Cracker Barrel's Resilience: Navigating Tariffs and Revitalizing for Long-Term Profitability

Julian WestFriday, Jun 6, 2025 1:04 pm ET
20min read

Amid rising global trade tensions and a challenging economic landscape, Cracker Barrel Old Country Store (NASDAQ: CBRL) has positioned itself as a case study in strategic adaptability. The casual dining giant is confronting tariff headwinds while executing a bold transformation plan aimed at modernizing its brand and operations. This article examines how Cracker Barrel's focus on operational efficiency and brand revitalization could unlock sustained profitability—and why investors should take note.

Operational Efficiency: The Foundation of Resilience

CBRL EBITDA, EBITDA YoY

Cracker Barrel's operational overhaul is its most critical defense against external pressures like tariffs. The company's three-phase back-of-house process redesign, launched in 2024, targets labor costs, food waste, and consistency. Phase 1 simplified kitchen workflows, reducing hourly turnover by 13 percentage points—a significant win in an industry plagued by staffing challenges. By 2026, these efforts are projected to save $50–$60 million annually, with Phase 2 introducing pre-cut ingredients and Phase 3 upgrading equipment.

These changes are not merely cost-cutting measures. They directly address profitability: streamlined workflows have already boosted dinner margins by 600 basis points, a critical improvement in a segment historically hampered by low margins.

Brand Revitalization: Attracting New Customers, Retaining Loyal Ones


While tariffs loom, Cracker Barrel's most ambitious initiative lies in reimagining its brand identity. The company is tackling two core challenges: appealing to younger diners without alienating loyal customers and leveraging data-driven strategies to boost engagement.

  • Menu Innovation: The introduction of dishes like the Bee Sting Chicken Tenders and Slow Braised Pot Roast targets younger audiences, while barbell pricing (affordable staples paired with premium items) broadens customer appeal. The $7.99 Sunrise Pancake and New York strip steak reflect this balance.
  • Store Remodels: A three-tiered program modernizing 50–60 stores in 2025 has already shown promise. Remodeled locations in Indianapolis reported consistent traffic and sales growth, with customers praising the “lighter, brighter” design. By Q3 2025, 40 stores were updated, laying groundwork for a broader rollout.
  • Loyalty Program Success: With 6 million members, the Cracker Barrel Rewards Program has driven a 50% increase in visit frequency and a 10% lift in average spend. Personalized promotions, such as anniversary cake gifts, underscore the brand's shift toward data-driven customer engagement.

Financial Performance: Progress Amid Headwinds

Cracker Barrel's Q3 2025 results reflect a balancing act: revenue grew 0.5% year-over-year to $821.1 million, driven by 4.9% menu price hikes. However, retail sales fell 3.8%, a direct hit from tariffs on Chinese-sourced goods. The company now anticipates a $5 million tariff cost in Q4 2025—a pressure point it is addressing through vendor negotiations and SKU reductions.

Ask Aime: What's Cracker Barrel's new menu item that's boosting sales?

The silver lining? Adjusted EBITDA rose to $48.1 million, and net income turned positive at $12.6 million, up from a $9.2 million loss in 2024. Management's revised 2025 EBITDA guidance ($215–225 million) signals confidence in its transformation plan.

Risks and Challenges

  • Tariff Uncertainty: Mitigation efforts, including domestic re-sourcing, are critical to avoiding further margin erosion.
  • Execution Risk: Scaling the Indianapolis remodel success across all locations is non-negotiable for long-term growth.
  • Economic Sensitivity: A downturn could hurt discretionary spending, though Cracker Barrel's affordability provides some buffer.

Investment Thesis: A Long-Term Play with Asymmetric Upside

CBRL Trend
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Cracker Barrel's valuation metrics suggest undervaluation: its EV/EBITDA of 9.7x lags peers by 20%, and its forward P/E of 18.25 implies room for expansion if EBITDA targets are met. Key catalysts include:
1. Remodel Completion: Demonstrating traffic and profit gains in remodeled stores by late 2025.
2. 2026 EBITDA Growth: Achieving $225 million EBITDA could push valuation multiples to 15x–18x, unlocking a 30–50% stock gain from current levels.
3. Dividend Reassessment: A modest dividend hike by 2026 could attract income investors, provided cost savings materialize.

Conclusion

Cracker Barrel's 2025 transformation—driven by operational rigor and brand reinvention—presents a compelling long-term opportunity. While near-term risks like tariffs and execution hurdles are real, the company's disciplined strategy and undervalued stock price position it to thrive in a recovering casual dining sector. For investors with a 3–5 year horizon, this could be a high-reward entry point, especially if Cracker Barrel's operational and financial targets are met.

Investment Advice: Consider a gradual position-building approach, with a focus on dips below $55/share. Monitor Q4 earnings and 2026 guidance closely—positive updates could trigger a re-rating.

This analysis underscores that Cracker Barrel's future hinges on execution, but the pieces are in place for a comeback story.