Group 1 - Cracker Barrel Old Country Store (CBRL) is currently ranked 1 (Strong Buy) in the Zacks Rank system, indicating a positive earnings outlook [3] - The Zacks Consensus Estimate for CBRL's full-year earnings has increased by 8.5% over the past three months, reflecting stronger analyst sentiment [4] - CBRL has returned 14.2% year-to-date, significantly outperforming the average return of 3.2% for the Retail-Wholesale sector [4] Group 2 - Cracker Barrel belongs to the Retail - Restaurants industry, which is currently ranked 158 in the Zacks Industry Rank, with stocks in this group having lost about 0.9% year-to-date [6] - In comparison, Walgreens Boots Alliance (WBA), another outperforming stock in the Retail-Wholesale sector, has returned 22.1% year-to-date and has a Zacks Rank of 2 (Buy) [5][7] - The Retail - Pharmacies and Drug Stores industry, where WBA is categorized, has seen a year-to-date increase of 21.8% [7]

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Core Viewpoint - Cracker Barrel Old Country Store, Inc. has announced the upsizing and pricing of its offering of $300 million aggregate principal amount of 1.75% convertible senior notes due 2030, increasing from a previously announced $275 million [1] Group 1: Offering Details - The notes will accrue interest at a rate of 1.75% per annum, payable semi-annually starting March 15, 2026, and maturing on September 15, 2030 [2] - The initial conversion rate is set at 13.8455 shares of common stock per $1,000 principal amount of notes, equating to an initial conversion price of approximately $72.23 per share, representing a premium of about 32.5% over the last reported sale of $54.51 per share on June 10, 2025 [2] - The aggregate principal amount of the notes may be increased by an additional $45 million if the initial purchasers exercise their option [1][5] Group 2: Use of Proceeds - Cracker Barrel estimates net proceeds from the offering to be approximately $290.1 million, or $333.9 million if the option for additional notes is fully exercised [5] - Approximately $145.9 million of the net proceeds will be used to repurchase $150 million of outstanding 0.625% convertible senior notes due 2026 [5] - Remaining proceeds will be allocated for general corporate purposes, including potential repayment of existing indebtedness [5] Group 3: Redemption and Repurchase Conditions - The notes are redeemable for cash at Cracker Barrel's option starting September 15, 2028, under certain conditions [3] - In the event of a "fundamental change," noteholders may require Cracker Barrel to repurchase their notes for cash [4] Group 4: Capped Call Transactions - Cracker Barrel has entered into capped call transactions intended to reduce potential dilution upon conversion of the notes, with an initial cap of approximately $87.22, representing a 60% premium over the last reported sale price [6] - If additional notes are sold, a portion of the net proceeds will be used for further capped call transactions [7] Group 5: Market Activity and Impact - The option counterparties may purchase shares of Cracker Barrel's common stock or enter into derivative transactions, which could influence the market price of the stock and notes [8][10]

Core Insights - Cracker Barrel reported positive same-store sales in Q3 FY 2025, indicating strong consumer demand and effective operational strategies [1] - The company has formed fresh strategic partnerships, which may enhance its market position and operational efficiency [1] - Menu upgrades have been implemented, likely aimed at attracting new customers and retaining existing ones [1]

Core Viewpoint - Cracker Barrel Old Country Store, Inc. plans to offer $275 million in convertible senior notes due 2030, with an option for initial purchasers to buy an additional $41.25 million, subject to market conditions [1][2]. Group 1: Offering Details - The notes will be senior, unsecured obligations, accruing interest payable semi-annually starting March 15, 2026, and maturing on September 15, 2030 [2]. - Noteholders can convert their notes under certain conditions, with conversions settled in cash and/or shares of common stock at the company's discretion [2]. - The notes are redeemable at the company's option starting September 15, 2028, if specific stock price conditions are met [2]. Group 2: Use of Proceeds - A portion of the net proceeds will be used for capped call transactions, with remaining funds allocated for general corporate purposes, including the repayment of existing debt [3]. Group 3: Capped Call Transactions - Cracker Barrel will enter into capped call transactions to mitigate potential dilution from note conversions, with additional transactions expected if the option to purchase more notes is exercised [4]. - The initial hedging activities related to these transactions may influence the market price of Cracker Barrel's common stock [5]. Group 4: Existing Debt Management - The company may unwind existing convertible note hedge and warrant transactions if it repurchases any of its 2026 convertible notes with proceeds from the new offering [6][7].

Core Insights - Cracker Barrel Old Country Store, Inc. (CBRL) reported third-quarter fiscal 2025 results with earnings exceeding estimates but revenues falling short, indicating mixed performance [1][3][9] Financial Performance - Adjusted earnings per share (EPS) for the third quarter were 58 cents, surpassing the Zacks Consensus Estimate of 17 cents, but reflecting a 34.1% decline year over year [3][9] - Quarterly revenues reached $821.1 million, missing the consensus mark of $827 million, but showing a year-over-year increase of 0.5% [3][9] Comparable Store Sales - Comparable-store restaurant sales increased by 1% compared to the same quarter in fiscal 2024, while comparable-store retail sales decreased by 3.8% year over year [4] - Menu pricing increased by 4.9% year over year, although the predicted growth for comparable-store restaurant sales was 1.8% [4] Operating Highlights - Cost of goods sold (excluding depreciation and rent) was $247.3 million, up 1% year over year, representing 30.1% of total revenues, which is a 10 basis point increase from the previous year [5] - General and administrative expenses totaled $46 million, down 16% year over year, significantly lower than the predicted $53.9 million [5] Net Income - Adjusted net income for the fiscal third quarter was $13.1 million, down from $19.6 million in the prior-year quarter, but above the prediction of $5 million [6] Balance Sheet - As of May 2, 2025, cash and cash equivalents were $9.8 million, down from $11.9 million a year earlier [7] - Inventory at the end of the fiscal third quarter was $168.9 million, a decrease of 3.8% year over year [7] - Long-term debt increased to $489.4 million from $472.2 million a year earlier [7] Dividend Declaration - CBRL declared a cash dividend of 25 cents per share, scheduled for payment on August 13, 2025, to shareholders on record as of July 18 [7] 2025 Guidance - For fiscal 2025, the company expects revenues between $3.45 billion and $3.5 billion, with adjusted EBITDA anticipated to be between $215 million and $225 million, an increase from previous projections [10] - Commodity inflation is expected to be in the mid-2% range, while hourly wage inflation is also anticipated to be in the mid-2% range, down from earlier estimates [10] Capital Expenditures - Capital expenditures are projected to be in the range of $160 million to $170 million [11]

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Financial Data and Key Metrics Changes - For Q3, total revenue was $821.1 million, up 0.5% from the prior year quarter [21] - Restaurant revenue increased by 1.2% to $679.3 million, while retail revenue decreased by 2.7% to $141.8 million [22] - Comparable store restaurant sales grew by 1%, while comparable store retail sales decreased by 3.8% [22] - Adjusted EBITDA was $48.1 million, or 5.9% of total revenue, compared to $47.9 million, or 5.9% of total revenue in the prior year [28] Business Line Data and Key Metrics Changes - Restaurant cost of goods sold was 26.2% of restaurant sales, up from 25.9% in the prior year, primarily due to menu mix and commodity inflation [23] - Retail cost of goods sold was 48.9% of retail sales, down from 49% in the prior year, driven by higher vendor allowances [24] - Labor and related expenses were 37.1% of revenue, down from 37.8% in the prior year, due to improved productivity [25] Market Data and Key Metrics Changes - Off-premise sales accounted for 19.1% of restaurant sales, compared to 18.9% in the prior year [22] - Pricing for the quarter was approximately 4.9%, consisting of 1.5% carry forward pricing from fiscal 2024 and 3.4% new pricing from fiscal 2025 [22] Company Strategy and Development Direction - The company is focused on brand refinement and enhancing guest engagement through various initiatives, including partnerships and promotions [11][12] - The transformation plan is aimed at driving relevancy, delivering food and experiences guests love, and growing profitability [19] - The company is leveraging AI technology to improve efficiency and effectiveness across various operations [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the macroeconomic environment but expressed confidence in executing the business and transforming for the future [18] - The company raised its guidance for total revenue and adjusted EBITDA for fiscal 2025, reflecting positive trends and strong start to Q4 [30][31] Other Important Information - The company is actively working to mitigate tariff impacts, with approximately one-third of retail products sourced from China [17] - The board declared a quarterly dividend of $0.25 per share payable on August 13, 2025 [29] Q&A Session Summary Question: What does a strong start to Q4 mean in the context of the 1% restaurant same-store sales number reported in Q3? - Management noted improving trends from Q3 into Q4, particularly pleased with the Campfire promotion resonating with guests [33][34] Question: Can you provide more detail on managing expenses in Q3? - Management indicated that they adjusted discretionary expenses and G&A to align with the challenges faced in Q3 [35][36] Question: How do you view G&A as a percent of sales for the upcoming year? - Management stated that fiscal 2025 is an investment year, and G&A will return to historical levels as the transformation plan progresses [38] Question: Can you share average check size and mix benefits for Q3? - The average check was up 6.6% for the quarter, with 4.9% from pricing and 1.7% from mix [40][41] Question: What is the anticipated impact of tariffs on Q4? - Management expects a $5 million net tariff impact on Q4 EBITDA, with ongoing efforts to mitigate this through vendor negotiations and alternate sourcing [30][51] Question: Can you elaborate on the back of house optimization initiative? - The initiative aims to improve food quality and ease of operations, with expectations for benefits to flow through in Q4 and into fiscal 2026 [61][65] Question: What have you learned from the remodeling initiatives? - Management indicated that they will provide more insights in September regarding the impact of remodels and future plans [70]