Cracker Barrel Old Country Store Inc. said this week that rising gasoline prices may challenge its recent successful traffic-building efforts in the months ahead.
“We think that given our susceptibility, particularly in the summer travel season, to potential increases in gasoline prices, it is appropriate to be suitably cautious about our third and fourth quarter traffic outlook,” Cracker Barrel chief financial officer Lawrence E. Hyatt said Tuesday.
The operator of 610 family restaurants, which are located primarily along highways, had factored in “approximately flat” traffic for the second half of the fiscal year ending in July, when forecasting annual same-store sales growth of between 1 percent and 2 percent, Hyatt said in an analyst call discussing second quarter earnings.
Lebanon, Tenn.-based Cracker Barrel reported Tuesday same-store traffic growth of 1.1 percent for the second quarter ended Jan. 27, the first increase in five quarters. Revenue and same-store sales rose during the quarter, but net income fell due to expenses related to the 2011 proxy fight with activist investor Sardar Biglari.
Hyatt’s statement about the potential for consumers to cut back on travel and dining as higher gas prices crimp discretionary spending came as research suggested that sales at many restaurant chains had not yet been affected by consumer reaction to increases at the pump.
And while the national unemployment level is falling, “the pace of improvement remains slow, and consumer spending is still being pressured by higher grocery and energy costs,” said Cracker Barrel president and chief executive Sandra B. Cochran.
The company will concentrate its advertising spending in the second and fourth quarter, she said, when guest traffic traditionally is highest. In November 2011, the chain launched its first national TV advertising campaign, “Handcrafted by Cracker Barrel,” in support of the brand’s “wholesome connections” messaging.
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“We believe the new advertising was an important contributor to our sales growth during the quarter,” Cochran said.
The company expects to continue with TV advertising later in the year, but a full analysis of the costs and benefits from the first campaign are pending, she said.
Cracker Barrel efforts to improve and “deliver a more consistent guest experience” have benefited from additional employee training and an investment of less than $2 million in restaurant equipment and technology, such as printers and computer display screens, Cochran said.
“We’re pleased with sustained improvement in guest satisfaction scores, which are up from the same quarter last year across a spectrum of key measures,” she said. “In particular, we noted solid increases in our primary areas of focus, such as the friendliness and attentiveness of our servers, temperature of food and speed of service.”