Full-service restaurant, Cracker Barrel Old Country Store, Inc. (CBRL), has turned down the buyout offer from Sardar Biglari, who owns a 20% stake in Cracker Barrel. The restaurant chain reportedly intends to carry on its business and believes that the existing business strategy will optimize shareholders’ value. Biglari’s recent non-binding proposal for a $20 special dividend from the company was also rejected.
Biglari offered to buy the company citing an inefficient management team and lower-than-expected earnings. However, the bid was rejected by the board at the annual meeting.
According to media reports, Cracker Barrel decided to pull back some "Duck Dynasty" items from its shelves after actor, Phil Robertson, made some anti-gay remarks. However, the company reinstated them after 24 hours. Biglari pointed out this incident as a case of serious mismanagement on the part of the company.
This is not the first time when Sardar Biglari has showed interest in the company; in fact, he has made numerous attempts to take over Cracker Barrel, only to be voted down by shareholders each time.
Although Biglari asserts that the earnings of Cracker Barrel are lower than expected, CBRL posted strong fiscal first-quarter 2014 results in Nov 2013. Adjusted earnings (excluding proxy contest expenses) of $1.22 per share increased 13.0% year over year and also beat the Zacks Consensus Estimate of $1.13 by 8.0%. Top-line growth and lower interest expenses boosted earnings in the quarter.
The Zacks Rank #2 (Buy) company reaffirmed its guidance for fiscal 2014. CBRL expects earnings to be between earnings per diluted share of between $5.60 and $5.80. It expects revenues in the range of $2.70 billion to $2.75 billion for fiscal 2014. The guidance takes into account seven or eight expected store openings and increases in comparable store restaurant sales and retail sales in a band of 2.0% to 3.0%.
Other Stocks to Consider
Other players in the industry, which look attractive at the current levels, include The Cheesecake Factory Inc. (CAKE), Krispy Kreme Donuts Inc. (KKD) and Jack in the Box Inc. (JACK). All these stocks carry the same Zacks Rank as Cracker Barrel.