10-Q: Cracker Barrel Reports Q2 Loss Amid Revenue Decline

Cracker Barrel Old Country Store, Inc. reported a net loss for the six months ended January 30, 2026, driven by significant revenue decreases and negative comparable store sales.

Summary

• Total revenue for the second quarter decreased by 7.9% to $874.8 million, and for the first six months, it decreased by 6.8% to $1.67 billion, compared to the prior year periods.
• The company reported a net income of $1.3 million ($0.06 diluted EPS) for the second quarter, a significant drop from $22.2 million ($0.99 diluted EPS) in the prior year quarter.
• For the first six months, the company posted a net loss of $23.3 million ($-1.05 diluted EPS), a reversal from a net income of $27.1 million ($1.21 diluted EPS) in the same period last year.
• Comparable store restaurant sales decreased by 7.1% in the second quarter and 6.0% for the six months, primarily due to a 10.1% and 8.7% decrease in guest traffic, respectively.
• Comparable store retail sales decreased by 9.2% in the second quarter and 8.9% for the six months, also attributed to guest traffic declines.
• Operating income for the second quarter was $0.5 million, down from $29.1 million, and the company recorded an operating loss of $32.3 million for the six months, compared to an operating income of $36.2 million in the prior year.
• Cash and cash equivalents decreased from $39.6 million at August 1, 2025, to $8.6 million at January 30, 2026.
• Net cash used in operating activities was $2.2 million for the first six months of 2026, a significant change from $93.7 million provided in the prior year period.
• The company closed one Cracker Barrel store and fourteen Maple Street Biscuit Company (MSBC) locations during the first six months of 2026 due to poor operating performance, incurring $3.5 million in closing costs.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing negatively due to significant declines in revenue, a shift to net loss for the six-month period, and substantial decreases in comparable store sales and guest traffic, indicating fundamental business challenges.

Positives

• General and administrative expenses decreased as a percentage of total revenue due to lower incentive compensation and reduced professional fees, including lower proxy contest expenses and strategic initiative costs.
• The company expects to receive approximately $47.4 million, net of legal fees, in March 2026 from a settlement agreement resolving interchange fee litigation.
• The company was in compliance with all financial covenants under its 2025 Revolving Credit Facility as of January 30, 2026, and expects to remain in compliance for the term of the facility.

Negatives

• Total revenue decreased by 7.9% in the second quarter and 6.8% for the first six months compared to the prior year.
• Net income significantly declined in the second quarter and turned into a net loss for the first six months.
• Comparable store restaurant sales decreased by 7.1% in Q2 and 6.0% for the six months, primarily due to a substantial decrease in guest traffic (10.1% in Q2, 8.7% for six months).
• Comparable store retail sales decreased by 9.2% in Q2 and 8.9% for the six months.
• Operating income declined sharply in Q2 and resulted in an operating loss for the first six months.
• Cash and cash equivalents saw a significant decrease from $39.6 million to $8.6 million.
• Operating activities used cash of $2.2 million for the first six months, a reversal from providing $93.7 million in the prior year.
• Restaurant cost of goods sold as a percentage of revenue increased due to higher food waste, commodity inflation (1.3% in Q2, 1.7% for six months), increased discounts, and a shift to higher-cost menu items.
• Retail cost of goods sold as a percentage of revenue increased due to lower initial margin (tariffs), higher markdowns, higher discounts, and inventory shrinkage.
• Labor and related expenses increased as a percentage of total revenue due to lower productivity, deleverage from decreased revenue, and unfavorable employee health care claim experience.
• Other store operating expenses increased as a percentage of total revenue due to decreased revenue, higher maintenance expenses (including snow removal), and increased media advertising.
• Impairment charges of $418 thousand were recorded for three MSBC locations in Q2 2026, and total impairment and store closing costs were $3.9 million for the six months, including costs for 1 Cracker Barrel and 14 MSBC closures.
• Negative publicity from brand initiatives (new logo, modern test store remodels) contributed to decreases in guest traffic and required the company to revert to its former logo and discontinue remodels.

Risks

• Inflationary conditions with respect to the price of commodities, ingredients, transportation, distribution, and labor.
• Disruptions to the restaurant or retail supply chain.
• Effects of changes in international, national, regional, and local economic and market conditions (e.g., trade barriers).
• Ability to manage retail inventory and merchandise mix.
• Impact of adverse or extreme weather events on sales and customer travel.
• Effects of increased competition on sales, labor recruiting, cost, and retention.
• Consumer behavior changes due to negative publicity, health/dietary trends, or safety concerns (including infectious disease outbreaks).
• Effects of indebtedness and associated restrictions on financial and operating flexibility.
• Changes in interest rates, increases in borrowed capital, or capital market conditions affecting financing costs and ability to refinance indebtedness.
• Reliance on a single distribution facility and certain significant vendors, particularly for foreign-sourced retail products.
• Information technology disruptions, data privacy, and information security breaches.
• Compliance with privacy and data protection laws.
• Changes in or implementation of additional governmental or regulatory rules, regulations, and interpretations (tax, health and safety, animal welfare, pensions, insurance).
• Actual results of pending, future, or threatened litigation or governmental investigations.
• Ability to manage the impact of negative social media attention and the costs and effects of negative publicity.
• Impact of activist shareholders.
• Ability to achieve aspirations, goals, and projections related to sustainability initiatives.
• Ability to successfully enter new geographic markets.
• Changes in land, building materials, and construction costs.
• Availability and cost of suitable sites for restaurant development.
• Ability to retain key personnel and recruit, train, and retain qualified hourly and management employees.
• Uncertain performance of acquired businesses, strategic investments, and other initiatives.
• Effects of business trends on the outlook for individual restaurant locations and their carrying value.
• General or regional economic weakness, business, and societal conditions.
• Discretionary income or personal expenditure activity of customers.
• Implementation of new or changes in interpretation of existing GAAP.

Future Outlook

The company anticipates commodity inflation to be between 2.0% and 2.5% and wage inflation between 2.5% and 3.0% in 2026. Capital expenditures are expected to be approximately $105 million to $115 million in 2026, funded by operations and the revolving credit facility. The company expects to be in compliance with its 2025 Revolving Credit Facility's financial covenants for the term of the facility. New income tax disclosure requirements will be adopted in Q4 2026, and new disaggregation of income statement expenses disclosure requirements will be adopted in 2028 for annual periods and Q1 2029 for interim periods.

Management Comments

• "We believe that Cracker Barrel's brand remains one of the strongest and most differentiated brands in the restaurant industry, and we plan to continue to leverage and build on that strength as a core competitive component of our business strategy."
• "Our long-term strategy is anchored on three overarching business imperatives: driving relevancy, delivering food and experiences guests love, and growing profitability."
• "Our strategy is focused on improving the guest experience to drive an improvement in our traffic and includes enhancing our operations, connecting with guests through our menu, marketing and value proposition, and implementing cost savings to improve profitability."
• "We presently expect the rate of commodity inflation to be between 2.0% and 2.5% in 2026."
• "We presently expect the rate of wage inflation to be between 2.5% and 3.0% in 2026."
• "We currently expect capital expenditures to be approximately $105,000 to $115,000 in 2026."
• "We expect to be in compliance with the 2025 Revolving Credit Facility's financial covenants for the term of the facility."

Industry Context

StockSavvy.ai notes that Cracker Barrel's performance reflects broader macroeconomic challenges, including continued inflation volatility, high consumer debt levels, and lower savings rates, which are impacting consumer demand across the restaurant and retail sectors. The company's struggles with brand initiatives and guest traffic declines highlight the competitive pressures and evolving consumer preferences within the casual dining and specialty retail segments.

Corporate Governance

Legal Proceedings

• The company expects to receive approximately $47.4 million, net of legal fees, in March 2026 pursuant to a settlement agreement resolving interchange fee litigation.
• The company and its subsidiaries are party to various legal and regulatory proceedings and claims incidental to their business in the ordinary course, with management believing the ultimate liability will not materially affect financial statements.

Stakeholder Impact

• Shareholders: Experienced a significant decline in net income and EPS, with a net loss for the six-month period. Dividends are continuing but are subject to restrictions under the 2025 Revolving Credit Facility. No share repurchases were made in the first six months of 2026 despite a board authorization.
• Customers: Negative reactions to recent brand initiatives (new logo, modern test store remodels) led to decreased guest traffic, indicating a disconnect with a portion of the customer base.
• Employees: Severance costs were incurred due to a corporate restructuring, and lower bonus expenses resulted from underperformance against financial objectives.
• Creditors: The company remains in compliance with its 2025 Revolving Credit Facility covenants, but increased debt levels and reduced cash flow from operations warrant close monitoring.

Next Steps

• Receive approximately $47.4 million, net of legal fees, in March 2026 from an interchange fee litigation settlement.
• Record the settlement proceeds in other income in the Consolidated Statement of Income (Loss) in the third quarter of 2026.
• Pay a regular dividend of $0.25 per share on May 13, 2026, to shareholders of record as of April 10, 2026.
• Continue to assess the potential impacts of the One Big Beautiful Bill Act (OBBBA) on financial position as additional guidance is released.
• Evaluate the effect of adopting new income tax disclosure requirements, effective for annual periods beginning after December 15, 2024, with adoption planned for Q4 2026.
• Evaluate the effect of adopting new disaggregation of income statement expenses disclosure requirements, effective for annual periods beginning after December 15, 2026 (adoption in 2028) and interim periods within fiscal years beginning after December 15, 2027 (adoption in Q1 2029).

Key Dates

Recommendation

The filing reveals a significant deterioration in Cracker Barrel's financial performance, marked by substantial revenue declines, a shift to a net loss for the six-month period, and a sharp drop in comparable store sales and guest traffic. Operational challenges, including increased costs and negative customer reactions to brand initiatives, underscore fundamental business weaknesses. While a litigation settlement provides a one-time cash infusion, it does not address the core operational and demand issues. The overall trend suggests ongoing headwinds and a challenging outlook, making the stock a 'sell' for seasoned investors.

Keywords

Cracker Barrel, Restaurant Industry, Retail Sales, Comparable Store Sales, Net Loss, Guest Traffic, SEC Filing, 10-Q, Financial Performance, Macroeconomic Factors, Inflation, Debt, Convertible Notes, Maple Street Biscuit Company