After years of struggling with COVID-related disruptions, labor shortages, inflation, and shifting consumer habits, Cracker Barrel (NASDAQ: CBRL) is turning a corner. The FQ4 and full-year 2024 results are lackluster, and the guidance is tepid, but it could have been worse, much worse, and there is an expectation that improvements will continue gaining traction in F2025. It may take time for the market to build a stronger base and set itself up to sustain a rally, but lower prices are unlikely, and there is a dividend to consider. 

A growing expectation for a distribution cut was among the factors driving the share price action over the past two years, confirmed last quarter. With the payment right-sized to the current operational quality, the payout ratio is a sustainable 30% of the 2025 outlook, yielding 2.4% to investors buying near the current lows. 

Investors shouldn’t expect a dividend increase soon: sustainability is the operative word. Cracker Barrel has a fortress balance sheet that can sustain the current payment while it invests in its turnaround efforts. These include optimizing menu and price, remodeling, and improving customer experiences to drive revenue growth and widening margin. 

Cracker Barrel Struggles in Q4 Despite Growth

Cracker Barrel’s struggles are not over. The Q4 revenue of $894.4 million is up nearly 7% compared to last year, but due to one-offs like an extra 53rd week for the year and higher realized prices. Revenue is down 0.6% when adjusted for the additional week, and comp-store gains of 0.4% are due entirely to the 4.2% increase in average menu pricing. Retail sales, the higher margin business, contracted by 4.2% and suggests weakness will continue in F2025. Revenue is also below the consensus forecast, but that fact is offset by the revision trend, which feared much worse. 

Margin news is also mixed with the company’s costs rising at all levels on a GAAP and adjusted basis. However, the $0.98 in adjusted earnings is sufficient to sustain the company’s financial health while paying dividends despite falling short of the consensus. Inflation is expected to run at a low-single-digit pace in F2025 and will continue to pressure the margin until traffic trends improve.

The guidance is optimistic, aligning with the consensus estimates despite the decline in consensus posted over the past year. The takeaway is that analysts had feared worse, and revenue will hold steady in 2025 compared to the last two years, with a chance of outperformance on the top and bottom lines. 

There Is a Floor for Cracker Barrel’s Price Action

The sell-side, including analysts and institutions, has signaled a floor for the price action.  Although analysts have lowered their price targets this year, the market outran the trend and is now trading at the low end of the target range. Analysts rate the stock at reduce but see it trading with a low price of $42.00 and a consensus of $54.50, a gain of 27% when reached. Among the opportunities for investors is the potential for a revision trend as comps get easier and improvement efforts gain traction.

The institutions are buying Cracker Barrel. The broad group of institutions has bought on balance every quarter this year, and the activity ramped higher in Q3. Institutional activity also hit a multi-year high, aligning with bottoming action on the charts, and includes activist investor Sidar Biglari. Biglari is mounting a second attempt at taking control of the restaurant chain and is vying for up to ten seats on the board. Biglari is the chairman and CEO of Biglari Holdings, a conglomerate focused on restaurant chains Steak-n-Shake and Western Sizzlin’. 

Cracker Barrel Trading at Rock Bottom

Cracker Barrel’s shares moved higher on the news but continue to struggle with resistance. The bottom appears to be in place, and market sentiment is shifting, but a price reversal isn’t evident on the charts yet. The move has the market above the 9- and 30-day EMAs, which show a bullish crossover and provide a target for significant support that may lead to a reversal later this year. Shares of CBRL may retest that level soon and will likely provide a buying signal when they do. Short interest is also a factor, running near 12%. The shorts will continue to weigh on the action and provide ample fuel for a short-covering rally or short squeeze, so volatility is expected regardless of the stock price direction.