Cracker Barrel 2008 Annual Report Download - page 39

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Percentage of retail sales to total sales indicates the
relative proportion of spending by guests on retail
product at Cracker Barrel stores and helps identify overall
effectiveness of our retail operations. Management
uses this measure to analyze a store’s ability to convert
restaurant traffic into retail sales since the substantial
majority of our retail guests are also restaurant guests.
Average check per person is an indicator which
management uses to analyze the dollars spent in our stores
per guest on restaurant purchases. This measure aids
management in identifying trends in guest preferences
as well as the effectiveness of menu price increases
and other menu changes.
Store operating margins are defined as total revenue
less cost of goods sold, labor and other related expenses
and other store operating expenses, all as a percent
of total revenue. Management uses this indicator as a
primary measure of operating profitability.
RESULTS OF OPERATIONS
2008 Summary
Total revenue from continuing operations increased 1.4%
in 2008 as compared to 2007. In 2007, total revenue
from continuing operations benefited from an additional
week, resulting in an increase of $46,283. Excluding that
additional week, total revenue from continuing operations
increased 3.4% in 2008 as compared to 2007.
Operating income margin from continuing operations
was 6.3% of total revenue in 2008 compared to 7.2%
in 2007. Excluding the additional week in 2007, operating
income margin from continuing operations was 7.0%
in 2007. The decrease in operating income margin from
2007 to 2008 primarily reflected the following:
•
higher food costs and retail cost of goods sold,
•
higher management wages,
•
higher group health costs,
•
higher utilities and
•
the non-recurrence of litigation settlement proceeds
received in 2007.
The higher costs, which decreased operating income
margin, were partially offset by lower incentive
compensation, lower general insurance, lower store hourly
labor costs as a percentage of revenue in 2008 versus
2007 and higher menu pricing.
Income from continuing operations for 2008 decreased
14.1% from 2007 primarily due to lower operating
income and lower interest income partially offset by a
lower provision for income tax. Excluding the effects
of the additional week in 2007, income from continuing
operations for 2008 decreased 8.8%.
Diluted income from continuing operations per share
increased 10.7% in 2008 as compared to 2007 due to
the reduction in shares outstanding resulting from our
share repurchases. Excluding the additional week in
2007, diluted income from continuing operations per
share increased 17.2% in 2008.
Consolidated Results
The following table highlights operating results over the
past three years:
Period to Period
Relationship to Total Revenue Increase (Decrease)
2008 2007
2008 2007 2006 vs 2007 vs 2006
Total revenue 100.0% 100.0% 100.0% 1% 6%
Cost of goods sold 32.4 31.7 31.8 4 5
Gross profit 67.6 68.3 68.2 — 6
Labor and other related
expenses 38.2 38.0 37.6 2 7
Impairment and store
closing charges — — 0.2 — (100)
Other store operating
expenses 17.7 17.4 17.3 3 7
Store operating income 11.7 12.9 13.1 (9) 5
General and administrative 5.4 5.7 5.8 (7) 6
Operating income 6.3 7.2 7.3 (10) 4
Interest expense 2.4 2.5 1.0 (3) 168
Interest income — 0.3 — (98) 918
Income before income taxes 3.9 5.0 6.3 (20) (17)
Provision for income taxes 1.2 1.8 2.0 (30) (10)
Income from continuing
operations 2.7 3.2 4.3 (14) (20)
Income from discontinued
operations, net of tax — 3.7 0.9 (100) 314
Net income 2.7 6.9 5.2 (60) 39