The Basch Report: Cracker Barrel investing in new concepts

The restaurant chain’s acquisition of Maple Street Biscuit Co. follows its $140 million investment in Punch Bowl Social.

  • By
  • | 5:10 a.m. October 17, 2019
  • | 5 Free Articles Remaining!
Punch Bowl Social is at 875 Battery Ave. SE Suite 720 in Atlanta. The 27,000-square-foot restaurant, bar and entertainment concept opened in September 2017 in The Battery Atlanta adjacent to SunTrust Park, the home of the Braves.
Punch Bowl Social is at 875 Battery Ave. SE Suite 720 in Atlanta. The 27,000-square-foot restaurant, bar and entertainment concept opened in September 2017 in The Battery Atlanta adjacent to SunTrust Park, the home of the Braves.
  • Columnists
  • Basch Report
  • Share

From the opening of its first restaurant in Lebanon, Tennessee, 50 years ago, Cracker Barrel Old Country Store Inc. has grown into a significant national chain with 660 restaurants in 45 states.

However, the company last week showed it is not sitting still with its iconic brand.

Cracker Barrel acquired Orange Park-based Maple Street Biscuit Co. Inc. for $36 million, bringing a new brand under its umbrella.

That acquisition follows a July deal to invest $140 million into Punch Bowl Social, which it describes as an “experiential food and beverage concept” pairing food and drink with “social gaming.”

Cracker Barrel’s investment is a noncontrolling interest with an option to eventually take ownership of Punch Bowl, which has 17 locations in 12 states.

Before these two deals, the company’s only restaurants not operating as Cracker Barrels were seven Holler & Dash Biscuit House locations. The company plans to convert those sites into Maple Street restaurants.

The company continues to expand its Cracker Barrel concept with new locations, with a focus on California where it only has a handful of stores.

More than half of its restaurants are in Southeastern states with Florida its biggest market with 60 stores, according to its annual report. It operates six locations in Northeast Florida.

The headquarters remain in Tennessee.

Cracker Barrel last month reported $3.07 billion in revenue for the fiscal year ended Aug. 2 with adjusted earnings rising 40 cents to $9.27 a share.

The company’s locations operate as restaurants combined with retail stores with an “old country store theme.”

The restaurants accounted for 81% of sales last year. Comparable-store sales at the restaurants (sales at stores open for more than one year) rose 2.6% in the fiscal year but that was due to price increases. The average check rose by 3.3% but store traffic fell 0.7%.

Comparable-store retail sales rose by 0.1% in the year.

Longbow Research analyst Alton Stump said in a research note after the earnings report he is maintaining a “neutral” rating on Cracker Barrel stock.

“In the long term, we remain largely positive on Cracker Barrel’s fundamentals, but refrain from recommending the shares pending further evidence of a sustainable recovery in Cracker Barrel’s same-store traffic,” Stump said.

Cracker Barrel expects the Maple Street acquisition to be neutral to its earnings in fiscal 2020.

The company projects adjusted earnings of $9.30 to $9.45 this fiscal year, but charges associated with the Punch Bowl deal are expected to lower its final earnings to $8.80 to $8.95

Analyst downgrades FNF as it nears price target

The third quarter likely was a boom period for title insurance companies like Fidelity National Financial Inc., as lower interest rates drove strong mortgage refinance volume.

However, Fidelity’s stock already is trading at record-high levels, so one analyst downgraded the Jacksonville-based company ahead of its third-quarter earnings report.

“We are downgrading FNF to Market Perform from Outperform on valuation since the shares have only around 9% upside to our price target,” Keefe, Bruyette & Woods analyst Bose George said in a research report.

“However, we remain very positive on the outlook for the company and the sector,” he said.

George set a $48 price target for Fidelity’s stock, which was trading at $44.17 at the time of his report last week.

George said third-quarter mortgage volumes are projected to be 26% higher than last year, mainly because of a surge in refinancing activity.

Fidelity’s stock has remained at high levels despite its planned acquisition of Stewart Information Services Corp. falling apart last month.

Fidelity agreed in March 2018 to buy Stewart in a deal that would have increased its dominant share of the U.S. title insurance market from about 32% to 43%.

However, the U.S. Federal Trade Commission opposed the merger on antitrust grounds and the two companies couldn’t reach an agreement with the FTC to resolve the issue. They agreed to terminate the merger last month.

Bose said he lowered his price target for Fidelity slightly from $49 “because our previous target also incorporated a small probability that the Stewart acquisition would close driving greater accretion than buybacks.”

Fidelity is expected to use some of the cash it had targeted for the Stewart purchase on stock buybacks.

Fresh Market adds ex-Winn-Dixie officer

The Fresh Market last week added another former Winn-Dixie Stores Inc. executive to its top management team.

Dan Portnoy, a former chief merchandising and marketing officer for Winn-Dixie, was named chief merchandising officer of Greensboro, North Carolina-based Fresh Market.

He joins Larry Appel, who was named CEO of the specialty grocer two years ago. Appel is a former chief operations officer and chief legal officer of Winn-Dixie.

Portnoy is the second former Winn-Dixie executive recruited by Appel, after Mary Kellmanson joined Fresh Market as chief marketing officer in 2017.

Appel, Kellmanson and Portnoy all were part of Winn-Dixie’s executive team before it merged with Bi-Lo LLC into Jacksonville-based Southeastern Grocers in 2012.

Fresh Market operates 160 stores in 22 states, including five in the Jacksonville market.

Drone Aviation plans 1-10 reverse stock split

Drone Aviation Holding Corp. is planning a 1-for-10 reverse split to lift its stock price for a Nasdaq listing, according to a Securities and Exchange Commission filing last week.

The stock was trading at 83 cents on the OTCQB market with “a very limited market” for the shares, the Jacksonville-based company said in the filing.

“Quotes of stock trading prices on an over-the-counter marketplace may not be indicative of the market price on a national securities exchange,” it said.

Shareholders approved a resolution in June authorizing a reverse split to help the company meet minimum share price requirements for listing on the Nasdaq Capital Market.

By issuing one share of stock for every 10 shares outstanding, it would lift the price to $8.30.

The reverse split would reduce the number of shares outstanding from 27.6 million to 2.76 million. However, if the company achieves its Nasdaq listing, it intends to sell 1.2 million units in a public offering consisting of one share of common stock and one warrant to buy a share of stock.

Drone Aviation, which produces specialized tethered aerial monitoring and communications platforms, recorded its first profitable quarter in the second quarter this year with net income of $53,814 on revenue of $1.4 million.

Obitx waiting for ticker

Jacksonville-based medical cannabis company mCig Inc. spun off a marketing and advertising software subsidiary called Obitx Inc. into a separate public company in December. But while Obitx has been filing regular SEC reports, it doesn’t have a ticker symbol to trade the stock.

In an update to shareholders last week, mCig Chief Executive Paul Rosenberg said Obitx is waiting for the Financial Industry Regulatory Authority, or FINRA, to approve its ticker.

“The process of obtaining a trading symbol from FINRA has taken much longer than anticipated. All the required paperwork has been submitted to FINRA and we are expecting our stock symbol to be issued to Obitx in a timely manner,” Rosenberg said.

Obitx reported no revenue for the six months ended July 31.



Special Offer: $5 for 2 Months!

Your free article limit has been reached this month.
Subscribe now for unlimited digital access to our award-winning business news.