Carrot Cake as a limited-time offering.
On new products, Masino discussed the Breakfast Burger introduced in the fall and new Garden and Farmhouse Scrambles, aimed at guests who have asked for omelets and scrambles for years. She also pointed to Smoky Southern Salmon as a premium, lighter limited-time option. Masino said the Breakfast Burger and Carrot Cake outperformed internal expectations on preference.
The company also discussed efforts to strengthen its value proposition, including “Meals for Two starting at $19.99” for weekday dine-in, described as two full-size entrees plus a shareable or dessert. Masino said guest preference for the platform has increased since launch and that the company is evolving the offer. She also cited a short-window promotion tied to retail—offering a free toy up to $5 with the purchase of a kids meal in the weeks leading up to Christmas—which she said delivered incremental margin dollars and helped the toy category outperform during the promotion.
Masino said the company made additional menu and bundling changes in January to improve mix and margin, including allowing guests to upgrade to three sides for a modest upcharge, add soup and salad for $5, and choose bundled shareable “duos and trios.” She said early results were encouraging and that mix trends improved after the additions.
Loyalty, marketing, and brand efforts
Masino said the Cracker Barrel Rewards loyalty program has grown to more than 11 million members a little over two years after launch and now accounts for more than 40% of tracked sales. She described loyalty as a key tool to understand customer behavior, reinforce value, and drive frequency, adding that engagement has remained strong.
On marketing, management said the company is taking a more targeted approach, using loyalty data to test messaging, offers, and campaign constructs, including tailoring communications to different customer segments. Pommels said the company expects aggregate advertising spend in the second half of fiscal 2026 to be $13 million to $17 million lower than the same period a year ago, following higher spend in the first half that management said did not translate into the desired traffic improvement.
Masino also highlighted brand initiatives including an ongoing 10% military discount available through Cracker Barrel Rewards in both restaurant and retail, continued support for veterans organizations in November, and a renewed partnership with Speedway Motorsports, including sponsorship of the Cracker Barrel 400 in May. She said the company plans to bring back its Campfire Meals platform in the summer.
Retail sales decline as tariffs and discounting weigh on margins
Retail revenue decreased 9.3% to $180.5 million, with comparable store retail sales down 9.2%. Masino said retail results remained pressured due to traffic, though she described guest response to the seasonal holiday assortment as encouraging. She added that retail attachment was flat versus the prior year and average order value increased slightly. Looking ahead, she said the retail team is focused on managing inventories, mitigating tariffs, and enhancing the shopping experience.
Pommels said retail cost of goods sold rose to 56.8% of retail sales from 53.4% a year earlier, a 340-basis-point increase he attributed primarily to higher tariffs and increased discounts, partially offset by pricing. Quarter-end inventories were $180.3 million compared with $173.0 million in the prior year.
Margins pressured; company updates fiscal 2026 outlook
For Q2, total cost of goods sold rose to 33.5% of total revenue from 32.6% in the prior year. Restaurant cost of goods sold increased 30 basis points to 27.4% of restaurant sales, driven by higher waste, increased discounts, and commodity inflation, partially offset by pricing. Pommels said commodity inflation was about 1.3%, led by higher beef, pork, and coffee prices, partially offset by lower poultry and dairy prices.
Labor and related expenses rose to 36.1% of revenue from 34.4%, driven by sales deleverage and lower productivity, with wage inflation around 2%. Other operating expenses increased to 24.8% of revenue from 23.2%, driven by sales deleverage and higher occupancy costs, including increased maintenance spending that was partly due to elevated snow removal costs.
Adjusted G&A was 4.9% of revenue and excluded $2.6 million related to the proxy contest and a $2.6 million corporate restructuring charge. Pommels said adjusted G&A improved 60 basis points year over year due to lower incentive compensation and cost savings initiatives, including corporate restructuring. The company also recorded a non-cash store impairment charge of $400,000 related to Maple Street stores.
GAAP earnings per diluted share were $0.06 and adjusted EPS was $0.25. Adjusted EBITDA was $38.2 million, or 4.4% of revenue, compared with $74.6 million, or 7.9% of revenue, a year earlier.
On the balance sheet, Pommels said the company ended the quarter with $531.5 million in debt, compared with $471.5 million a year earlier, and noted a consolidated senior debt-to-adjusted EBITDA leverage ratio of 0.3, below the maximum allowed under its credit agreement. Capital expenditures were $26.6 million in the quarter. Pommels also said the company expects to record a net cash benefit of about $46 million in the third quarter following settlement of certain litigation matters, which he said will be included in EBITDA as defined by the credit agreement but excluded from reported adjusted EBITDA for comparability.
For fiscal 2026, management guided to:
- Total revenue: $3.24 billion to $3.27 billion
- Pricing: approximately 4%, with lower menu mix due to higher discounts
- Commodity inflation: 2% to 2.5%
- Hourly inflation: 2.5% to 3%
- Adjusted EBITDA: approximately $85 million to $100 million
- Capital expenditures: $105 million to $115 million
Pommels said corporate restructuring begun in Q1 and continued in Q2 is expected to generate annualized G&A savings of $20 million to $25 million. He added that the pace of traffic recovery and the level of investment required remain key variables for full-year EBITDA. On traffic, he told analysts the company expects full-year traffic to be “somewhere in the neighborhood of -8.5% to -9.5%,” while noting easier comparisons in Q3 and a more challenging comparison in Q4.
In closing remarks, Masino said the company remains focused on consistently delivering “delicious, flawless food,” improving guest satisfaction, and driving traffic, adding that the organization is aligned around execution as it works to return to positive momentum.
About Cracker Barrel Old Country Store (NASDAQ:CBRL)
Cracker Barrel Old Country Store, Inc operates a distinctive combination of country-themed restaurants and retail stores across the United States. Since its founding in 1969, the company has focused on providing a nostalgic dining experience reminiscent of Southern hospitality, serving breakfast, lunch and dinner with an emphasis on traditional comfort foods.
The restaurant segment offers an extensive menu featuring signature items such as buttermilk pancakes, country ham, biscuits and gravy, meatloaf and pot roast.
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