Not even the rocking chairs and knickknacks at Cracker Barrel Old Country Store Inc. are immune to the disease spreading through the retail sector. The Lebanon, Tenn.-based chain of roadside family-dining restaurants, which includes retail areas, said that same-store retail sales fell 4.7 percent in the third quarter ended April 28. That was considerably worse than Cracker Barrel’s restaurant sales. Same-store restaurant sales fell 0.4 percent in the quarter, with traffic declining 2.1 percent. Speaking on the company’s earnings call Tuesday morning, Cracker Barrel executives suggested that some of the same problems afflicting casual dining — notably heavy discounting — are far worse in the retail world. “As much as we believe that discounting in the restaurant business is significant, it’s even more so in the retail industry right now,” Cracker Barrel CEO Sandra Cochran said. “I would characterize the environment as even more highly competitive.” Cracker Barrel’s retail areas sell everything from doormats to hammocks to the rocking chairs along the restaurants’ porches, where customers sit while they wait for a table. The company makes most of its money from its restaurants, but the retail area is a sizable portion of the business. So far this year, 20.3 percent of the company’s revenue has come from its retail business, down from 20.9 percent a year ago. Retail is a tough business to be in these days. With heavy competition from Amazon.com and other online companies, retailers have been shutting their doors and marking down prices in a bid to win back customers. Hundreds of retail locations have closed since January. Cochran said on Cracker Barrel’s earnings call that customers have grown accustomed to the markdowns they see at mall-based retailers, and Cracker Barrel hasn’t done a good enough job of showing off its lower cost items. She said the company is working to “highlight value on the merchandise floor.” For instance, she said Cracker Barrel is more clearly marking that all jewelry on a display is the same price. Cochran said the company is “aggressively looking at inventory levels and, where they could, trimming them.” Still, for all the retail woes, Cracker Barrel is still a restaurant chain. The chain’s same-store sales decline reflects similar problems at other family-dining chains, such as IHOP and Denny’s. The results were “below our internal projections,” Cochran said. However, the company hopes that national marketing and a change to the chain’s 1,600 billboards along highways nationwide, can generate incremental sales and traffic. Still, the company expects a continued challenging environment and anticipates same-store sales to be flat to up 0.5 percent for the full year. Cochran said the restaurant environment is “increasingly competitive,” both at quick-service restaurants, with which Cracker Barrel competes at breakfast, and at casual-dining concepts. Many of these companies are pushing value. Cochran said Cracker Barrel plans to emphasize more of its value offerings to improve sales in relation to competitors. Executives did have some success with off-premise business, including a Holiday Heat and Serve program, with a family-sized meal for 10 guests available for pickup. Executives said the program generated traffic and favorable sales. Cochran also cited Cracker Barrel’s online wait list, enabling customers to go online to join the wait list, something numerous other casual dining chains are doing. She said the online wait list shouldn’t hurt the chain’s retail sales because most customers buy retail items after they visit. “This allows them to come in and eat, and gives them time at the end to visit and shop at our stores,” Cochran said. “There’s been no negative impact on retail related to online wait lists.” – Source: NRN.
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