What Happened:

Shares of restaurant company Cracker Barrel (NASDAQ:CBRL) fell 14.7% in the morning session after the company announced updates related to its strategic transformation plan and capital allocation strategy. Specifically, the Board of Directors declared a quarterly dividend of $0.25 per share of the company's common stock, down more than 80% from the previous dividend of $1.30. In addition, the company expects Q3 and Q4 2024 financial results to be below its previous expectations, mainly due to weaker-than-anticipated traffic. 

In line with the plan, Cracker Barrel provided FY'2027 sales outlook of approximately $3.8 billion to $3.9 billion and adjusted EBITDA of approximately $375 million to $425 million. Adjusted EBITDA in FY'2025 is expected to be in line with, or slightly lower than, FY'2024 results, with gradual improvement in the second half of fiscal 2026 and further acceleration in fiscal 2027. 

On a more positive note, it maintained its current share repurchase authorization, which has $138 million remaining. Overall, the updates provide challenging aspects that the market might find tough to digest in the short term.

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What is the market telling us:

Cracker Barrel's shares are somewhat volatile and over the last year have had 12 moves greater than 5%. But moves this big are very rare even for Cracker Barrel and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 6 months ago, when the stock dropped 5.2% on the news that the company reported first quarter results that missed analysts' revenue and EPS expectations. Same-store sales were in line, though they declined in absolute terms as traffic declined and more than offset the positive contribution from pricing growth. Adding to the negatives was the fact that Cracker Barrel initiated fiscal 2024 guidance below Wall Street Consensus for revenue and operating margin. Overall, it was a weaker quarter for the company, and the results could have been better.

Cracker Barrel is down 36.9% since the beginning of the year, and at $48.73 per share it is trading 57.9% below its 52-week high of $115.62 from May 2023. Investors who bought $1,000 worth of Cracker Barrel's shares 5 years ago would now be looking at an investment worth $294.81.

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