Why Cracker Barrel Stock Dropped Like a Rock Today

Core Viewpoint - Cracker Barrel Old Country Store is significantly reducing its dividend by 80% to allocate funds for business improvements, leading to a sharp decline in its stock price [1][3]. Financial Performance - The company reported trailing-12-month revenue of $3.4 billion, nearing an all-time high, with comparable-restaurant sales showing modest growth in Q2 of fiscal 2024 [2]. - Despite the revenue figures, earnings per share (EPS) are currently lower than they were a decade ago, indicating underlying financial issues [2]. Dividend Policy Changes - Cracker Barrel has a history of paying quarterly dividends and special dividends, but recent earnings deterioration has led to a situation where dividend payouts exceeded earnings, prompting the drastic cut [3]. - The decision to reduce the dividend is aimed at reallocating resources to fix the business, which has not been well received by investors, resulting in a significant drop in share price [3][4]. Future Outlook - Management is optimistic about turning the business around, with capital expenditures expected to increase through fiscal 2027, aiming for approximately $400 million in adjusted EBITDA by that time [5]. - Currently, the company has an enterprise value (EV) of $1.7 billion, and if it meets its targets, it would trade at an EBITDA-to-EV ratio of four, suggesting potential upside for the stock [6].