The corporate reversed course on its brand. Can it additionally flip round its faltering shares?
Properly, that was quick.
Only one week after revealing a brand new brand that was practically universally panned, Cracker Barrel Outdated Nation Retailer (CBRL 8.01%) introduced on Tuesday that it was scrapping its plans to alter the brand. On Wednesday, the corporate’s shares — which had tumbled greater than 10% after the brand new brand was revealed — had rebounded by 8.0% by the point the closing bell rang.
For traders who purchased the dip, it is a fairly good end result. However is it too late for everybody else to purchase in?
Why shares had been down
On Aug. 19, Cracker Barrel launched a fall marketing campaign it dubbed “All of the Extra.” It was largely a fairly customary seasonal restaurant marketing campaign. It introduced a partnership with nation music star Jordan Davis and launched some seasonal fall menu objects like a cinnamon roll skillet and Uncle Herschel’s Favourite (“again by in style demand”).
Nevertheless, the marketing campaign additionally featured “up to date inventive,” together with a change to the restaurant’s brand that eliminated the eponymous barrel and the enduring “previous timer” determine — referred to by many as “Uncle Herschel” — leaving solely an orange background and the phrases “Cracker Barrel.”
The backlash was fast and intense, with many criticizing the stripped-down brand as generic or too harking back to different restaurant logos, reminiscent of Denny’s or Golden Corral. On Tuesday, even President Donald Trump weighed in on Reality Social, “Cracker Barrel ought to return to the previous brand, admit a mistake primarily based on buyer response (the final word Ballot), and handle the corporate higher than ever earlier than.”
Regardless of the unfavorable reactions, Cracker Barrel initially doubled down on its brand resolution, with a spokesperson saying the suggestions had been “overwhelmingly constructive and enthusiastic concerning the refreshed eating and procuring expertise” (a press release which, you will discover, pointedly does not say something about suggestions concerning the brand particularly), and attributing the backlash to a “vocal minority.”
Nevertheless, by Tuesday, shortly after President Trump’s publish, the corporate modified its tune. “We thank our visitors for sharing your voices and love for Cracker Barrel. We stated we might hear, and now we have,” the corporate stated. “Our new brand goes away and our ‘Outdated Timer’ will stay.” The brand new brand has been faraway from the corporate’s web site.
Does it matter for the inventory?
Should you imagine that any publicity is nice publicity, this ruckus would possibly lead to some short-term positives for the corporate. Cracker Barrel’s identify has been within the information (and, extra importantly, within the zeitgeist) for every week now, and it is even making me hungry for hash brown casserole. Many individuals are praising administration for its final resolution. This may very well be a golden alternative for the corporate, as Trump steered in his Reality Social publish, writing: “They bought a Billion {Dollars} price of free publicity in the event that they play their playing cards proper. Very difficult to do, however a terrific alternative.”
Picture supply: Getty Pictures.
That publicity would possibly improve foot visitors to Cracker Barrel’s shops within the quick time period, which might be a great addition for the corporate. In its most up-to-date quarter, same-store restaurant gross sales elevated by simply 1%, whereas same-store retail gross sales declined 3.8%. General, income has been stagnant because the pandemic lockdown reopenings, solely up 5.7% since 2022. Internet revenue has slipped by greater than 50% and revenue margins have declined to only 1.7%.
These metrics aren’t simply unhealthy, they’re worse than most of its peer corporations, together with Brinker Worldwide (EAT -3.32%), which owns Chili’s and Maggiano’s; and Darden Eating places (DRI 0.14%), which owns Olive Backyard and Cheddar’s, amongst many others. Maybe the issue is the breakfast: Dine Manufacturers (DIN 1.20%), which owns IHOP and Applebee’s, has struggled with an analogous drop in earnings, however even Dine’s revenue margin is above 5%.
In brief, it is going to take greater than the publicity surrounding this brand controversy to gasoline a long-term turnaround at Cracker Barrel. In accordance with CEO Julie Felss Masino, the corporate is “in the midst of a three-year transformation” that is anticipated to value $700 million and embrace adjustments to the corporate’s promoting, menus, and retailer layouts. If that is how nicely issues are going, traders will face a protracted and rocky street, it doesn’t matter what Cracker Barrel’s brand finally ends up wanting like.
