CBRL

GMT Capital Pours $9.2 Million Into $CBRL During Market Slump - Strategic Bottom Fishing in Cracker Barrel?

04/29/2025 18:19

Amid extreme market volatility driven by trade dispute uncertainties, major shareholders of $CBRL (Cracker Barrel Old Country Store Inc) have been aggressively purchasing shares, catching the attention of investors. Over just three weeks from early to late April, GMT Capital Corp and Thomas Claugus collectively acquired approximately 249,000 shares worth about $9.2 million. This represents a significant insider transaction for Cracker Barrel, a small-cap company with a market capitalization of $872 million. The timing of these purchases is particularly noteworthy. As trade tensions between the U.S. and China escalated in early April, $CBRL's stock plummeted to around $35, representing a 46% decline from its early February levels. GMT Capital seized this opportunity, purchasing 105,900 shares at an average price of $35.94 on April 4. Despite subsequent price increases, the firm continued buying: 31,800 shares each on April 9 and 10, followed by 26,500 shares on April 16. Thomas Claugus further demonstrated confidence by acquiring 53,000 shares at $43.03 on April 25. According to insider trading filings, these transactions were jointly reported by GMT Capital, Thomas Claugus, and related entities, with disclaimers recognizing beneficial ownership only to the extent of actual economic interest. This suggests GMT Capital is implementing a confident long-term investment strategy. Founded in 1969, Cracker Barrel is known for its unique business model combining restaurants with gift shops across the United States. The company specializes in offering traditional Southern-style cuisine alongside nostalgia-evoking retail experiences, currently operating approximately 660 locations nationwide. These insider purchases gain additional significance when viewed alongside the company's positive quarterly results announced in early March. For the second quarter ending January 31, 2025, $CBRL reported impressive performance exceeding expectations. Total revenue increased by 1.5% year-over-year to $949.4 million, while adjusted EPS reached $1.38, substantially surpassing analyst projections of $1.00. Particularly encouraging was the 4.7% growth in comparable store restaurant sales. Buoyed by these improved results, Truist upgraded $CBRL to a 'buy' rating on March 10, raising its price target to $55. The brokerage expressed confidence in sustained improvement driven by new menu offerings and enhanced service quality. Meanwhile, Cracker Barrel faces important developments in its corporate governance. In August 2024, Lion Fund II, L.P announced its intention to nominate five candidates to the board, while the company affirmed its commitment to continuing its publicly announced strategic transformation plans. GMT Capital's substantial stake increase could be interpreted as either support for current management or an attempt to influence the company's direction. From a financial perspective, Cracker Barrel does face certain challenges. Its debt-to-equity ratio stands at 1.20, and its current ratio is a concerning 0.62, indicating potential liquidity issues. Net income declined by 16.3% year-over-year to $22.2 million. However, adjusted EBITDA increased by 19.6% to $74.6 million, suggesting improvements in operational efficiency. Currently, Cracker Barrel's stock has rebounded approximately 23% from its early April lows but remains 33% below its peak from early 2025. This indicates that market concerns have not fully dissipated despite the substantial insider buying. Investors should consider these insider purchase patterns alongside the company's performance improvements and potential governance changes. While significant buying by institutional investors like GMT Capital may signal undervaluation, macroeconomic uncertainties and company-specific financial challenges cannot be ignored. Over the coming months, U.S. trade policy directions, changes in consumer spending patterns, and Lion Fund II's board composition efforts will likely significantly impact Cracker Barrel's stock performance. Most importantly, the next quarterly results expected in May will serve as a critical indicator of whether the timing of these insider purchases proves prescient.

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