Cracker Barrel Earnings Show How Casual Restaurants Are Making a Comeback

A positive earnings announcement from Cracker Barrel Old Country Store (CBRL)  sent the company's shares soaring on Wednesday. Not only is Cracker Barrel's stock an investment worth taking a look at, but Wednesday's earnings and the related rally may signal the comeback of the casual eatery.

The American consumer is a fickle creature, especially when it comes to food. Dining trends are all over the map these days, with the pendulum swinging from fast-food outlets to sit-down restaurants and back again. For a while, the pendulum has been stuck somewhere near the middle, in the category of "fast casual." But now it looks like this category may be losing its luster.

Just a few months ago, fast casual was the hot dining trend. Consumers still cash-strapped by the last recession but too health-conscious for fast-food joints like McDonald's (MCD) were flocking to restaurant chains that serve quickly made-to-order meals from fresh ingredients but without table service. And investors were pulling in the profits.

The leader in this sphere was Chipotle Mexican Grill (CMG) . However, the tide quickly turned over the winter when multiple outbreaks of food-borne illnesses at Chipotle locations frightened consumers -- and investors -- away.

And although some companies in this sector, such as Panera Bread (PNRA) , continue to fare well, others, such as Cosi (COSI) , have been floundering.

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Apart from food safety concerns, the American consumer is finally beginning to have expendable dollars to spend on things like eating out at a more leisurely pace, as well as leaving a tip. That's where the casual eatery chains are stepping in.

Already this quarter, we've seen positive results from companies such as diner operator Denny's (DENN) and Darden Restaurants (DRI) , which owns eateries such as the Olive Garden and LongHorn Steakhouse.

But Wednesday's earnings news for Cracker Barrel shows that consumers are heading back to their old standbys. Indeed, Cracker Barrel is notable for doing nothing notable. The restaurant/retail hybrid is perhaps the antithesis of flashy or sexy, offering homestyle eats in a country store setting.

For the third quarter of fiscal 2016, Cracker Barrel reported net income of $49.2 million, a 39% increase year over year. Revenue came in at $700.1 million, a 2% year-over-year bump from the third quarter of fiscal 2015. The company also raised its guidance for earnings for the full fiscal year.

On Wednesday, CEO Sandra Cochran said, "During the third quarter, we had positive comparable store restaurant and retail sales growth, and continue to outperform the casual dining industry."

Be that as it may, the casual dining industry as a whole is swinging back into favor again. And names including Cracker Barrel will be at the front of the pack, delivering tasty profits to investors along the way.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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