Good day. And welcome to the Cracker Barrel Fiscal 2024 Fourth Quarter Conference Call. All participants will be in a listen only mode [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead.

Thank you. Good morning. And welcome to Cracker Barrel's fourth quarter fiscal 2024 conference call and webcast. This morning, we issued a press release announcing our fourth quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the fourth quarter ended August 2, 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 page 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 Pommells. 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 Masino. Julie?

Good morning. And thank you for joining us. Today marks Cracker Barrel's 55th birthday. This incredible milestone is one that few concepts have achieved and is a testament to the enduring appeal of our brand and the hard work by so many since Danny Evins founded Cracker Barrel in 1969. Their efforts lay the foundation for the investments we are making for our future and we are grateful for the opportunity to build upon and continue this legacy. This morning, we were pleased to report total revenue and adjusted EBITDA consistent with our guidance. We remain focused on operational excellence day in and day out. Our multiyear strategic transformation journey is off to a great start. I'll touch more on each of these in a moment but there's a lot to be excited about. We've hired a new dynamic CMO and are making progress on refining the brand. Our new menu items are resonating with guests. Our optimized pricing initiative is delivering strong flow through and strong value perception scores. We're seeing a lift in traffic and sales in our remodeled pilot stores. Our loyalty program has 6 million users after just one year and is delivering incremental sales and traffic. And our teams are highly engaged in executing at a high level, which is reflected in key improvements in employee and guest metrics. All of these are highlights from our five strategic pillars: refining the brand, enhancing the menu, evolving the store and guest experience, winning in digital and off-premise and elevating the employee experience. I'll now dig into each one of these. Our first pillar is focused on evolving the brand and reflecting this in all the ways we interact with guests. We've partnered with a top tier agency and have conducted extensive qualitative and quantitative research that…

Thank you, Julie. And good morning, everyone. Today we reported total revenue of $894.4 million, which was up 6.9% from the prior year quarter. This increase was primarily driven by an additional $62.8 million of revenue from the 53rd week. Restaurant revenues were $731.3 million and retail revenues were $163.1 million. Comparable store restaurant sales increased 0.4% over the prior year. Pricing was approximately 4.2%. Our quarterly pricing consisted of approximately 0.2% carry forward pricing from fiscal 2023 and 4% new pricing from fiscal 2024. Off-premise sales were approximately 17.2% of restaurant sales. Comparable store retail sales decreased 4.2% compared to the fourth quarter of the prior year. We saw declines across most categories with food and decor seeing the largest declines. 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 fourth quarter expenses. Total cost of goods sold in the quarter was 30.4% of total revenue versus 30.8% in the prior year quarter. Restaurant cost of goods sold in the fourth quarter was 26% of restaurant sales versus 26.6% in the prior year quarter. This 60 basis point decrease was primarily driven by menu pricing. Commodity inflation was approximately 1.1%, driven principally by higher pork and beef prices, partially offset by lower oil and poultry prices. Fourth quarter retail cost of goods sold was 50.1% of retail sales versus 48.8% in the prior year quarter. This 130 basis point increase was primarily driven by discounts and markdowns. Our inventories at quarter end were $181 million compared to $189.4 million in the prior year. With regard to labor costs, our fourth quarter labor and related expenses were 37.5% of revenue versus 36.5% in the prior year quarter. This 100 basis point increase was primarily…

[Operator Instructions] The first question today comes from Brian Mullan with Piper Sandler.

Just a question on the remodel plans for the current fiscal year. Can you just remind us or take us through the differences between the high to medium and the low options? And is there one of those that you are favoring at this point or is there a goal to set on one of those for fiscal '26 and beyond after you have the learnings? And then just separately, you mentioned a new refresh option. If I understood you right in the prepared remarks, I think that was informed by what you're seeing in the pilot stores already. So just maybe elaborate on that refresh option, what makes a store good candidate and maybe what kind of sales uplift you're hoping to see?

So let me start out by actually talking about all of these. So we have the high and medium, low, which we've talked about before, and we laid out with a plan for 25 to 30 of those in fiscal '25. And we completed three of those in fiscal '24 and we've added the refresh option as well. And the refresh option. I'm going to start with that one, and work up from there because they're all build. The refresh option really came out of the work that we did in fiscal '24. And what we realized as we went through that work is there was an opportunity for something at a lower cost that really included paint and decor and that seemed to accomplish a lot and we were seeing good results. So that's the new one. As we move up from the refresh option, the low option adds on to that and it lays on furniture, primarily furniture and lighting. And from low to medium, we start to do some flooring work and a little bit more extensive work on the interior and exterior. And the high has more flooring. In addition to the flooring in the restaurant portion of the business, we have flooring in the retail portion of the business, as well as a couple of other elements. So fiscal '25 for us is really all about testing. We have these pilots in '24. We're encouraged by the pilots. But all of the -- everything that we're working through, we have targets but the precision around that is going to be developed in fiscal '25 across all of those designs. So we're excited about that and we'll share more in the future.

And then just a follow-up question. Just when you -- understanding there's different pricing tiers and you're seeing some success moving some stores up and down. Just as you put together the guidance for fiscal 2025, how are you thinking about menu pricing for the fiscal '25?

So we have 5% pricing for the year in the guidance and that blends all of those together, everything that's down as well as up.

The next question comes from Dennis Geiger with UBS.

Wondering if you could talk a little bit about what you saw in the quarter from a customer standpoint, any thoughts as it relates to some of those key cohorts, either age, income demographic, et cetera? And then specific to loyalty, maybe the incremental customers that you've been adding, if there's anything you could say about those, age-wise, how it's skewed, great stats, I think, on the uplift that you're seeing from the program. But maybe just who is now in the program, who you've been adding to that, if there are commonalities there?

We really haven't seen a huge mix -- or a mix shift in the customers in Q4. We've seen a little uptick in our 65 plus group, which is positive because they had been down prior. So it's nice to see that recovering a little bit. But other than that, the demographics have stayed pretty, pretty similar. We have seen a decline among the under $60,000 a year cohort in spending. So we're just kind of keeping our eye on that. We have great value for all guests and we continue to reinforce that with the barbell pricing strategy. Items like Early Dine as well as our Sunrise Pancake special, that's just such an amazing value and if you're like me and you love our pancakes, it's a delicious way to start your day. So we feel really good about the shifts that we're seeing there, although they're very minimal, Dennis, honestly. Loyalty, thanks for asking about that. We are so excited about this program. We're so excited to really understand the cohort better. We haven't really been spending a lot of time digging into them demographically. We've actually been spending more time thinking about their behavioral spending and really using that to test and learn ways to drive behavior. The demographics, from what we've seen and what we're setting, are relatively in line with the average Cracker Barrel guest. Again, we view this as more of a way to drive behavior and that's really what we're looking at as we segment the population and really communicate with them directly to drive their behavior.

And Dennis I'll actually just -- it is Craig, I'll jump in and add a little bit to that as well, just to build on what Julie was saying, a couple really more encouraging things despite the really challenging backdrop. We ended the quarter -- on average over the quarter, we actually exceeded Black Box's Casual Dining Index for the quarter and continue to exceed for family dining. And some more encouraging news in that regard is we've been doing a lot of work around dinner. Dinner has been challenged for a while and we've shared that in the last few calls. And we added this Early Dine offer, as well as some other dinner news and we're seeing that trend start to move in a really good direction. So we're starting to close the gap there. So some encouraging things kind of finishing out Q4 and going into Q1.

One more just on the cost savings side of things, a few to kind of put in here. Craig, on the G&A side, anything more specific to share for '25 beyond what you said already? Or is it a bit of a moving target where you want to maintain a little bit of flexibility there as it relates to that exact G&A number for ‘25? And related, on the cost saving side of things, you talked about a few of the opportunities today. Is that $50 million to $60 million cumulative three years, is that still the same that it was, if anything has changed there or if any kind of net commentary there, would just be curious?

I'll start with cost savings. Yes, we're still fully aligned with the $50 million to $60 million over the three years. In fiscal '25, we also have meaningful, what I would call, as gross cost savings as well but it is an investment year and as such, we really invest in that. We want to kind of keep building the momentum. So that's not going to net flow through in '25. But as we've shared before, by the back half of '26 and into '27, we expect those benefits to really accelerate in EBITDA to start to pick up meaningfully. And I think you hit the nail on the head as it relates to G&A. It is an investment year. We're doing a lot to build the business. But however G&A as well, as we move into the back half of '26 and into '27, we expect that will start to normalize as overall financial performance improves.

The next question comes from Katherine Griffin with Bank of America.

Craig, I don't know if I missed it, but did you provide a breakdown of traffic and mix in the quarter? And then maybe you can also help us just understand like the pricing cadence of the year in terms of when you took pricing in the quarter. Just assuming like -- they're trying to get a picture, I guess, of the full year pricing at 5% you guided to and how much that implies for carryforward?

Katherine, traffic for the quarter was approximately negative 4%, mix was approximately positive 0.2%. And as you think about pricing for fiscal '25, we had multiple actions really in '24. We didn't have like two large ones, we had multiple throughout the year. So I'm not anticipating a whole lot of lumpiness, so to speak, as it relates to pricing in fiscal '25.

And then I think like something that the brand is known for is value. I imagine that's -- it's most appealing in the loyalty program and in your messaging. So I wanted to understand how you're thinking about balancing, taking some more pricing with maintaining those value scores? I think just given that casual dining has relatively low frequency, what gives you confidence that you can maintain those, I don't know if they're rising value scores, against higher pricing?

Katherine, it's Julie. I'll take this one. Thanks for the question because value is so important to us at Cracker Barrel. To your point, it is a hallmark of the brand and something that our guests really take very seriously. And when they think about value at Cracker Barrel, it's, like at any concept or any brand, it's an equation, right? So it is about not only at the price point that they're paying but all of those elements of service, all of the elements of the food and the experience that come together in that. Our guests have told us, we spent a lot of time thinking about this and researching it in the last year that for them one of the most important pieces of that equation is the amount of food and the abundance and quality of the food that they receive from us at Cracker Barrel. So as we work on the strategic pricing initiative, one of the things that we have absolutely maintained is our focus on quality and our focus on a real full plate. When you leave Cracker Barrel, you are leaving hungry. And honestly, look around a Cracker Barrel the next time you're in, most people are leaving with leftovers for tomorrow or for later in the day. So we are absolutely focused on maintaining that. As we talked back in May when we were introducing the strategic transformation, the way we've really approached pricing is different for Cracker Barrel. We have taken a new approach, which really puts the barbell pricing strategy out there. So we have really focused on sharpening and frankly, talking more about some of our lower entry price points. And to highlight that, we really have a key thing at breakfast, which is the Sunrise Pancake special…

The next question comes from Jake Bartlett with Truist Securities.

Mine was just on the same store sales guidance, the implied guidance in '25 and how that might be informed by more recent trends. I believe maybe, Craig, if you can just confirm that you're looking at positive low single digits same store sales for the year. We heard earlier today from another company that industry sales had improved in August and then into September. It looks to me like Cracker Barrel has likely seen the same. If you could just confirm that. And then if that is true, if you're seeing an improvement, do you attribute it to industry trends or do you think some of your initiatives are really starting to kind of to bear fruit already?

So let me just start out with the first part. As we talked about our guidance is total sales $3.4 billion to $3.5 billion. If you take a 52 to 52 week basis there, that does work out to about approximately a 1% sales growth year-over-year on a 52 to 52 week basis. And with the pricing on the restaurant side of about 5%, you could kind of back into roughly what we're thinking in terms of traffic. And what I would say on the recent trends is our guidance really contemplates that already where we think the work that we're doing is working. I think it's all coming together and -- but it is a multiyear journey. We're very confident in the guidance. We're really encouraged by the momentum that we have across the whole host of metrics and Julie talked about the operations metrics, the guest satisfaction metrics, the loyalty metrics, what we're seeing with Early Dine. However, the backdrop is challenging. I mean there are times that it's a little bit better or a little bit worse but it is a challenging backdrop for sure and that is contemplated in the guidance as well. So current trends are contemplated and a challenging backdrop is also contemplated. The big thing for me is really the three year plan. How -- where are we working towards and how do we feel about that? And the signs that we're seeing right now are saying, hey, it's a three year plan but we're on our way and we're feeling good about the progress.

And on the 5% menu pricing, at the surface, it's obviously a big number in a challenging environment that you just mentioned. Can you try to disaggregate how much of that is driven by the tiers, the changing of -- moving the net restaurants to a higher tier versus like-for-like menu pricing at a given store? And it’s probably hard to disaggregate but I think the answer there would help us feel a little more confident that traffic is not going to be materially impacted by a 5% price increase.

Yes, I'll start, Jake and then Craig can jump in if there are some things that I missed. So let's start with kind of the last part of your question, which is we have been testing our way through this since about March. And every single test that we have done and that would give us a little bit of -- a lot more time, honestly, has proven out that we're actually able to flow through almost all of it. It's not impacting traffic or elasticity, it is frankly lower than what we had built into the plan. And so that gives us a lot of optimism as well as looking again at those value scores that I talked to you about or that I talked to Katherine about. So we feel good about that side of things. With the moving pieces and the more strategic approach and the more sophisticated approach to pricing, it is hard to sort of disaggregate it a little bit. But what I will tell you again there is that we are watching it. We are watching what's going up, we're watching what goes down, we're watching the way that all of that is coming through and it is, again, flowing through very, very nicely. I want to remind you of something that I talked about back in May, which was when we started the strategic pricing work, we did a ton of competitive analysis. We looked tons of research out there. On average, for like items with our competitors, we are priced 8% to 12% below them. It's a really important thing to remind everybody of, because even taking 5% that doesn't close that gap, right? And that would just be sort of straight numbers on all of that. So in general, we have room and our guests are telling us that we have room to take price. And so that's sort of the foundation of how we've actually kind of gone in and reassorted stores and the tiers, looked at where we have room. This is a multivariate approach. We're looking at willingness to pay, we're looking at cost of living, we're looking at cost of operation and trying to really come through with the best way to take this price in a way that doesn't kind of affect the same consumers and the same stores all the time, right? So that's really a big part of the strategy there. So that's giving us a lot of confidence in what we're doing and our ability to do it and to actually flow through the pricing. And the important reason that we're taking it is because we want to flow it through, it's an important part of our drive to drive profitability.

And Jake, I'll build on that just a little bit. I think one of the things that's not as clear to everyone if you're kind of outside the company looking in is our check average, our check average on the -- is we're mid-14s, right, mid-14 check average. Casual dining check average these days is in the $26 range. If you take out the steak heavy folks, you're maybe in the $22, $23 range. So we are starting out from really a much lower point. And the pricing, in addition to everything that Julie also said, is kind of what Katherine said earlier too, the additional value lever is the loyalty program. We're able to deliver not only just a share discount through the loyalty program but we're also able to have offers. And we've been testing those offers over the year as an additional way to drive value and to drive incremental traffic. So it's a good question and we've really pushed on a lot of levers to ensure that we get really good flow through from the pricing. And so far, so good.

The next question comes from Andrew Wolf with CL King.

I wanted to follow up on the loyalty program. And first, could you just compare that 6 million active users to the legacy program? And assuming it's up somewhat or a lot, can you discern whether that's existing customers who you converted or is it like net new customers to Cracker Barrel?

We did not have a legacy program. So this is all new. We launched the loyalty program kind of in September last year. So it's about a year old. Now your question may be, were these already loyal customers to Cracker Barrel? Sure. But we don't have a lot of that pre-information. But what we can tell pre and post of the loyalty program implemented, these guests that are in the loyalty program today have a higher frequency than non-loyalty members, about a 50% higher frequency and their check is higher. And as I said in my prepared remarks, they're spending more on retail. So we do know a lot more about them now. It's 6 million of all the guests that come to visit us in a year, some of them probably were very loyal to us before we implemented this program last fall. But it's a new program and we continue to learn and be really optimistic about the results.

I thought there was like a Pegs program that was sort of manual, but I'll just move on. Can you kind of discuss what the -- or what the '27 goal is in terms of penetration if you're at 25% of transactions now?

For the loyalty members?

Yes.

Andrew, I'll start with that one. We haven't -- we're at 25%, it's continuing to grow. At this point, we really haven't even defined what the top is. We've been doing a lot more testing. We think there's a lot more opportunity to go here. Really as we'll continue to build capabilities, it's one of the areas that we're continuing to invest in. But we have not communicated a firm penetration target as yet.

The last thing, I just wanted to ask about the quarter. I think it's a travel heavy quarter. Was the comp same-store sales improvement as you go between measuring between folks who traveled and local people live around the store, around the restaurant, are you able to discern which cohort cut that way, you saw more improvement in?

We do that periodically. We did not do it for this quarter. We've really been -- as Julie shared, there is -- what we've seen more is a big difference between the under 60,000 cohort versus the over 60,000, and we've continued to see softness with the under 60,000 and much more stable in the above 60,000. We also saw some improving trends with the over 65 group. And we've been focused on dinner. We've been focused on regaining our momentum at dinner, which has been a challenge for a while.

And I would just add on that real quick, Andrew. Remember, our Q4 last year was a real challenge from a traffic perspective. So we were really pleased to have to seen some dramatic improvements in our traffic there. So kind of across all the segments, as Craig just mentioned.

The next question comes from Jon Tower with Citigroup.

Maybe first off, just a clarification. The pricing action that you took, did that start in August or something that's hit a little bit later?

The pricing action -- one of the things that we've done, and we've been doing this for a while, is we're taking more frequent pricing actions that are smaller, because guests respond better to that. And that's one of the reasons that we're not expecting a whole lot of lumpiness as it relates to pricing. So we had a series of pricing actions in '24 that will roll off and we have a series of pricing actions in '25 that will roll on.

So some -- what's -- I guess, the 5% was included in the August number, quarter-to-date number, with the…

Yes exactly.

And then maybe just going to the advertising piece of the business, I know 2024 the company stepped up spend there. And I'm just kind of curious, given all the transition that the company's going through right now when looking at fiscal '25, do you anticipate another step-up in spend? And specifically, where do you see yourselves putting that money? Will it be focused more around value still as that's imperative to the core customers today or do you see it focused on some of these new menu items that you're talking about that have an attractive price point but might be a little bit more premium to the everyday value?

I'll start and then Craig can kind of jump in. We do not have a planned step-up in marketing spend as a percent of sales in '25. We did step that up last year. As we were -- as I talked about on a lot of the different calls, really testing and really refining our mix and looking at that and that's something that we're always doing. Especially with Sarah here, the team is really evaluating the mix. We're really doing a lot of media mix modeling right now to really find our way in through all the noise, because remember it's noisy out there. Our competitors are spending a lot of money. They're screaming a lot of value. And so we've got to find our way in with those messages. Now in the last kind of Q4 and even in Q1, we've had some different messages out there. What I will say is that they're actually all resonating, right? When you think about the fact that we messaged early dinner -- Early Dine, that's been, as I mentioned earlier, that has been ticking up. The take rate has been going up on that. And right now, we just switched over to the Hashbrown Casserole Shepherd's Pie, which has been a tremendous performer for us. So I think we're able to really just be uniquely Cracker Barrel. Find our guests, find our super fans, and really communicate with them in ways that are meaningful, because we are able to deliver amazing value as well as these craveable, delicious menu items in our way. And that's really a big part of our goal to regain market share is to really speak to guests the way that they want to be spoken to and really continue to tell our story and delight them every step of the way. And I know with Sarah at the helm of the marketing organization will continue to refine that and move that forward in a really meaningful way.

And then maybe as you're going through the remodel process, I know you had some store closures last year. Have you found perhaps there's more opportunity to clean up the portfolio with respect to incremental store closures or are you pretty happy with where you sit today?

We're always looking at the store portfolio. We do it regularly. So what I'll say is, for right now, we don't have any planned close-ins but we'll continue to evaluate it.

And then just last one from me, I should have asked this earlier. What's your average guest frequency today?

Right now, it's still a little under 2 times a year, but that obviously doesn't take into account our loyalty members. So as we continue to learn more about them and the program, we'll be able to talk about that. They visit about 50% more often than a normal guest. So that's pretty exciting for us. So we'll continue to work on driving their frequency as we move forward.

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

I want to thank everybody for joining us today. It is the 55th birthday of Cracker Barrel, so it's an exciting day. And both Craig and I want to thank our 70,000 plus team members for their continued hard work and dedication to bringing the brand to life each and every day. I hope you took away that our transformation plan is well underway and on track. We're pleased with the progress the team is making and the initial results of our initiatives are promising. We're still in the early stages of this multiyear journey and there's much work to be done. But we are confident we are on the right path to deliver our imperatives of driving relevancy, which is really about capturing market share, delivering food and experiences that guests love, and growing profitability. And make no mistake, we will do this while continuing to maniacally focus on operational excellence every shift every day. We look forward to providing further updates on our progress, and thanks for your interest.

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