Cracker Barrel (NASDAQ:CBRL) Old Country Store (NASDAQ: CBRL) reported its latest quarterly earnings, revealing a miss on earnings per share (EPS) forecasts. Despite this, the company's stock experienced a slight uptick in pre-market trading. The restaurant and retail chain posted total revenue of $845.1 million, aligning with expectations, but EPS fell short at $0.98 compared to the anticipated $1.14. The company's stock price saw a 2.74% increase, reaching $41.56.
Key Takeaways
- Cracker Barrel's EPS of $0.98 missed the forecast of $1.14.
- Total (EPA:TTEF) revenue matched expectations at $845.1 million.
- Stock price rose 2.74% in pre-market trading.
- Restaurant revenues grew, while retail revenues slightly declined.
- The company remains optimistic about fiscal 2025 as an investment year.
Company Performance
Cracker Barrel demonstrated a mixed performance in its latest earnings report. The company saw a 2.6% year-over-year increase in total revenue, driven by a 3.4% rise in restaurant revenues. However, retail revenues saw a slight decline of 0.8%. The company outperformed the casual dining industry by 290 basis points, with particularly strong results in the Northeast and Midwest regions.
Financial Highlights
- Total revenue: $845.1 million, up 2.6% year-over-year
- Restaurant revenues: $683.3 million, up 3.4%
- Retail revenues: $161.8 million, down 0.8%
- Adjusted EBITDA: $45.8 million (5.4% of total revenue)
- GAAP EPS: $0.22; Adjusted EPS: $0.45
Earnings vs. Forecast
Cracker Barrel reported an EPS of $0.98, missing the forecasted $1.14 by approximately 14%. This shortfall contrasts with the company's historical trend of meeting or exceeding expectations, suggesting this miss could be significant compared to previous quarters.
Market Reaction
Despite the EPS miss, Cracker Barrel's stock rose by 2.74% in pre-market trading to $41.56. This increase suggests that investors remain optimistic about the company's future prospects. The stock is currently trading within its 52-week range, with a high of $83.52 and a low of $34.88, indicating room for potential growth.
Company Outlook
Looking ahead, Cracker Barrel views fiscal 2025 as an investment year, with plans to generate total revenue between $3.4 billion and $3.5 billion. The company anticipates a pricing increase of approximately 5% and expects to open two new Cracker Barrel stores along with three to four Maple Street units. Commodity inflation is projected at 2-3%.
Executive Commentary
"Our fiscal year is off to a very good start," said CEO Julie Masino, highlighting the company's positive momentum. CFO Craig Fumils emphasized the strategic focus on fiscal 2025 as an investment year, while Masino noted, "Value for us is about absolute price, abundance, and loyalty."
Q&A
During the earnings call, analysts inquired about Thanksgiving week performance and the impact of the loyalty program on sales and traffic. The company's remodel strategy and pricing methodologies were also discussed, providing insights into Cracker Barrel's strategic initiatives.
Risks and Challenges
- Supply chain disruptions could affect product availability.
- Retail sector headwinds may continue to impact sales.
- Commodity inflation could pressure margins.
- Market saturation in the casual dining sector poses a challenge.
- Economic downturns may affect consumer spending.
Cracker Barrel's latest earnings report reveals a complex picture, with missed EPS expectations but positive revenue growth and stock performance. The company remains focused on strategic investments and value-driven initiatives to navigate potential challenges in the coming year.
Full transcript - Cracker Barrel Old Country Store (CBRL) Q1 2025:
Conference Operator: Please note this event is being recorded. I would now like to turn the conference over to Adam Hanon, Director of Investor Relations.
Please go ahead.
Adam Hanon, Director of Investor Relations, Cracker Barrel: Thank you. Good morning, and welcome to Cracker Barrel's Q1 fiscal 2025 conference call and webcast. This morning, we issued a press release announcing our Q1 results. In this press release and on this call, we will refer to non GAAP financial measures such as adjusted EBITDA for the Q1 ended November 1, 2024. Please refer to the footnotes in our press release for further details about these metrics.
The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non GAAP information to the GAAP financials. On the call with me this morning are Cracker Barrel's President and CEO, Julie Masino and Senior Vice President and CFO, Craig Fumils. Julie and Craig will provide a review of the business, financials and outlook.
We will then open up the call for questions. On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward looking statements, which involve risks and uncertainties that in many cases are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnish to the SEC.
Finally, the information shared on this call is valid as of today's date, and the company undertakes no obligation to update it except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Julie Messina. Julie?
Julie Masino/Messina, President and CEO, Cracker Barrel: Good morning and thank you for joining us. We were very pleased with our Q1 results, which underscore the fact that our entire organization is aligned and executing against our 3 imperatives: driving market share, delivering food and experiences guests love and growing profitability. Let's review some highlights from the quarter. We delivered positive comparable store sales for the 2nd consecutive quarter, driven by improved traffic and strong average check growth. And we're proud that comparable store sales performance also And we're proud that comparable store sales performance also outperformed the black box casual dining industry by 2.90 basis points.
Digging deeper, we continue to see improved traffic trends in the important dinner daypart. In fact, we've delivered sequential improvements in dinner traffic over the past 4 quarters. New menu items such as the hash brown casserole, shepherd's pie and pot roast are resonating with guests. Our optimized pricing initiative is delivering strong flow through. We're driving improved value perception scores and improved key operational metrics.
Notably, hourly turnover improved by 17 percentage points. Cracker Barrel Rewards is delivering incremental sales and traffic. And finally, our 4 pilot remodel stores are collectively experiencing a sales and traffic lift and we are encouraged by the early results in our 1st remodel market in Indianapolis. This progress is evidence of strong operational execution by our team. I want to remind you all that this is really the Q1 of executing the new plan after months of evaluation and planning.
Given that fact, we are excited about the quarters and years ahead, and I want to assure you that we are intensely focused on profitable growth and long term value creation. Our transformation plan consists of 5 pillars as many of you know. 1, refining the brand 2, enhancing the menu 3, evolving the store and guest experience 4, winning in digital and off premise and 5, elevating the employee experience. We're making progress on all of them, but today my remarks will largely focus on pillar 2, enhancing the menu and pillar 3, evolving the store and guest experience. Pillar 2 is enhancing the menu, which is all about making it more craveable for guests and easier to execute for our teams.
This pillar also includes optimizing our pricing while maintaining our strong value proposition. Our Q1 menu promotion featured a new hash brown casserole Shepherd's pie, which was wildly popular, as well as our new fried apple French toast bake. Our November menu promotion featured our seasonal guest favorite, country fried turkey, and a new cinnamon swirl French toast breakfast, and we are excited about the additional innovation that's in our pipeline. We remain focused on strengthening our value proposition through our barbell pricing strategy and continue to highlight exceptional value offerings such as our Sunrise Pancake Special for 7.99 dollars and our early dinner deals starting at $8.99 In Q1, we augmented our daily dish menu by adding several new daily specials such as our sweet and tangy southern barbecue ribs, creamy and savory chicken and rice and our delicious low braised pot roast. The pot roast has been particularly successful.
And as a result, we listen to our guests and have now made it available every day. And on the premium end of our barbell, our New York strip offerings continue to resonate. We've been pleased with the performance of our new menu items. In fact, in some cases, such as the Shepherd's Pie and Pot roast, they've been so popular with guests, we've had to source additional product to meet the high demand. This menu innovation has contributed to the improvement in our traffic trends, particularly at the dinner daypart.
In fact, our Q1 dinner traffic improved over 600 basis points compared to the prior year quarter and 200 basis points compared to Q4. Dinner will be a key driver for our overall success and although early, we're making progress. Another way we're enhancing our menu is through our back of house optimization initiative to drive efficiencies that improve profitability while making jobs easier and more enjoyable. This is a multiyear initiative that will be completed in several phases. The first phase is focused on process improvement.
And one way we are doing this is through a just in time approach for certain items to more efficiently use labor, reduce waste and importantly improve product quality. We are encouraged by the results of the test in approximately 20 stores in Q1 and are expanding it to a full region in the coming weeks. In Q3, we plan to launch the 1st phase to the system. We're also enhancing our menu through our price optimization initiative. As we've discussed, our refined pricing methodology is based on criteria including consumer willingness to pay, competitor pricing and store operating costs.
We've been pleased with the results as we continue to see strong flow through while simultaneously driving improved value scores. Turning to Pillar 3, evolving the guest experience encompasses several things. 1st, operational execution 2nd, store design and atmosphere and 3rd, retail. With regard to operational execution, we continue to see progress across key operating metrics such as guest satisfaction, hourly turnover, average server and Grille Cook skill level, speed metrics and off premise missing itemry. I want to give a shout out to our teams for their tireless work and strong execution during Thanksgiving week.
Your efforts created a great holiday experience for millions of guests and helped deliver an important week for the business. Store design and atmosphere are critical to the guest experience and to position us to win in the near and long term. And our remodel program is an important way we are addressing these. To reiterate an important point I've made previously, fiscal year 2025 is a test and learn year for remodels. We are working to understand which remodel packages resonate the most with guests and drive the strongest returns.
These learnings will inform our plans and spend in the subsequent years. We continue to see a collective lift in sales and traffic in the 4 pilot stores that were updated in fiscal year 2024. So far in fiscal year 2025, we've remodeled another 19 stores and completed 12 refreshes. This includes the 12 stores we updated as part of our first market test in Indianapolis, the majority of which are refreshes. We're also incorporating other new elements including new menu items and a new employee dress code.
We're encouraged by the early results and later this week we will be turning on local marketing to further raise awareness. For the full year, we continue to expect 25 to 30 remodels with approximately half of these being the low version. We also continue to expect 25 to 30 refreshes in 2025. In retail, we're leaning into our seasonal themes. Our Harvest collection performed well and we're encouraged by the performance of Christmas themes and are looking forward to perennial favorite collections that are about to hit the floor.
As we've discussed, our retail business as well as the broader retail industry has faced headwinds. However, it remains a huge differentiator for our brand and we believe there is meaningful opportunity to unlock profitable growth. To achieve this, we've been conducting extensive research and are in the process of revamping our retail strategy. We're in the early stages and look forward to sharing more in the future. In closing, our fiscal year is off to a very good start.
Our initiatives are gaining traction and we're focused on sustaining this momentum. Before turning it over to Craig, I want to thank our shareholders for their constructive engagement over the past few months and for their support for our strategic transformation plan. We are grateful for the trust they have placed in our directors and management and we remain accountable and are confident we are on the right path to return Cracker Barrel to growth and meaningful value creation for all shareholders.
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Thank you, Julie, and good morning, everyone. As Julie noted, we're gaining momentum and while still early are on track for delivering our 3 year strategic transformation plan. In Q1, there are a few moving pieces that I will touch on. But overall, we are pleased with our underlying operational performance and results were in line with our expectations. We reported total revenue of $845,100,000 which was up 2.6% from the prior year quarter.
Restaurant revenues increased 3.4% to $683,300,000 and retail revenues decreased 0.8% to $161,800,000 Comparable store restaurant sales increased 2.9% over the prior year. Pricing was approximately 4.7%. Our quarterly pricing consisted of approximately 2.8% carry forward pricing from fiscal 2024 and 1.9% new pricing from fiscal 2025. Additionally, our Q1 sales results also benefited from a timing shift related to gift card breakage of approximately $6,000,000 This time and favorability, which also benefits EBITDA by the same amount will mostly be offset in Q2. Off premise sales were approximately 18.4% of restaurant sales.
Comparable store retail sales decreased 1.6% compared to the Q1 of the prior year. Our decor and toys categories saw the largest declines, partially offset by increases in our kitchen food and bed and bath categories. Although retail sales were soft, we were pleased with how the team effectively managed inventory levels, which were below prior year. Moving on to our Q1 expenses. Total cost of goods sold in the quarter was 30.6% of total revenue versus 31% in the prior year quarter.
Restaurant cost of goods sold in the Q1 was 26.1 percent of restaurant sales versus 26.2% in the prior year quarter. This 10 basis point decrease was primarily driven by menu pricing. Commodity inflation was approximately 1.9%, driven principally by higher dairy, beef and pork prices, partially offset by lower poultry, oil and produce prices. 1st quarter retail cost of goods sold was 49.7 percent of retail sales versus 50.4% in the prior year quarter. This 70 basis point decrease was primarily driven by higher vendor allowances and higher initial margin.
Our inventories at quarter end were $201,900,000 compared to $207,300,000 in the prior year. With regard to labor costs, our 1st quarter labor and related expenses were 36.4 percent of revenue. Compared to the prior year quarter, labor and related expenses decreased 60 basis points, primarily driven by menu pricing and improved productivity, partially offset by wage inflation of approximately 3% and an approximately $2,000,000 increase in our workers' compensation expense reserves following an update of the actuarial assumptions used to calculate these reserves. Other operating expenses were 25% of revenue. Compared to the prior quarter, other operating expenses increased 30 basis points, primarily driven by higher depreciation and approximately $2,000,000 increase in general liability expenses following an update of the actuarial assumptions used to calculate these reserves and approximately $1,000,000 in expenses related to our District Manager Conference, which we held in person for the first time since the pandemic.
Additionally, I want to note that total store operating expenses also include an approximately $1,000,000 unfavorable impact related to the hurricanes. Adjusted general and administrative expenses in the Q1 were 6.3 percent of revenue. Compared to the prior quarter, adjusted G and A increased 90 basis points, primarily due to investments related to our strategic transformation, more normalized incentive compensation and approximately $3,300,000 in legal settlement expenses. As a reminder, our adjusted G and A expenses exclude professional fees related to our strategic transformation initiatives and expenses related to our proxy contest. Before moving on and given the moving pieces, I want to provide a quick recap of the atypical items I called out, all of which are included in both our GAAP and adjusted results.
On the expense side, there were 4 of these items that I mentioned. First, we increased our workers' compensation and general liability reserves by approximately $2,000,000 each for a total of $4,000,000 These increases flowed from changes to actuarial calculations associated with these reserves. 2nd, we recognized a charge to G and A of $3,300,000 in connection with an advantageous settlement of a series of wage and hour arbitrations that occurred in early November. 3rd, we saw a $1,000,000 expense impact from the hurricanes. And finally, we incurred approximately $1,000,000 in expenses related to our District Managers Conference.
These negatives were partially offset by $6,000,000 in favorability resulting from a timing shift of gift card breakage. Although this breakage favorability will be largely offset in Q2. I hope that provides some clarity around what we believe was a successful operational quarter. Moving on to net interest expense for the quarter, which was $5,800,000 compared to net interest expense of $4,900,000 in the prior quarter. This increase was primarily the result of higher debt levels.
Our GAAP income taxes were a $3,600,000 credit flowing from GAAP earnings before taxes. Adjusted taxes were a $2,000,000 credit. 1st quarter GAAP earnings per diluted share were $0.22 and adjusted earnings per diluted share were $0.45 In the Q1, adjusted EBITDA was $45,800,000 or 5.4 percent of total revenue compared to $43,900,000 or 5.3 percent of total revenue in the prior year quarter. Now turning to our balance sheet. We continue to have a strong balance sheet that provides flexibility and allows us to invest in the business to drive profitable growth and long term value creation.
In the Q1, we invested $38,900,000 in capital expenditures. We ended the quarter with $527,000,000 in total debt. Lastly, as announced in today's press release, the Board declared a quarterly dividend of $0.25 per share payable on February 12, 2025 to shareholders of record on January 17, 2025. Before providing our outlook, I want to comment on Q2. First, we were pleased with our Thanksgiving week results, which were in line with our expectations.
This is an important week given the high volume and I'm so proud how our teams executed to deliver against our plans. 2nd, as noted earlier, we expect a headwind in Q2 related to the timing shift of gift card breakage as the $6,000,000 EBITDA favorability we experienced in Q1 will largely be offset by unfavorability in Q2. Now turning to our fiscal 2025 outlook. I want to remind everyone that we view fiscal 2025 as an investment year as many of our initiatives are in the early stages and we anticipate our financial results will significantly improve by the second half of FY twenty twenty six and further accelerate into FY twenty twenty seven. For FY twenty twenty five, we reaffirmed our outlook and continue to expect the following.
Total revenue of $3,400,000,000 to $3,500,000,000 pricing of approximately 5%, the opening of 2 new Cracker Barrel stores and 3 to 4 new Maple Street units commodity inflation of 2% to 3% and hourly restaurant wage inflation of 3% to 4%. As a reminder, we expect our adjusted G and A expenses will be elevated in fiscal 2025, both in dollars and as a percent of sales, primarily due to investments related to our strategic transformation initiatives as well as more normalized incentive compensation. However, we expect that G and A as a percent of sales will begin to normalize as our financial performance improves in the second half of FY twenty twenty six and into FY twenty twenty seven. Taking all of the above into account, we continue to anticipate full year adjusted EBITDA of approximately $200,000,000 to $215,000,000 I want to remind everyone that this excludes consulting fees related to our strategic transformation, which we expect will be approximately $5,000,000 to $10,000,000 as well as approximately $8,000,000 in expenses related to our proxy contest. Regarding interest expense, based on current market conditions, we expect that we will refinance our $300,000,000 convertible debt later this fiscal year.
Given the current rate environment, we expect that the coupon rate on our new debt instrument will be meaningfully higher than our existing coupon rates of 0.625%. And as a result, we expect our interest expense will increase following this transaction. We expect a full year GAAP effective tax rate of negative 7% to negative 11% and an adjusted effective tax rate of 0% to negative 4%. We anticipate capital expenditures of $160,000,000 to $180,000,000 In closing, our fiscal year is off to a good start and our transformation plan remains on track. Our teams are executing at a high level and we're focused on sustaining this momentum to deliver on our commitments.
With that, I'll now turn the call over to the operator for questions.
Conference Operator: Thank Our first question today will come from Dennis Geiger of UBS. Please go ahead.
Dennis Geiger, Analyst, UBS: Great. Thanks guys and appreciate all the color as well as the detail or some of the color on Thanksgiving. Craig, wondering if you could talk a little bit more about that 2Q to date period maybe and what you're seeing, if you're seeing overall continuation of that momentum? I know Thanksgiving is a big part of that, but just any additional color on the most recent quarter to date period?
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Hi, Dennis. Thank you. Yes, Thanksgiving as you know is a very important week for us. We have our big heat and serve business that we do during the Thanksgiving week. Overall, we're pleased with the way that Q2 has gone so far.
As a little bit of a reminder, if you think back to last year in our Q2 call then, we actually set a number of records for Thanksgiving week last year. But as we reflected in that and did the diagnostics, a couple of things came out of that. Number 1, the guest experience wasn't exactly where we wanted it to be. Number 2, the employee experience wasn't where we wanted it to be either. And the flow through, the profitability of all of that wasn't where we wanted it to be.
So on the one hand, we're doing a tremendous amount of work to drive the top line record, but we didn't think that was a sustainable approach for the business. So the team did a lot of work there and made some significant changes that we have implemented this year. And we're really happy with how that's played out. In fact, this year we had a bit more of an emphasis on the dine in occasion and we're really happy with that. So all in all, a lot of moving pieces there, but we're happy with how it all came together.
Dennis Geiger, Analyst, UBS: That's great. Thank you. One more if I may. As it relates to the strength you saw in the Q1, it sounds like progress against a bunch of the strategic plans, including dinner. I want to touch on the loyalty piece and if there's just if there's anything more to share there, it sounds like you like what you're seeing from an incremental sales and traffic perspective.
Any more breakdown as far as frequency or kind of other benefits that you're seeing thus far from the program? Thank you.
Julie Masino/Messina, President and CEO, Cracker Barrel: Good morning, Dennis. Thanks for the question. We shared a lot about the loyalty program on the last call. So I'll just remind that we're at over 6,000,000 members. We are real pleased with the progress of the program.
These guests are coming more often. They're spending more with us and they have a higher check, the non members. What I will say is we continue to test and learn with this group and really think about how we use them to power the business going forward. And that's really exciting for us and for them because they really love Cracker Barrel. One of the big things that we learned in Q1 is their propensity to spend in retail.
And we did some testing around that with some offers with salt pepper shakers and discounts on retail and different things like that to really drive their occasion and their basket, all of which were incremental and exciting and we were able to flow them all through. So more to come there, Dennis, continues to be a bright spot in our journey that pillar 4 about winning with digital and loyalty and all of those experiences, continues to be a focus for us. So thanks for asking the question.
Dennis Geiger, Analyst, UBS: Thank you, Julie. Appreciate it.
Conference Operator: Our next question today will come from Brian Mullen (NASDAQ:MULN) of Piper Sandler. Please go ahead.
Brian Mullen, Analyst, Piper Sandler: Thank you. Just a question on your efficiency efforts in the back of the housework. As you continue with your test and then deploy some of the system wide in Q3, can you give some examples or some specifics around what areas of the P and L you think will start to see some benefits as you get this deployed?
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Hi, Brian. It's Craig. I'll start and Julie can jump in. The initial stages are primarily going to be about our own labor. We expect that we will see improvements in labor productivity coming out of the kitchen.
But we also expect from a job satisfaction perspective, we expect it to be a better experience for employees because it will be easier. So primarily labor, maybe a little bit of waste and then an improved employee experience. It's a part of a multiyear journey. So we laid out in a 3 year plan $50,000,000 to $60,000,000 in kind of structural cost savings. And this is kind of the very, very early stages of that.
So much more to come over the 3 years.
Brian Mullen, Analyst, Piper Sandler: Okay. Thank you. And then just a question on the retail business. I guess one just talk about your outlook for the upcoming holiday season. Anything you could offer on the consumer in a realistic way to think about the top line there would be helpful just given how important the 2Q is from a seasonal perspective.
And separate from that, the gross margins looked really good in the first quarter. I'm just wondering how we should be thinking about the retail gross margins from a full year perspective?
Julie Masino/Messina, President and CEO, Cracker Barrel: Sure. I'll start and then Craig can jump in. Look, we're real pleased with how the team is managing the retail business. As you know, the industry is facing a lot of headwinds. It's a tough business out there.
It's super discretionary when people are feeling pinched in their wallet. This is really a place that they do cut back. But for us at Cracker Barrel, it's such a key differentiator. It makes our experience so wonderful. You could just start and finish your Cracker Barrel journey in the retail shop.
So again, real pleased with how the team's managed inventory levels. You probably heard from Craig's prepared remarks, inventory levels are down, margins are up. We feel good about where we are right now. We did a new promotion in storage. You may have seen it.
It kicked off on Black Friday. We're calling it seasons of savings, runs for 10 days, so into next week, where we're highlighting great gifts at key price points. Now we always have our great gifts assortment this time of year, but this is even a plus up on that. We're really getting behind it with some social marketing and things like that. So you're probably seeing a little bit more of it.
Early stats as it's resonating with guests, we're excited about it. It gives the associates something to talk about as well in stores. So we're feeling good about the holidays. Now remember, there's fewer shopping days as a result of leap year and the late Thanksgiving. But given our inventory position and margin position, we feel like we are poised to really take advantage of that.
Plus, we get that extra weekend before Christmas. So we're we think we're poised well to capture the last minute shoppers. We know all you men wait until the last minute. So we're here for you at Cracker Barrel.
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: That's right, Julie. We do always for the last time. As it relates to retail margins, we were a bit ahead in Q1. However, the environment from a brick and mortar retail perspective does remain challenged. So we expect across the full year that retail margins will be a bit unfavorable.
It's a little bit unfavorable across the full year. Thank you both. Okay.
Conference Operator: And our next question today will come from Jake Bartlett of Truist Securities. Please go ahead.
Jake Bartlett, Analyst, Truist Securities: Great. Thank you so much for taking the questions. My first is, I wanted to dig into some of these more atypical items and make sure I understand what's going on. For the gift card breakage, I was just looking quickly last 2 first quarters, it was a positive. So this seems to be something that is a positive in the 1st quarters in general and maybe just kind of confirm that.
The $6,000,000 does that contribute, I mean my math would be that slightly less than 1% on same store sales for the restaurant side. Just want to make sure that gift card breakage gets reflected in same store sales. And then I had some follow-up questions on the other side.
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Well, let's start on the gift card. The same store sales as reported do not are not impacted by the $6,000,000 So the same store sales as reported are really driven by kind of store level activity. The $6,000,000 gift card breakage benefit is something that we hold at the corporate level. So as you think about kind of what's really happening to the run rate for the stores, that's not a factor. It's certainly a factor in overall total company sales and it's a factor in EBITDA for the quarter.
And as we noted, that is largely a timing impact as most of that is going to be offset in Q2.
Jake Bartlett, Analyst, Truist Securities: Got it. Okay. That makes a lot of sense and that's helpful. On the other side, I think there's about $9,000,000 in atypical costs that you mentioned. It doesn't look like any of those costs are kind of being added back to adjusted results.
So those are flowing completely through to your adjusted results. So I guess the net impact is a drag on EBITDA. While you have the $6,000,000 benefit from the gift card breakage, there's $9,000,000 of a headwind. Is that the right way to think about it? Or am I getting that right that none of that $9,000,000 was actually
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: okay. Yes. Headwind is about $9,300,000 and all of those are included as normal operating costs in our adjusted EBITDA and as is with all the costs are included in GAAP numbers, so that are included in both. And there was a partial offset in the quarter of the $6,000,000 So it's a net negative or net drag to EBITDA of about $3,000,000 $3,300,000 when you factor in all of those.
Jake Bartlett, Analyst, Truist Securities: Got it. And just to kind of close the loop on these atypical items. In the Q2, the $6,000,000 should reverse from the benefit side, but anything reversing out on the cost side? So are there any offsets to the what looks to be a $6,000,000 drag in the Q2 for EBITDA?
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: We are not aware of anything at this time, no. So at this point, the $6,000,000 will be a drag to Q2 and we don't expect any other partial offsets. Certainly nothing from any of the items that we mentioned earlier.
Jake Bartlett, Analyst, Truist Securities: Okay. So net net, you kept your EBITDA guidance, but there's a $3,000,000 headwind that you hadn't expected in the Q1.
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Exactly right. I think that's the right takeaway from all of that. Appreciate it.
Jake Bartlett, Analyst, Truist Securities: Great, great. And then just one question
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: on
Jake Bartlett, Analyst, Truist Securities: the operations. And it's on your remodel program. I guess I'm a little confused with some of the terminology. I just want to make sure I get it right. I'm looking at the last quarter's earnings call and you talked about the 3 kind of high, medium, low options and then you've developed a 4th option which you're calling a refresh.
Now it seems like you're referring to kind of refreshes separately from the 4 different tiers of remodel. So I just want to make sure I understand the difference between a refresh as you're calling it now and the 4 tiers of remodels that you're testing. And I'm also wondering if there's anything more you can share about the relative performance of each. It sounded like one of my takeaways from the last call is that the refresh or the less intense remodel was actually having a really good result and that might end up driving maybe a lower cost of the program overall. I guess my question is whether is that bearing out that you're finding that maybe some of the lighter investments is actually driving the most attractive returns?
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Well, let me talk about the number of stores, because I agree that it is it can get a little confusing. The high, medium and low are the traditional kind of remodels. There are about 25 to 3 of those in the plan for this fiscal year. That's in our current projection. The refresh are an incremental over and above 25 to 30.
So both the high, medium, low as a group are 25 to 30 and refresh or an incremental over and above 25 to 30. And then in terms of performance, I think the key takeaway here is 2025 for us really is a test and learn year and we've structured a lot of this investment to really understand the economics and the highest level of efficacy of the spend around the program. And we really are not biased to an answer one way or another. The facts are going to kind of drive the decision. Now, no one wants to spend more if you don't have to spend more and so on.
We're excited about the performance from the initial 4, but that's only 4. We have 25 to 30 of high, medium, low and incremental 25 to 30 for the infills. When it's all said and done, it would likely be a combination of those. And we're working through understanding the math to determine what the right combination is. And if it ends up being lower, then we'll lean lower.
But if it ends up being higher, we'll lean higher. Really, the math is going to have to drive the return on the investments, exceeding the appropriate hurdle rates set by the board is going to drive what the final answer is there.
Jake Bartlett, Analyst, Truist Securities: All right. Thank you very much. Appreciate it.
Conference Operator: Our next question will come from Andrew Wolf of CL King. Please go ahead.
Andrew Wolf, Analyst, CL King: Hi. Thank you. I actually have a follow-up on the $6,000,000 as well on the breakage. If you take that out of sales and flow it through, you get to about a flat margin year over year on restaurant level Or were any of the $9,300,000 costs, Craig, that you called out, were any of those would any of those be in the restaurant level expenses or were they all in G and A?
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: I'm trying to With the exception of $3,300,000 all of it was at the restaurant level. So effectively, dollars 3,300,000 was in G and A and $6,000,000 was at restaurant level. So those two restaurant level pieces effectively offset each other.
Andrew Wolf, Analyst, CL King: Okay. Okay. That's what I was getting at. Great. All right.
Billy, you I want to get to the restaurants. On the menu, when you're talking about menu items, you talked about some new items and some LTOs and an LTO that might become a new item. I just wanted to get a sense, it sounds like there's a it's going quite well and there's good guest reception. Is that because the company is taking kind of more shots on goals or is it there's something like improved in the innovation process so that you're putting better items on the menu that are resonating better?
Kathryn Griffin, Analyst, Bank of America (NYSE:BAC): That's a great question, Andrew.
Julie Masino/Messina, President and CEO, Cracker Barrel: I would say it's probably a little bit of both in all honesty. So in this last year when we were building the plan, we spent a lot of time talking to our guests, talking to our team members and really digging into what will help Cracker Barrel regain its leadership position and what people love about Cracker Barrel, right? People love our scratch made home style cooking. And so things like the hash brown casserole shepherd's pie are so in our sweet spot. It's something that only Cracker Barrel could make, right.
It builds on our signature hash brown casserole. It introduces something that's comforting, that's really warming and luscious like the shepherd's pie and similarly with our pot roast
Conference Operator: as well. So we're
Julie Masino/Messina, President and CEO, Cracker Barrel: I'm sorry, do you hear that feedback? I want to make sure I'm clear.
Andrew Wolf, Analyst, CL King: Just for for your last sentence, was it?
Julie Masino/Messina, President and CEO, Cracker Barrel: Okay. So these items are uniquely Cracker Barrel, and they are and our guests are loving them, right? So like I said in my prepared remarks, we hadn't planned for pot roast to be an everyday item, but people loved it so much. I mean, we literally ran out of it. And they said, gosh, our team members said, you really need to put this on the menu every day.
I could sell this every day if it were on the menu every day. So we really listen to our guests, listen to our team members, move to that item through. But I will tell you the pipeline to the second part of your question is more full. The team, the culinary teams got a new leader over there. They are working really hard to find those items that are signature Cracker Barrel, things that only we can do that are really going to resonate with guests as we invite more people into the brand.
We're also opening that aperture, widening, our appeal and making sure that the people who love us continue to love us, but that we're inviting more people in and letting them know that Cracker Barrel is here for them and a really great option for them for breakfast, lunch or dinner every day.
Andrew Wolf, Analyst, CL King: Okay. I was going to get to that second part, but you kind of answered. So some of the innovation is to drive trial and some of it's to maybe increase repeat business?
Julie Masino/Messina, President and CEO, Cracker Barrel: Yes. All of the above, right. And we've got innovation across the day part. As I mentioned on the prepared remarks, we brought back our country fried turkey for Q2 and that's actually sold so well that we're out of that early again. So we're really driving some business in these LTOs.
But then we introduced a new item, the Cinnamon Swirl French Toast (NYSE:TOST), which has also been a great item. So it's a little bit of both, Andrew, honestly, as we really try to drive the business with people who love us, invite new people in and really just return Cracker Barrel to strength.
Andrew Wolf, Analyst, CL King: And just the last thing, I mean, on new items, driving new traffic, new customers, trial, probably not intentionally, but you didn't get too much in what's new with marketing in this period, although you did you were asked about the loyalty. But I think you have a new agency and also on. Would it be fair to say you might want to skew more towards increased usage by existing customers until your marketing is more ramped up? Or can you can the menu speak for itself and word-of-mouth and that kind of thing?
Julie Masino/Messina, President and CEO, Cracker Barrel: No, we continue to evaluate our marketing mix. We've a brand new CMO who is about 2 quarters in at this point in time. She's off to a great start and her team is rocking and rolling. They are continuing to look at ways to reach our guests. Remember the first pillar of our transformation is about the brand and refining that and how we show up for our guests, how we communicate with them.
If you follow us on socials and some of those places, you'll see us starting to show up in some different ways. So they continue to refine the mix, the messaging, because it's not just where you're saying it, but it's also what you're saying and who you're saying it to. So we can get even more targeted than we are today. Loyalty helps us do that as well. So it's bringing all of those things together with the menu, with the experience in ways that people want to experience the brand.
Remember, that's really that second imperative when you step back and think about it, our imperatives are about driving relevancy, which is market share, driving that food and experience that guests love and driving profitability. And those first two really work together to say, how do we communicate with people the way they want to be communicated, give them the experience that they want. That's literally through the communication cycle as well as the in store experience or the to go experience or the catering experience and really make sure that we're delivering on all pieces of that. So it's marketing, it's also the way that we show up in store and the way that we operate. They all have to come together to really drive that business.
Andrew Wolf, Analyst, CL King: Got it. Thanks and congratulations on the progress so far.
Julie Masino/Messina, President and CEO, Cracker Barrel: Thanks, Andrew.
Conference Operator: Our next question will come from Todd Brooks of The Benchmark Company. Please go ahead.
Todd Brooks, Analyst, Benchmark Company: Hey, good morning to you all. Quick question. Julie, you mentioned in your comments that you saw strong average check growth in the quarter. Can you share the magnitude of check growth with us?
Julie Masino/Messina, President and CEO, Cracker Barrel: Yes. I actually am going to let Craig take that one. He loves talking about check, Todd.
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Yes. I'll start, Todd. Overall check was up 5.8% for the quarter. So 4.7% of that was from price and then we had favorable mix of 1.1%. And let me kind of unpack that a little bit.
Keep in mind, we've been taking the strategic pricing effort. So one concern there is how does that flow through? Well, the good news is the strategic pricing is flowing through really well. We're seeing that across a number of metrics and we're getting this favorable mix. The favorable mix in a lot of ways is coming from this effort around dinner.
It's one of the first things that Julie did when she started. You kind of diagnose what's going on with the business? Why has the traffic been down so much? And we actually performed relatively well, fairly well at breakfast, but we had lost a lot of share at dinner. And so that was the first stream of work.
We kicked off this really big test and then we have rolled out a number of those components. One of the benefits there is we're seeing favorable mix just as dinner as a whole improves because it's a higher check, higher margin occasion and a number of the items that we've added have been kind of the higher end of the barbell. And so that's helped to drive some favorable check mix as well.
Todd Brooks, Analyst, Benchmark Company: That's great. That's really encouraging. And then knowing that Sunrise is out there at $7.99 and EarlyDine at $8.99 would you share with us what the value mix is? How many what percent of customers are accessing through those two platforms to drive their visit to Cracker Barrel?
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: No, it's interesting. We actually we look at it, but we don't really look at it that way because so much of our menu is just a great value overall. I mean, keep in mind, we have the numbers moved a little bit as the quarter has passed, but towards almost recent check average is about $15 at Cracker Barrel. And casual dine in, I believe is somewhere in the $27 range. So whereas a lot of folks have just really a much more dramatic barbell.
So they talk about what their mix is on discounts. So much of our menu is a great price every day. It just wouldn't be, it wouldn't be meaningful. What I can tell you is the Early Dine continues to grow. It stabilized a bit more recently, but it's grown a lot over the quarters.
And the Sunrise is available. It's not only it's a breakfast item, but it's available all day. So overall, we continue to be really happy. We are not getting any meaningful negatives from the work that we have done on the check.
Julie Masino/Messina, President and CEO, Cracker Barrel: I would say, Todd, 2 things. That's really well said by Craig, but 2 other things to point out on value. Remember, we've done a lot of work with our guests. And while price is important, right, anybody will tell you price is important. What they've actually said to us is that the absolute price is not the most important thing to them.
They actually care about abundance of our home cooked food, right? So we're making sure that in everything that we put forward that that is a key component of what we do. That's one reason why I believe the pot roast and the hash brown casserole pie are resonating so much. I challenge you. I challenge everybody that's, go try to eat that whole hash brown casserole shepherd's pie.
It's ginormous. And so people really see the value in that. I see so many people when I'm out in restaurant leave with a to go box of food for the next day or the next meal or lunch or whatever. So we value for us is about it is about the absolute price, but it's also about that abundance. The second thing I'd point out is remember we also deliver value through our loyalty program.
And as we continue to sign up new people and really drive traffic through that program, that's another way that we deliver value. So we deliver value in so many ways here at Cracker Barrel. Craig's point about our absolute check is a really important one to keep in mind, but then add in abundance, add in loyalty and we really, I think are there for our guests in a lot of really very real ways.
Todd Brooks, Analyst, Benchmark Company: Those are all very germane points. And I probably should have asked the question this way. It might be the way that you guys really do look at this. You talked about value scores improving with your customers. Would you share with us how much value scores have improved year over year?
That might be the holistic way to look at all these efforts together. Thanks.
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Well, let us take that as a follow-up, Todd, because we've actually changed our we have a full year of our new value metric, but I don't know that we're fully prepared to share the exact amount externally as yet. We look at our Google (NASDAQ:GOOGL) ratings as a way to evaluate the overall guest satisfaction inclusive of value. We also have a really great tool internally that we get a lot of participation and then we've seen value scores improve as well. However, we have not shared that externally as yet. So we want to make sure we do that in a more comprehensive way.
Todd Brooks, Analyst, Benchmark Company: Okay, great. Thank you both.
Conference Operator: Our next question will come from Kathryn Griffin of Bank of America. Please go ahead.
Kathryn Griffin, Analyst, Bank of America: Hi, thank you. First, I wanted to ask about the quarter trends. In the Q1, the outperformance versus the casual dining industry, did you see that consistent in each month of the quarter? And then were there any callouts as far as maybe where outperformance was strong by region, or was it also consistent?
Craig Fumils, Senior Vice President and CFO, Cracker Barrel: Catherine, I'll start. From a regional perspective, relatively steady. We were a bit stronger in kind of the Northeast, Midwest and a bit softer in Texas, but other than that relatively steady. In terms of trends, you did see general improving trend in the industry over the past quarter or so. Our performance got a little bit better from August, but September, October was relatively steady between the 2.
So nothing dramatic there. What we are seeing is a kind of a gradual steady improving trend over time, particularly at dinner and we're very pleased with that.
Kathryn Griffin, Analyst, Bank of America: Okay. Thank you. That's helpful. And then, I wanted to ask, I guess, a follow-up to an earlier question just about the different, I guess, tiers of remodel and then refreshes. As you're a few months into the strategic turnaround, I'm curious if there are some initiatives that are resonating better than you had expected or maybe better than others.
And has that changed at all the way that you're thinking about the timing of or how you're allocating the investments into the turnaround? Thank you.
Julie Masino/Messina, President and CEO, Cracker Barrel: Thanks, Catherine. This is our first we shared this during some of the proxy meetings with our shareholders. This is really our Q1 reporting against the transformation plan. So it's an exciting time. It's also early.
So while we've progressed a lot of initiatives across the 5 pillars and even across the enablers at the bottom, I would say it's still really early days. What we're real proud of is a couple of the initiatives have moved out of what we call sort of transform and into run. When we think about the changes that we made to the Thanksgiving strategy that Craig talked about earlier in our overall catering business, those are now sort of run the business. When we think about pricing, that is now sort of run the business. That's a way that we are actually just ongoing.
It's not this transformation initiative anymore. So that's what we're real proud of when we think about kind of where we are in these early stages that some of these things are now just how we do business instead of these new transformation agendas. Loyalty is another one where we continue to just make that part of how we do business and how we're thinking about driving traffic and interacting with our guests and delivering value to them, as I mentioned earlier. So, it's still really early days. With your specific question about the remodels, excited about where we are there.
And I know everyone wants us to say, this is how many we're doing of the high, the medium and the low. We just want to be really good stewards of capital and make sure that we are getting the algorithm right and really understanding not only how guests are reacting to their models in terms of their traffic, but also how our team members are working in them and are there things that we can do to improve their experience. So it's really a year for us to continue to learn, and we're excited about that. So early days, Catherine. Thanks for the question, but good early results.
Conference Operator: Thank you. This concludes our question and answer session. I'd like to turn the conference back over to Jolie Messina for any closing remarks.
Julie Masino/Messina, President and CEO, Cracker Barrel: Thank you all for joining us today. Before closing, I want to take this wish everyone a happy holiday season and express my sincere appreciation to our 70,000 plus team members for their hard work and dedication day in and day out, particularly in these last few weeks over the Thanksgiving holiday. Your efforts and hard work are paying off and have supported a good start to our fiscal year. We look forward to providing updates on our progress on our next call. Thank you and happy holidays.
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