Cracker Barrel Old Country Stores (Nasdaq:CBRL) just closed the books on a successful year that saw sales stabilize and profits jump significantly. Its store base is no longer growing rapidly, but it can be counted on for an appealing combination of a loyal customer base and excess capital to return to shareholders.

Fourth-Quarter Sales Review
Revenues improved a modest 2.8% to $612.5 million as same-store restaurant sales rose 2% as average customer checks increased 1.9%. Comparable store sales at the retail portion of the stores grew 2.6%. Management attributed its ability to outperform other casual dining rivals, which generally include Texas Roadhouse (Nasdaq:TXRH), Ruby Tuesday (NYSE:RT) and the Applebee’s and IHOP chains of DineEquity (NYSE:DIN), to “better execution, creative new product offerings and more effective advertising support.”

Profit Recap
Operating income grew faster than sales, rising nearly 10% to $45.4 million and reaching 7.4% of revenues. Cracker Barrel experienced some sales leverage as increased profitability at its stores offset a higher level of general and administrative expenses. Impairment charges stabilized as consumer demand grew after an extremely rough stretch for the industry due to the credit crisis.

Interest and income tax expenses also fell and helped push net income up 20% to $27.4 million, or $1.4 per diluted share. This beat analyst projections by a couple of pennies.

Outlook
For the coming year, Cracker Barrel expects sales to continue their modest trend and increase between 3% and 4.5% as restaurant comps should grow in a range of 1.5% and 3% and retail comparable sales should grow between 2% and 4%. The company projects earnings of $3.95 – $4.10 per diluted share.

Bottom Line
Cracker Barrel’s stock has performed well as of late, but it still trades at a reasonable forward P/E multiple of 12.3 if it can hit the high end of its earnings guidance range. Earnings should receive a boost as management continues to pare down its debt load. The company repaid nearly $65 million in debt this year, but it only expects to repay $25 million of its $573 million in debt for the coming year.

CBRL also repurchased $62.5 million in its own shares with excess cash flow, and used another $18.5 million to support a current dividend yield of 1.6%. A loyal customer base is also helping sales and profit stability, and though the company isn’t growing as fast as Texas Roadhouse or some of Darden Restaurant’s (NYSE:DRI) chains, its business is highly profitable and somewhat unique (highway locations that combine food and retail sales) in an extremely crowded restaurant industry. (Don’t put your money on the table before getting a taste for analyzing this sector. For more information, see Sinking Your Teeth Into Restaurant Stocks.)

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