Cracker Barrel Old Country Store, Inc (NYSE:CBRL) opened the first quarter of its fiscal year in fine fashion as earnings again beat analyst expectations. It also continues to post growth trends at existing stores ahead of the competition. Expansion opportunities over the long haul are somewhat limited, but management should be able to use excess capital to boost the bottom line for some time going forward.

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First Quarter Review
Cracker Barrel's total sales improved 3% to nearly $599 million as same-store restaurant sales grew 2.4% and increased 1.5% at the retail portion of the stores. Restaurant traffic also advanced 0.5% as the average check size expanded a respectable 1.9%. As has been the norm, the company detailed that its comparable sales outgrew the industry and casual-dining rivals that generally include Texas Roadhouse (Nasdaq:TXRH), Ruby Tuesday (NYSE:RT) and the Applebee's and IHOP chains of DineEquity (NYSE:DIN).

Cost of goods sold only advanced 1% while flat labor and related costs were sufficient to offset 6% growth in other operating expenses and allow sales leverage that pushed store operating income ahead by 12% to $82.3 million. Modest corporate cost growth pushed overall company operating income up 20% to $45.4 million. Flat interest expense pushed net income ahead even more and led to an increase of 32% to $23.7 million, or $1.01 per diluted share. This came in ahead of analyst projections.

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Outlook
For the full year, management expects sales growth between 3% and 4.5%, and earnings within a range of $3.95 and $4.10 per diluted share. This would represent a year-over-year bottom-line growth rate of about 13% if it hits the high end of current guidance. (For more on guidance, see Can Earnings Guidance Accurately Predict The Future?)

Bottom Line
Cracker Barrel continues to offer an appetizing combination of sales stability, profit growth and a reasonable stock valuation. The forward P/E is under 14 while sales and earnings are recovering nicely after a severe rough patch during the financial crisis.

Rival Darden (NYSE:DRI) has a better track record at expanding an equally mature franchise base of Olive Garden and Red Lobster, but Cracker Barrel should also be able to open a modest amount of stores going forward. Additionally, earnings will rise as the company pays down debt and interest expense decreases over time. Management should also continue to repurchase stock, which will also boost per-share profits. (For related reading, take a look at Analyzing Retail Stocks)


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