Cracker Barrel is a company that I have followed tangentially over time, as a major shareholding of Biglari Holdings, a company those who follow the Substack will know well. Given the very interesting marketing and brand news about Cracker Barrel, and the depressed stock price, the situation deserves some commentary.
As we have seen with Steak’n Shake, a core principle of good marketing is a willingness to take risks. I don’t know whether the Cracker Barrel management team was trying to make news when they removed Uncle Herschel from their logo, but in any case, they have. The stated intention was to create a new logo that would display cleanly on digital marketing campaigns and help appeal to the younger and mainstream customer demographics, the folks who eat at Cheesecake Factory or Snooze.
As those who follow the story will know, management has now backtracked on the logo change due to the very interesting and loud objections of conservative commentators and Donald Trump himself.
"They got a Billion Dollars worth of free publicity if they play their cards right. Very tricky to do, but a great opportunity," the president wrote on his Truth Social platform.
"Have a major News Conference today. Make Cracker Barrel a WINNER again. Remember, in just a short period of time I made the United States of America the 'HOTTEST' Country anywhere in the World. One year ago, it was 'DEAD.' Good luck!" — Donald on Truth Social
I share the same amusement that I’m sure many feel about the whole story from start to finish, as someone who is not particularly invested in whether Uncle Herschel stays or goes, however I can’t help but recognize a certain truth to Donald Trump’s words. With exceptions, all publicity is good publicity. It seems unlikely that existing customers of Cracker Barrel will feel alienated or betrayed by management’s Logo snafu, especially since Uncle Herschel has been restored. Interestingly, the mistake may have accomplished the underlying goal of the logo change, which is to make Cracker Barrel more visible to wider demographics. I can attest that many in my social circle know about the logo drama, and whether one roots for Uncle Herschel, or considers the whole story another ridiculous sign of the times we live in, Cracker Barrel has succeeded in making everyone talk about them.
I believe that the chances are fair that the logo publicity can pull in new and curious customers to Cracker Barrel who otherwise wouldn’t think to walk in. If these customers are met with country hospitality, a tasty meal and a reasonable ticket, management could turn this into a substantial positive for the company. Conversely, I don’t believe the last few weeks of drama will result in meaningful abandonment of the chain by its core customer base. There are not many alternatives to Cracker Barrel for those seeking a nostalgic southern dining experience at a reasonable price.
Under the fairly new CEO Julie Masino, the company has made progress on store-remodeling, menu, and pricing changes, benefiting profitability, and stabilizing sales/traffic trends after a rough few years under the prior management. Cracker Barrel’s menu pricing is generally lower than comparable peers, which gives it room to maneuver on price over time. The company’s stock price is quite depressed relative to prior years, having cut its dividend to fund turnaround work. Should same-store sales return to traffic-led growth, profitability has the potential to rebound extremely fast and potentially send the stock back towards $100+ territory. Such is the nature of the restaurant business where all the profit is made on the last incremental dollar. Should a traffic boost not materialize, my base case is that Cracker Barrel continues to amble along near its current valuation, with no harm done.
While my view on the stock more resembles a trade based on sentiment rather than an in-depth accounting analysis, I believe that the current dynamics have created a reasonable risk-reward for a company that was already making good progress on operational initiatives.
I am bullish on Cracker Barrel and believe that the stock, which currently trades at ~51 USD, could head towards ~100 USD with good execution from management.
This content is for informational and educational purposes only and does not constitute investment advice, legal advice, or financial recommendations. The opinions expressed are solely those of the author. You should do your own research or consult a qualified professional before making investment decisions. The author may hold positions in the securities discussed and is under no obligation to update readers on changes.