Good day, and welcome to the Cracker Barrel Fiscal 2021, fourth-quarter earnings call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jessica Haze, Senior Director Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Cracker Barrel's fourth-quarter fiscal 2021, conference call and webcast. This morning, we issued a press release announcing our fourth quarter and full-year results. In this press release, and on this call, we will refer to non-GAAP measures for the fourth quarter and 12 months, ended July 30th, 2021. The fourth quarter non-GAAP financial measures are adjusted to exclude the non-cash amortization of the asset recognized from the gains on our sale and leaseback transactions. Interest expense related to the termination of interest rate swaps, and the convertible senior notes offering carried out in the fourth quarter, and the related tax impacts. The full fiscal year non-GAAP financial measures are adjusted for the items listed above, as well as the gain on sale of assets from the sale and leaseback transaction that closed in the First quarter. Expenses related to the proxy contest in connection with the Company's 2020 annual meeting of shareholders and the related tax impacts of these items. The Company believes that excluding these impacts from its financial results provides 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 President and CEO, Sandy Cochran, Senior Vice President, and Interim CFO, Doug Couvillion, and Senior Vice President and CMO, Jen Tate. Sandy will begin with a review of the business, and Doug will review the financials and outlook. We will then open up the call for questions for Sandy, Doug, and Jen. On this call, statements may be made by the 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 certainties 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 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 will now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran. Sandy.

Thank you, Jessica. And good morning, everyone. We accomplished a lot in 2021, and I'm proud of how our teams navigated one of the most difficult years in the history of our Company and the industry as a whole. We entered the quarter on an upswing as the country cautiously reemerge from the pandemic. And we are poised to see sales and profitability continue to accelerate across our system through the end of our year. We were pleased that profitability continued to trend positively from the third quarter, the disappointed that the pace of sales recovery slowed below our expectations. As we shared on our previous earnings call, we're encouraged with the pace of sales recovery and our sequential monthly restaurant sales improvements through April. However, May sales were softer than we expected and unfortunately, this softness persisted through most of the fourth quarter. We are pleased, however, that both retail and Maple Street revenues exceeded our expectations, and helped to offset some of the restaurant declines. We believe there are a number of factors that contributed to our softer fourth quarter restaurant sales results, including a summer travel season that did not follow traditional patterns or our own robust expectations. The COVID resurgence, particularly in the areas where our stores are more heavily located, that impacted guest visitation patterns and our employees' ability to consistently work. A general consumer preference coming out of the pandemic for more celebratory, higher check occasions than we're known for, as well as industry-wide staffing, challenges to fully satisfy guest demand. Comment more about staffing shortly. Despite are softer than expected Dine-in sales Fourth Quarter retail sales once again exceeded our expectations with comparable retail sales, 18.2% above fiscal '19. Our merchants and our operations teams consistently managed our inventory and produced outstanding results,…

Thank you, Sandy. And good morning, everyone. For the fourth quarter, we reported total revenue of $784.4 million. Our restaurant revenue increased 54.8%, and our retail revenue increased 74.3% versus the prior year's fourth quarter. Air to the fourth quarter of fiscal 2019, comparable store restaurant sales decreased 6.8%, which was mostly offset by our stronger retail and our Maple Street Biscuit Company sales. We saw a return in guest demand during the fourth quarter, and our average weekly Dine-in sales increased from approximately $54,000 in April, to $59,000 in July. Our off-premise sales remain elevated in the fourth quarter, and we're more than double our sales from the fourth quarter of 2019. We retained approximately 75% of the peak off-premise growth from pre-COVID levels. As expected, we did experience modest declines in sales from our individual to-go channel compared to the third quarter as our core guests shifted back to in-store dining after having been limited to off-premise during the pandemic. Meanwhile, our third-party delivery and catering channels continue to grow sales throughout the quarter. As Sandy shared, our lower than anticipated store restaurant sales were the result of several factors, including disrupted travel patterns, consumer preference for more celebratory higher check options, the resurgence of the pandemic, and staffing headwinds. We felt these staffing challenges most acutely on the weekends, where we occasionally didn't have enough staff to service elevated guest counts, particularly in the breakfast and lunch dayparts. Happily, our sales during the week were stronger and weekday breakfast sales were positive compared to 2019, which was a favorable trend change compared to the pressured weekday breakfast results we experienced throughout the pandemic. Comparable store retail sales were above our expectations in the fourth quarter and increased 18.2% over 2019. Supporting these sales results were improvements in…

We will now begin the question-and-answer session. Our first question will come from Jake Bartlett with Truist Securities. Please go ahead.

Great. Thanks for taking the questions. On what you mentioned about the quarter-to-date same-store sales at the restaurant and retail. But restaurant in particular, it looks like a pretty significant improvement from what you're running in the fourth quarter. Yet, you've also described the COVID cases as being a pressure. Maybe if you could help us understand the cadence of same-store sales throughout the quarter, and then confirm whether you're seeing seasonally improved trends more recently versus as you exited the fourth quarter? That'd be helpful.

Sure. Thanks. Glad to help there, Jake. In terms of the cadence during the quarter, we saw slight improvement as we moved over the course of the summer. And coming out of the quarter into this year, we have seen the trend turn positive -- not positive, but improved from a same-store sales perspective. And we expect these trends to continue on through the end of the quarter.

Great. And do you have any sense of what's driving that improvement? Perhaps you are moving past this summer driving season, which had been a drag for you. Are you seeing any incremental improvement in those markets where the COVID cases have been, you've discerned it, an impact? What do you think is driving the improvement in quarter-to-date?

Jake, it's Sandy, I'll take that. I think the biggest single thing is we've made a lot of progress on getting staffed, and in those restaurants where we've been able to both get staffed and have had an opportunity to train new staff, I think, we're seeing that we are better able to take care of the guest demand when it comes. I do think that we're seeing in some communities some normalization of routines, as we've now gone back to the back-to-school session and so on. We're pleased that we've seen the improvement and are hopeful that we will see continued recovery as we head into the second quarter.

Great. And then you've described the cost pressures that you were expecting in inflation. Can you go into some of the potential offsets, for instance, what kind of pricing you expect to take in 2022? And also, touch on any cost-savings efforts. I think you've run through your last round of cost-cutting and cost savings. Is there any current program going on? Do you expect x million dollars of savings in 2022, for instance?

I'll ask Jen to jump in on pricing and Doug can add some more color. First of all, we always have a program. We've had a very consistent focus over the years on improving profitability and productivity through a variety of savings initiatives. We have not announced our most current objectives, specifically on this. But in addition to what we believe there's some pricing power, I think there's a number of tech-enabled initiatives that we've been talking about and continue to feel good about how they will improve our productivity and profitability. We've recently installed POS in all but about 160 stores in the chain. Those that are not installed, it's because we weren't able to get the hardware with the shortages going on. And as you know, from listening over the years, Jake, that that POS system we believe is been foundational to allowing us to implement tablets program with our servers, our food initiative, PC and food which we actually just installed a few days ago and about about half of our chain, as well as in the second half of the year, we hope to begin piloting a labor initiative, all of which will be supported with this new POS system. Payon app has been another initiative, which we've been excited about the impact that that could have on the labor demands in the store, as well as the work on the digital store and how that helps to streamline the experience, both for our customers and for our employees. There's a lot of cost of goods sold work being done, on both the restaurant side and the retail side, to offset the commodity pressures and the inflationary pressures on the retail side. So, I'm really pleased that we've got a lot of work going on to offset these and to improve the business model. In terms of specifically pricing, I'll let Jen speak to how we're looking at that subject now.

Great. Historically our approach to pricing has been pretty conservative as we've steadfastly guarded our strong competitive advantage as an everyday value leader. But right now, I think, both the consumer data and trends and also what's happening in our category, indicate to us that we have some considerable pricing power, both in recent months, but also, we think that's going to continue throughout this fiscal year. So, in the second half of FY '21, our pricing actions resulted in pricing of 3.1% in Q4. And this August, based on our continuing the inflationary pressures that Sandy and Doug spoke about and also industry dynamics, we took a more aggressive increase than we typically do in Q1. So that results in Q1 carried pricing of approximately 5.5%, which is more than we normally take, but we think is very appropriate given the current environment. And we think that we're going to be watching how that flows through, and we think we may have an opportunity to take additional pricing in January.

Great. So, 5.5% pricing in the first quarter of '22, just to be clear.

Yes.

Great. Thank you very much. I appreciate it.

Yes, that's the carried pricing. So that's a combination of the carryover from Q4, and what we took in Q1, which is approximately 3%.

Perfect, thanks.

Our next question will come from Brett Levy with MKM Partners. Please go ahead.

Great. Thank you. Appreciate taking the call. Going back to labor, you talked about your productivity and the challenges you're having in terms of finding and retaining people. Where are you right now in terms of staffing levels? How many stores do you think are what you would call pressured on that front? Where are you in terms of turnover? And then just on the supply chain, on the cog side, how are you looking at the ability to contract? What are you seeing on the supply chain side? Where are you seeing the greatest pressure points within both retail and restaurants?

All right. Brett, I'll start on the staffing, and then I'll let Doug take the commodities. First of all, our operators have made very impressive progress over the last couple of months, in particular, addressing the staffing challenges broadly, and in particular, those locations that we had identified as the most critical and as a result of a lot of grassroots efforts, we've reduced the number of critical, or concerning, stores to half of what it was as we entered into the fourth quarter. What we're really focused on now is, on-boarding all new employees that we have and getting them trained. So that we get the productivity that we both need and are looking for and can deliver the guest experience we need, to be sure we're focused on retention. To your point on turnover. It is elevated than what it's been historically at really both the hourly and the manager level, but it is still, we believe, below what the industry is, and I think we will be able to get that under control as we focus on that in the first and second quarter this year. And then, finally, just ensuring that we're staffed up to the volume that we're expecting and hoping to get, as we head into the second quarter. In particular, we feel really good about the back of the house, in terms of the grill cooks and positions like that. What we are very focused is, on ensuring we have the servers that we need.

Okay. On the supply chain front. I'll start with letting you know that, similar to the restaurant industry, a lot of, as far as we do business with, or having labor challenges as well, which largely affects processing costs, which in turn causes -- is causing some problems in terms of seller of our proteins. So, we're seeing cost pressures there and disruptions from time to time-related to some of our proteins. Nothing major that we're not able to deal with, but it's causing there to be just a lot more interaction between our teams and our suppliers. In terms of the areas where we're seeing the pressure, we -- one of the largest areas that we're experiencing cost inflation is in the area of fry oil, particularly the soybean markets are trading at rates that we haven't seen in many, many years, as well as within our pork category, bacon has been running quite high as well. On the retail side, we have similar pressures there. Those are more in terms of some of the shipping costs and container costs. As many of you probably seen in a lot of articles, you see ocean freight containers are up at time from 2% to 300% over contracted rates. And our teams are doing a really good job of managing our costs. We've been able to secure the majority of our containers so far at our contracted rates, which were slightly elevated over the prior year, but we're having to turn to the spot market to move some products, and that is putting a little bit of pressure on us. We believe that we can largely offset that through some pricing actions and through some of the success we've had with seeing rapid move through of our products and our new themes that are moving really well.

And just on the sales front, would you care to go into any more detail in terms of where you're seeing the greatest successes and challenges on a regional basis. And if -- I know you talked about impacted by COVID, and traffic, and transportation, visitations, and things of that, and staffing levels, but could you be a little bit more specific in terms of regions that you've seen strengths or weaknesses in the fourth quarter and the first quarter? Thank you.

I don't know that it's a regional story. We've got a number of our regions that are making really great progress in the recovery. Just probably a few communities in particular, as they deal with COVID resurgence or a store that may be as particularly tied to travel. Maybe international travel or a destination that might be disproportionately impacted. One of the things that you heard about; we're pleased with the performance we've seen at the breakfast daypart. And in the weekday breakfast in particular, which says, we've got a lot of our guests want to get back to normal. And so, it really is a state where many of our customers are just anxious to recover and get back to their routines. And in the other hand, we've got increased concern with the Delta variant, and we're just going to have to deal with that as it moves through in the next few months.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Sandy Cochran for any closing remarks.

Right. Thank you for joining us today. Cracker Barrel continues to be one of the strongest and most differentiated brands in the industry. Looking forward to the new fiscal year, we remain confident in our strategy and initiatives. And I believe we're well-positioned to drive strong performance when the industry normalizes. We appreciate your support and look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.