CBRL

GMT Capital Makes $3.8 Million Bet on Cracker Barrel ($CBRL) After Stock Plunges 50% From 52-Week High

04/09/2025 07:42

GMT Capital, a major shareholder of Cracker Barrel Old Country Store ($CBRL), has made a significant purchase amid a steep decline in the company's stock price. According to SEC filings, GMT Capital purchased 105,900 shares on April 4 at an average price of $35.94, representing a total investment of approximately $3.8 million. This purchase comes at a time when $CBRL's stock has fallen approximately 50% from its 52-week high of $71.13. Following this transaction, GMT Capital now holds a total of 2,452,200 shares, marking a substantial increase in its position. Despite the complex ownership structure, this large purchase suggests that a major investor sees significant value at the current price levels. Cracker Barrel has been facing challenging times over the past several months. The stock, which had climbed to nearly $65 in late January 2025, has been on a sharp downward trajectory since February and is currently trading in the $35-37 range. This represents a decline of more than 45% year-over-year and almost 60% over the past five years. However, there have been some positive signals in the company's most recent earnings. In results announced on March 6 for the quarter ended January 31, 2025, $CBRL reported adjusted earnings of $1.38 per share, significantly exceeding analysts' expectations of $1.09. Revenue also increased by 1.5% year-over-year to $949.44 million. Following these improved results, Truist upgraded $CBRL to a 'buy' rating on March 10 and set a price target of $55. Truist expressed confidence in sustained improvement due to new menu items and improved service, despite ongoing challenges. Meanwhile, $CBRL has also been facing governance pressure since last August when activist investor Biglari (Lion Fund II) announced its intention to nominate five candidates to the board. The company has responded by affirming its commitment to continuing its strategic transformation plans. For fiscal year 2024, $CBRL reported revenue of $3.47 billion, a modest 0.8% increase from the previous year, with operating income of $45.1 million and net income of $40.9 million. The restaurant chain, which operates 658 locations and employs 77,600 people, has been struggling with the dual challenges of inflation and reduced consumer spending in its post-pandemic recovery. Cracker Barrel currently offers a dividend yield of 2.8%, with a payout ratio of 127%, indicating that the company is paying out more than it earns in dividends, which raises questions about dividend sustainability. While GMT Capital's substantial purchase could be interpreted as a signal that the current stock price is undervalued, investors should consider both the structural challenges facing the restaurant industry and the company's potential for performance recovery. Key factors include how effectively $CBRL can implement its strategic changes in an environment characterized by high prices, reduced consumer spending, and intensified competition. The next quarterly earnings announcement, progress on strategic plans, and developments in the governance issue with Biglari will likely be critical variables determining the future direction of the stock price. Particularly worth monitoring are any additional moves by major investors like GMT Capital regarding their equity positions.

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