The corporate reversed course on its emblem. Can it additionally flip round its faltering shares?
Effectively, that was quick.
Only one week after revealing a brand new emblem that was almost universally panned, Cracker Barrel Outdated Nation Retailer (CBRL 8.01%) introduced on Tuesday that it was scrapping its plans to vary the emblem. On Wednesday, the corporate’s shares — which had tumbled greater than 10% after the brand new emblem 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 have been down
On Aug. 19, Cracker Barrel launched a fall marketing campaign it dubbed “All of the Extra.” It was largely a reasonably customary seasonal restaurant marketing campaign. It introduced a partnership with nation music star Jordan Davis and launched some seasonal fall menu gadgets like a cinnamon roll skillet and Uncle Herschel’s Favourite (“again by fashionable demand”).
Nevertheless, the marketing campaign additionally featured “up to date inventive,” together with a change to the restaurant’s emblem 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 quick and intense, with many criticizing the stripped-down emblem as generic or too paying homage to different restaurant logos, akin to Denny’s or Golden Corral. On Tuesday, even President Donald Trump weighed in on Fact Social, “Cracker Barrel ought to return to the previous emblem, admit a mistake primarily based on buyer response (the last word Ballot), and handle the corporate higher than ever earlier than.”
Regardless of the detrimental reactions, Cracker Barrel initially doubled down on its emblem resolution, with a spokesperson saying the suggestions had been “overwhelmingly optimistic and enthusiastic concerning the refreshed eating and purchasing expertise” (an announcement which, you may discover, pointedly does not say something about suggestions relating to the emblem particularly), and attributing the backlash to a “vocal minority.”
Nevertheless, by Tuesday, shortly after President Trump’s put up, the corporate modified its tune. “We thank our friends for sharing your voices and love for Cracker Barrel. We mentioned we’d hear, and we have now,” the corporate mentioned. “Our new emblem goes away and our ‘Outdated Timer’ will stay.” The brand new emblem has been faraway from the corporate’s web site.
Does it matter for the inventory?
When you imagine that any publicity is sweet publicity, this ruckus would possibly end in some short-term positives for the corporate. Cracker Barrel’s title has been within the information (and, extra importantly, within the zeitgeist) for per week now, and it is even making me hungry for hash brown casserole. Many individuals are praising administration for its final resolution. This might be a golden alternative for the corporate, as Trump advised in his Fact Social put up, writing: “They acquired a Billion {Dollars} value of free publicity in the event that they play their playing cards proper. Very tough to do, however an important alternative.”
Picture supply: Getty Photos.
That publicity would possibly enhance foot site visitors to Cracker Barrel’s shops within the brief time period, which might be a fine 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 for the reason that pandemic lockdown reopenings, solely up 5.7% since 2022. Web earnings has slipped by greater than 50% and revenue margins have declined to simply 1.7%.
These metrics aren’t simply unhealthy, they’re worse than most of its peer corporations, together with Brinker Worldwide (EAT -3.52%), 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 1.15%), which owns IHOP and Applebee’s, has struggled with the same drop in earnings, however even Dine’s revenue margin is above 5%.
Briefly, it should take greater than the publicity surrounding this emblem controversy to gasoline a long-term turnaround at Cracker Barrel. In response to 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 effectively issues are going, traders will face an extended and rocky highway, it doesn’t matter what Cracker Barrel’s emblem finally ends up wanting like.
