How to profit on falling egg prices 🥚

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$13 BILLION UP FOR GRABS

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As they ratchet up distribution, they are inviting you to become an early investor in their company. Check it out below!

EGG PRICES ARE SCRAMBLED

In one of the more peculiar economic stories of recent times, the price of eggs was causing pandemonium.

In a single year, egg prices had spiked nearly 60%.

While it’s easy to pin this on general inflation from the pandemic, the real culprit was H5N1 - or as it’s commonly known, the bird flu.

Starting in 2022, a nasty strain of bird flu was ripping through farms at an alarming rate.

To prevent further spread, U.S. policy requires farms to kill all birds on the premises - even if the flu is only impacting a few birds.

All told, 130M egg-laying hens were butchered. Hens in their prime can lay upwards of 300 eggs in a year…

That means that as many as 39 BILLION eggs were wiped out of the total supply.

THE WORST IS OVER(-EASY)

Luckily, there haven’t been any major recent instances of bird flu, so supply is likely coming back to full force.

And egg prices are reflecting that - in March egg prices are down a whopping 57%.

CRACKER BARREL LOVES CHEAP EGGS

Perhaps more than any other company, Cracker Barrel was impacted by expensive egg prices.

The breakfast stalwart goes through an estimated 162M eggs each year (a bit eggcesive if you ask me).

Cracker Barrel usually isn’t impacted by changing egg prices because they sign long-term contracts with their suppliers to prevent risks like this from harming their business.

However, one of their main suppliers caught H5N1 and had to wipe out their flock. Unable to meet their needs, Cracker Barrel had to turn to the open market to buy their eggs.

This is absolutely killer for Cracker Barrel, because open market prices at a time when supply is at an all time low are (you guessed it!) not great.

In their most recent earnings report, we can see just how bad this is - purchasing eggs on the open market led to an extra $4M in incremental costs.

Cracker Barrel reported quarterly earnings of $22.2M, so the $4M in extra costs is pretty significant.

Year-to-date, Cracker Barrel’s stock has sunk 26%. Zooming out over the span of a full year, the stock is down 38% while the S&P 500 has increased 8%.

While growth has slowed considerably and short-term headwinds like the eggs debacle have spooked investors, there’s a good amount to like with Cracker Barrel stock.

According to management, customers have scored Cracker Barrel’s value & taste 7% higher YoY, while the menu satisfaction increased 8%.

These improvements have trickled through to their top line, as Cracker Barrel reported its first positive same-store sales growth in 2 years. 

Could this be the start of a turnaround for this storied breakfast brand?

Disclaimer: I’ve opened up a position in Cracker Barrel :)