Q4 2020 Cracker Barrel Old Country Store Inc Earnings Call

September 15, 2020

[music].

Good morning, and welcome to the Cracker barrel fiscal 2024th quarter earnings call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero after todays presentation.

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There will be an opportunity to ask questions.

I would now like to turn the conference over to Adam Hannah manager of Investor Relations. Please go ahead.

Good morning, and welcome to Cracker barrels fourth quarter fiscal 2020 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 financial measures for the fourth quarter and 12 months ended July 31st 2020.

The fourth quarter non-GAAP financial measures are adjusted to exclude the fees related to two sale leaseback transactions and noncash gain on sale of assets related to the sale leaseback transactions that occurred during the fourth quarter noncash impairment charges related to store assets and their related tax impact.

The full fiscal year non-GAAP financial measures are adjusted for the items listed above as well as expenses related to cobot 19, an impairment charge related to our equity investment in country, both social and their related tax impact of these items.

The company believes that excluding these items 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 page of the press release includes a reconciliation from the non-GAAP information to the GAAP financials.

On the call with me. This morning are cracker barrels president and CEO Sandy Cochran.

Senior Vice President and CFO, Joe Gorder, and Vice President Finance, Jeff Wilson.

Sandy will begin with a review of the business and Joe will review the financials and outlook. We will then open up the call for questions for Sandy Jill and Jeff.

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.

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 filed with or furnished to the SEC.

Finally, the information shared on this call is valid as of todays 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 barrels President and CEO Sandy Cochran Sandy.

Thanks, Adam Good morning, everyone. Thank you for joining us and I hope everyone is continuing to stay safe and healthy.

Since we last spoke in early June our business and the casual dining industry have unsurprisingly remained pressured due to the pandemic.

Despite this I'm very pleased with the progress we've made on our recovery in all key initiatives in recent months.

While we anticipate dealing with pandemic related challenges for some time I believe the decisive actions, we've taken to strengthen our business model bolster liquidity.

Outdoor operations.

Help us well positioned to successfully navigate this environment. Thanks.

Confident our fiscal 2021 business priorities and the corresponding plans will further strengthen our leadership position in casual dining and drive long term value creation.

Ill discuss some fourth quarter highlights speak to you about our priorities. Some plans for fiscal 2021 thing Joe will review, our fourth quarter financial results and our liquidity comment on our expectations for fiscal 21, as well as our sales performance quarter to date.

Before I go on I want to comment on our re staffing and our commitment to ensuring a safe and healthy environment in our stores.

I remain pleased with our effectiveness in waste staffing our stores, which I believe has been facilitated by our strong culture and the actions we've taken to support our hourly store employees in recent months.

Through the fourth quarter, approximately 80% of our core four should return to work.

I'm also impressed with our operators commitment to ensuring a safe environment for both our guests and our employees.

I believe these factors have been and will continue to be important in the current environment.

Especially proud of how our store managers and hourly team members continue to deliver.

Mission of pleasing people during these difficult times.

I want to again express my gratitude to all of our employees for the excellent job they've done over the past several months.

We were pleased with our sales trend and the sequential monthly improvements we saw in the fourth quarter.

For both stall restaurant sales decreased 39.2% in the quarter.

Proving from down 59% in May to down 28.2 in July.

This improvement has continued into fiscal 21.

We believe this trend has been driven by our reopened dining rooms sales improvements at stores with open dining rooms increased demand and the success of our off premise and menu initiatives.

Additionally, we believe these results reflect the strength of our brand our strong everyday value on the trust our loyal guests have allowed us to deliver a great safe experience with genuine hospitality.

Even when the hospitality is delivered with a face mask on.

We also believe we benefited from summer travel.

The demand for off premise dining has remained strong in the fourth quarter, we leverage successful initiatives, such as third party delivery and curbside pickup and are.

And our family meal baskets offering maintained its popularity with our guests.

Supported by our work to further enhance our off premise operations. These sales grew approximately 145% over the prior year quarter.

<unk> represented approximately 35% of fourth quarter restaurant sales compared to approximately 8.6% in the prior year quarter.

During the fourth quarter, we rolled out the new lunch and dinner menu that as part of our menu evolution initiative the.

The menu includes new craveable offerings, such as chicken pot pie and Maple Bacon grilled chicken, which are available every day as.

As well as new daily specials, such as Saturday country, fried pork chops and Sunday pot roast supper.

Additionally, we believe the new simplified menu results in increased consistency in execution.

And that is better highlights our signature offerings value and variety.

This is a significant initiative, which we've been taking a phased approach and I continue to be pleased with the results.

It began with the introduction of our signature fried chicken platform in fiscal 2019.

And I'm looking forward to the future menu innovation, we have planned as part of this initiative in fiscal 21.

Continue to make progress on the addition of a beer and wine program.

A reminder, at the time of our last earnings call. This test was an approximately 20 stores.

Currently these offerings are available in approximately 100 stores.

Based on the favorable results, we'll be introducing the beer and wine program to the majority of our system in fiscal 21.

And we expect it to be in approximately 600 stores by the end of the fiscal year.

I remain excited about this initiative and in addition to the financial benefits. We believe these offerings support the guest experience by providing additional variety.

The performance of this initiative has been in line with our expectation and while it is mostly targeted enhancing the dinner daypart, our mosys have proven to be quite popular in the breakfast and lunch day parts.

I was also pleased with our retail performance this quarter, especially considering the headwinds our retail business is facing as a result of our dining room closures and capacity restrictions.

Teams were focused on managing inventories and strong sales in categories, such as furniture decor and accessories contributed to top line retail performance that exceeded our internal expectations.

We believe consumers are looking for affordable ways to improve and update their homes during the pandemic and that our offerings. In these categories strongly appeal to guests have provided a compelling price value relationship.

Fiscal 2020 was unlike any year, we've ever experienced and the challenges presented by the pandemic have and will persist into our fiscal 21.

Fortunately I believe our existing business priorities around menu innovation growing off premise and enhancing the guest experience has us well positioned going into the crisis and they remain highly relevant will be.

We'll build on these priorities to drive performance and long term value creation amid this challenged environment.

Our fiscal 21 priorities include the following.

First and most importantly, ensuring the health and safety of our guests and employees.

Second driving restaurant sales by leveraging our new menu introducing additional craveable offers.

Further growing our off premise business.

Third driving retail sales by increasing off premise attachment and optimizing our floor space for the current reduced capacity environment.

Fourth enhancing our digital infrastructure and evolving our digital strategy to drive sales and improve the guest experience across all channels and.

And last accelerating the growth of Maple Street missed get company.

And I want to speak to some highlights of our fiscal 21 business plans and priorities.

Our first in top priority is ensuring the health and safety of our guests and employees.

Our elevated health and safety measures remain in place and our teams continue to do an excellent job diligently executing the procedures and protocols and adapting to a dynamic situation.

We're committed to prioritizing and we'll be investing in health and safety over the long term and we believe this emphasis has and will continue to strengthen the trust that both guests and employees have in our brand.

Culinary plans are focused on driving frequency by leveraging our new menu and introducing new craveable offerings during the fiscal year.

For example, our Q1 menu promotion features our new chicken pot pie a highlight of our new menu and is being supported by an integrated marketing campaign that includes national TV.

Looking ahead I'm excited about future menu innovations such as the hand, breaded chicken tenders will be introducing to the core menu later in the year as we build on the success of our signature fried chicken platform and I'm also looking forward to the continued rollout of our beer and wine program to our stores.

Turning to off premise, we've been pleased with the growth of this business in recent years, which was further accelerated by the pandemic and we anticipate that off premise will remain elevated for some time.

Fiscal 21, we're focused on growing our various off premise channels by building brand awareness and affinity.

Optimizing off premise operations.

And leveraging initiatives such as curbside pickup in third party delivery.

Additionally, we will be testing to new off premise formats grabbing go and a dedicated catering kitchen.

We believe grabbing grow will drive incremental to go purchases from our dining guests and can build off premise behaviors and guess that may not use that to go channel as often.

Our dedicated catering kitchen is designed to improve our ability to meet demand in high volume markets and drive productive growth in catering.

These tests are launching this month and will share additional details in future updates.

I continue to be impressed with the adaptability of our teams and I'm pleased with how we've been able to quickly and successfully introduce initiatives such as front porch dining.

This is currently available in approximately 350 stores and has helped to mitigate the impacts of the capacity restrictions.

Additionally, in certain locations. We've also set up tables, the need tens in our parking lots.

Teams are focused on ensuring we deliver hospitality to our guests whether their dining in our stores on our front porch picking up in order to go.

And we continue to adjust our operations to support the guest experience for all of these occasions.

In retail we are currently focused on our core holiday business, which accounts for a significant portion of our annual retail sales.

In our retail stores are presently set with fall and holiday Assortments.

We're encouraged by the early performance of these Assortments and believe our affordable and unique holiday decor and merchandise will resonate with guests in the current environment.

Our teams continue to work on optimizing the floor space in response to the capacity restrictions.

Additionally, we're focused on driving higher retail attachment for off premise occasions, and this will be a key priority for the teams throughout the fiscal year as we evolve our assortments and the location or merchandise targeted for off premise guests.

In fiscal 21 will be enhancing our digital infrastructure and evolving our digital strategy to drive sales and improve the guest experience across all channels, but.

The coming weeks, we'll be launching our digital store tour system, which is a new digital platform that provides an integrated an improved user experience for guests ordering food and retail.

It is foundational for future planned initiatives that we believe will further enhance the guest experience and empower guest by giving them more control over their journey.

In addition to increasing convenience, we believe the digital store and these initiatives allow us to extend our hospitality in new ways, but.

The digital store is already live in approximately 150 stores and the initial response has been positive as we've seen strong user engagement.

The digital store will also support sales driving opportunities such as bundled restaurant and retail offerings, a loyalty program and increased personalization and customization as well as it will result in richer guest data and support of deeper analytical insights.

No other technology initiatives that will provide additional guest experience enhancements as well as cost savings opportunities as our new Pos system.

We had suspended our roll out do the pandemic and I'm looking forward to resuming the implementation.

Approximately 175 stores currently have the new Pos and we plan for approximately 500 stores to have it by the end of the fiscal year.

I continue to be impressed with how the Maple Street team is navigating the difficult environment and I'm excited about the brand's future.

The resilience they demonstrated during the pandemic has reinforced the attractiveness of the concept and their business model.

We have a high degree of confidence in this brand and we anticipating a thing up to 15 new units this year.

In addition to opening these new locations. The Maple Street team is focused on developing replicable processes and on leadership development staffing and training to support the successful scaling of the brand as we accelerate their growth.

Lastly, before turning it over to Jill I'll update you on our capital allocation strategy.

Continue to work closely with the board to ensure we have the appropriate capital allocation strategy.

We believe were well positioned from a liquidity standpoint, and remain committed to our highly disciplined and balanced approach to capital allocation.

Top priority is investing in cracker barrel and Maple Street.

Regarding the regular dividend our board continues to evaluate the environment and intends to reinstate the dividend as soon as is prudent to do so.

And lastly, we're evaluating our debt levels and we'll be normalizing our leverage both by reducing debt and by increasing EBITDA.

And with that I'll now turn it over to Jill.

Good morning, and thank you Sandy in light of the ongoing impact of Cobot 19, My prepared remarks will focus on our fourth quarter financial performance and our liquidity position then I will provide some comments on our outlook for fiscal 2021, and our recent sales trends.

I would like to begin by discussing our financial performance for the fourth quarter of fiscal 2024.

For the quarter, we reported total revenue of $495.1 million.

Decrease of 37.1% compared to the prior year quarter.

Our restaurant revenue decreased 38.2% to $401.5 million and our retail revenue decreased 31.7% to $93.5 million.

Despite the headwinds from the pandemic, we were pleased with the improvement we saw throughout the quarter in our comparable store restaurant sales.

Fourth quarter comparable store restaurant sales decreased 39.2% with sequential monthly improvements from down 59% in may to down 28.2% in July being.

The improvement during the quarter was broad both geographically and across Dayparts with our dinner daypart remaining the strongest and the breakfast Daypart thing the biggest improvement we will.

We believe our topline results have been supported by summer travel improvements in dining room capacity.

Initiatives, such as our new lunch and dinner menu and in a portion of our stores. The addition of front porch dining and the introduction of beer and wine.

We were also pleased with our strong retail topline performance, which similarly saw sequential monthly improvement during the quarter comparable store retail sales decreased 32.3% in the fourth quarter and for the month of July comparable store retail sales declined 16.9%.

Rent.

Now moving on to expenses overall, we were pleased with our manageable expenses during the quarter as well as the cost savings, we achieved as part of our business model improvement initiatives.

Total cost of goods sold in the quarter was 30.5% of total revenue versus 28.8% in the prior year quarter.

We delivered restaurant cost of goods sold of 24.7% of restaurant sales, which was relatively flat versus the prior year quarter.

On a constant mix basis, our food commodity costs were approximately 40 basis points higher compared to the prior year quarter, driven by increases in beef and AG, which was partially offset by a decrease in pork.

Our retail cost of goods sold was 55% of retail sales versus 48.7% in the prior year quarter. This year.

This 630 basis point increase was primarily due to employee discounts and increased use of markdowns as our.

As our merchandising team aggressively work to manage our inventories.

I'm really proud of our retail teams, who have been diligently working to ensure appropriate inventory levels and deliver improved retail sales in a difficult environment.

Our operators continue to do a nice job managing labor this quarter as labor and related expenses were $187.8 million or 37.9% of revenue compared to $276.2 million or 35.1% of revenue in the prior year costs.

Peter.

Although we had de leveraging from our fixed expenses in the current sales environment, we were able to partially offset this with approximately $7 million and cost savings we realized during the quarter as a result of our field management restructuring initiatives.

We have been pleased with the results of this initiative, which we believe has been successful in large part due to our focus in recent years and better training and leveraging our par for hourly team members as leaders and mentors within our stores.

Other operating expenses were $141.3 million or 28.5% of revenue in the fourth quarter compared to a $164.5 million or 20.9% of revenue in the prior year quarter.

This 760 basis point increase was primarily the result of sales de leverage. Additionally, the growth in our off premise business resulted in higher supplies expenses, which also contributed to the increase.

General and administrative expenses in the fourth quarter were relatively flat to the prior year quarter at $41 million, which includes approximately $5.7 million in fees related to the two sale leaseback transactions beads.

These fees were partially offset by approximately $3 million in cost savings realized during the quarter from our corporate restructuring initiative.

GAAP operating income was $40.1 million or 8.1% of revenue on.

On an adjusted basis operating loss was $20 million.

Net interest expense for the quarter was $9.9 million compared to $3.9 million in the prior year quarter the.

The increase in interest expense was primarily due to higher debt as a result of drawing on our revolving credit facility in order to bolster our liquidity.

Our effective tax rate for the fourth quarter was 16.8% compared to an effective tax rate of 13.9% in the prior year quarter.

This increase was primarily driven by deferred taxes recorded as part of the sale lease back transaction that occurred in the fourth quarter.

We reported fourth quarter GAAP earnings per diluted share of one dollar and five cents and adjusted earnings per diluted share was a loss of 85 cents.

I now want to speak to our liquidity position since the pandemic began we have made it a priority to ensure the company is well positioned for the long term from a cash standpoint to achieve this objective we have been actively managing our balance sheet and have taken actions such as implementing cost.

Savings initiatives, drawing down on our revolver.

Exercising our accordion feature and completing a sale leaseback transaction. We believe these actions combined with the strong performance of our operations teams have put us in a strong financial position.

I would now like to spend time discussing our two sale leaseback transactions.

The first transaction closed in the fourth quarter and involved a group of 64 properties that were part of a previous sale lease back that was set to expire in 2021.

We entered into a new lease agreement with better terms that will result in cash rent savings of approximately $30 million over the life of the 20 year agreement.

Additionally, we entered into a second transaction to further bolster our liquidity. This transaction closed in the first quarter of fiscal 2021, and resulting in us selling 62 properties for approximately a $150 million we believe.

We believe the company is historically strong financial performance helped facilitate the transaction and secure and attractive long term rates.

Regarding the financial and accounting impacts of the sale leaseback transactions. The first sale leaseback resulted in us recording a non cash gain on sale of assets of approximately $70 million. Our fourth quarter results also included $5.7 million in fees relate.

It to the two sale leaseback transactions.

The adjusted fourth quarter operating income and adjusted EPS results I referenced earlier exclude this gain and these fees as well as noncash impairment charges related to store assets.

Adjusted EPS also excludes the related tax impacts from these items.

We anticipate the second sale leaseback will result in a noncash gain on sale of assets of approximately $218 million in our first quarter of fiscal 2021.

In fiscal 2021, we expect that these two transactions combined will increase our total rent expense by approximately $25 million compared to the prior year, which includes the amateurization of the rights of use asset related to the gains on the sale leaseback transactions.

And.

Our cash rent will increase $8.9 million versus the prior year, which includes the reduction in rent from the better terms of the first transaction as well.

As well as the increase in cash rent for the group of stores in the second transaction that are now being leased.

I now want to walk you through our changing cash from the end of the third quarter through the end of August.

We ended our third quarter with $363 million of cash on hand at the.

At the beginning of our fourth quarter, we exercised an accordion feature an increased our borrowings by approximately $40 million.

During the fourth quarter, we generated approximately $64 million in operating cash flow, primarily driven by our improvement in comparable store sales.

Some of the cash from our improved performance was used to invest in our key initiatives such as our digital guest experience enhancements.

Expansion of the new Pos system, and our beer and wine initiatives.

We ended the fourth quarter with $437 million of cash.

The sale leaseback transaction, we closed on in August further increased our cash and we ended the month of August with approximately $565 million of cash.

We believe our strong liquidity position enhances our flexibility both for managing through the environment and.

And as we consider capital allocation going forward.

The board continues to evaluate the environment and our debt levels and they will maintain a balanced approach to capital allocation and we will take our strong cash position into account when determining the optimal mix of investing in our business returning cash to shareholders and paying down debt.

Before moving to our outlook I would like to comment on Maple streak. We are pleased with their performance and with their resilience during the pandemic as all of their stores are open with limited dine in service.

We continue to believe they have strong unit economics, which in a normal environment includes targeted aid movies over $1 million.

Core level EBITDA over 17%.

And the build out cost of less than $750000.

We are excited about accelerating maple streets growth and anticipate opening up to 15 stores in fiscal 2021.

And we believe maple straight will meaningfully add to our results in the coming years.

I would now like to speak to our outlook.

Everyone should be mindful of the risks and uncertainties associated with this outlook as described in today's earnings release and in our reports filed with the SEC.

Because of the uncertainties, resulting from the pandemic, we're not providing annual guidance.

For fiscal 2021, we currently anticipate opening three cracker barrel stores.

These stores had been in the fiscal 2020 pipeline, but were delayed due to the pandemic.

We anticipate capital expenditures of approximately $100 million for the fiscal year.

Of this amount approximately half will support strategic initiatives and new unit growth with the remaining amount supporting existing store maintenance.

We expect to achieve the remaining balance of our approximately $50 million cost savings target in fiscal 2021 given.

Given the savings already realized this means that the first three quarters of fiscal 2021 are each expected to deliver approximately $12 million to $13 million of cost savings.

We anticipate 50% coming from labor and related with most of the remainder coming in DNA. However.

However, we do expect that these savings will be partially offset by inflationary pressures and investments with our investments driving sales indoor margin improvements over the long term.

We continue to closely monitor our restaurant supply chain.

And our having regular discussions with our vendors today.

To date, we have not experienced any meaningful supply chain disruptions and we do not anticipate any significant disruption in fiscal 2021, assuming.

Assuming that there are no severe cove, it 19 outbreaks that affect our suppliers.

We anticipate commodity inflation of approximately 1.5% to 2% in fiscal 2021.

We were pleased with our sales improvements in the fourth quarter and this trend has continued into the new fiscal year through the first six weeks of fiscal 2021, our sales trend has continued to improve with comparable store restaurant sales and decreasing approximately 20%.

And our comparable retail sales decreasing approximately 15% when compared to the same period in the prior year.

We have continued to see strong off premise sales growth and stores that have reopened dining rooms, and some capacity and currently stores with opened dining rooms are maintaining approximately 75% of their elevated year over year off premise growth compared to off premise only locations.

Although we are encouraged by our trends our overall outlook remains cautious for several reasons.

First the possibility of additional cobot outbreaks and resurgence is.

Second despite the improvement in our sales trend there continues to be much uncertainty around consumer willingness to revisit full service restaurants, as well as our ability to continue front porch dining in the fall and winter.

Third uncertainty concerning the economic impact of the pandemic remains high.

Despite these potential headwinds we are confident in our plans and initiative in fiscal 2021 will drive performance and long term value creation.

Additionally, we continue to believe we will potentially benefit from several factors first we are a trusted differentiated brand with loyal guests that.

Second we have a strong value proposition.

Third our interstate locations position us well when families choose to travel by car for holidays or vacations and lab.

And lastly, we believe key initiatives, such as our new lunch and dinner menu. The introduction of a beer and wine program and our investments in digital guest experience enhancements will help sustain our momentum and drive improved performance.

Open it up for questions I'd like to turn it back over to Sandy.

One final point before we head into Q and a.

We recognize the importance of maintaining a strong independent board that serves the best interests of our shareholders employees and guests with the expertise and experience is critical to our business.

Our board regularly reviews its capabilities and is committed to an ongoing refreshment process.

Part of that process. We've recently added two outstanding directors to our board following a rigorous search process Gilbert Abila NGL Ruiz.

Gilbert joined our board in July and we announced Chisels addition, yesterday.

Both of these candidates are tremendous addition to enhance the diversity and skill sets of an already outstanding board with Gilbert, bringing substantial marketing market segmentation and digital expertise and you sell bringing a wealth of talent, having led complex operational and.

Human resources functions for the country's largest company Walmart.

We're excited about what they will bring to our board room as we continue executing a clearly defined strategy to accelerate the growth of the company and enhance value for all shareholders and.

And with that Chase and now we'll open it up to today. Thank you.

Thank you well be begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you use any speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

The first question comes from Brooks from CL King. Please go ahead.

Good morning, everyone. Thanks for taking my questions I appreciate it.

HM.

To just things that kind of cautious on are watching going forward.

I'm just wondering.

I just wonder if you could kind of reconcile the down 20%.

Restaurant same store sales or we've seen quarterly guidance how much.

How much of that is supported by the poor truck and the time based out.

Outdoor dining that we may lose in some locations as we do.

Approach the winter season and.

If we get tied to when you look at optimal performance given the capacity restraints that you're having to operate hunger.

Gone, 20% at the restaurant level pretty much as well is the concept can do in the current capacity environment.

Good morning, Todd This is Jill and thank you for your question.

It's a great question a tough one to answer so let me kind of walk you through some things as we're looking at our the impact of compasses any constraints on our sales versus demand you know from a demand standpoint [noise] judge.

Just as we're focused on the health and safety of our guests and team members guests are focused on their health health and safety. So there may be some reduced demand because consumers are reluctant to eat in a dining room, others might be cutting back on there.

They're kind of away from home dining occasions, just given the uncertain environment from an unemployment standpoint, or an economic standpoint.

You know as we said as the dining rooms have reopened kind of e.

Kind of even under the capacity restrictions, we have seen our demand increase and as we looked at the demand progression. It's increased across all three dayparts, we've seen the most improvement and our breakfast day part but of all three daypart dinner remains a strong.

Yes, so which says to us that there is demand out there from the consumer and the capacity constraints. We do believe that in general we benefit from the fact that we have a large open dining room.

And the operators have done a really nice job maintaining capacity restrictions. The you know the six foot separation and managing through that you know that approximately 50% to 60% restriction.

Where we tend to run into capacity limitations tends to be on the weekend kind of weekend dinners as well as Sunday that Sunday occasion.

As we said we did introduce front porch dining and approximately 350 stores to help increase our overall capacity the front porch dining adds anywhere from five to six tables. So therefore top table.

So that piece of it will most likely be curtailed as we get into the cooler the cooler months here, but so to your point you know can we do better than down 20%. I mean, we have seen that we've been able to support the increased demand. The team has done a nice.

Nice job, we can't directly talk too.

Our overall number can be at that 50% to 60%.

Capacity levels, but hopefully that gives you a little bit more color.

Yeah. That's helpful. Thank you Joe and then just a follow up on that one more question. If you look at the.

The store base and the 350 stores, we do have the front porch dining set up 'cause it skew more across the southern tier. So you think you should be able to keep.

A decent amount of back in place through I mean, not necessarily the heart of winter, but let's say that the fall shoulder period.

That's true the early spring shoulder period.

Yes. It does first of all that's where our store base skews and those were a lot of the states that allowed us to go to yeah on premise dining some of the soonest and we're also hoping that the that geography will help us to spend are a bit.

Elude ti to allow guests to eat outside the long as long as we can.

The next question comes from Jeff Farmer from Gordon Haskett. Please go ahead. Thanks, a couple of questions. Those who is looking to drill down on the summer travel season. So was curious what was the highway the location Super sales performance like versus the non highway before.

<unk> units.

And what was the mix of local versus troubled customers that you saw in the summer.

So Jeff that's a great question, you know, we've been slice and dice, our data kind of 10 ways to Sunday and we really did not see a huge differentiation between the stores that are kind of off highway versus.

Hi, I'm more local.

Well, we have seen is in the northeast yeah, we've seen more improvement as their capacity restrictions have been lifted that's probably the biggest trend change that we have seen.

Okay.

Then second topic Sue for the 20% Super steels deployment, it's seen through the first six weeks of the quarter.

Just looking for some cadence there I mean, what does it look like at the beginning about six week period in the middle of a six week period, and then how does your sort of exit that six week period, meaning in the last two weeks to sort of hold the same for sales progressed or would they look like over that six week period to get to two to minus 20% okay.

Okay. So you know as you can appreciate six weeks is insane to too long of a time period. So I mean, clearly versus where we were in the fourth quarter. We saw some improvement, but we don't really want to slice and dice. The the the weeks themselves I guess, what I would say is that we've we've been pleased with.

Sales kind of at all levels, we were pleased with the breakfast lunch and dinner sale pleased with our ability to retain a significant portion of the off premise sales as the dine in 'em grows and then without permits all.

All you know virtually all channels have done well m. individual to go the third party as well as our catering not so overall, we've been pleased and I apologize if I can just sneak one more in which was on the 50 million dollar I don't push my luck here, but the 60 million dollar cost control.

But you talked about last quarter into this quarter, you mentioned on the call that that could be off set by some investments in technology and some other things so 50.

$50 million cost can fool versus what amount of dollars of all the investment are we talking about here. So we're going to continue to manage the pan out based on the business performance and our cash generation.

So as we look out let's talk about some of our kind of puts and takes in terms of our overall expectations. So you know we expect it you know as we think about some of the puts we expect to.

Continue to generate cash from the sales performance.

We will benefit from the cost savings initiatives.

And we're expecting to take approximately 2% pricing, maybe a little bit less than that on some of the tanks were expecting wage inflation in the range of 2% and we talked about on the call are commodity inflation in the range of one in it.

A half percent and so some of that then will be.

Reinvested in our initiative, probably the biggest investments there are going to be around the beer and wine initiatives as we we do training and we obtain licenses then we'll have some of our investment in Pos which will both be capital investment.

And as well as you'll see some training.

Some training and an incremental depreciation expenses associated with that and then of course, our digital that Sandy mentioned, we'll see some impact in that NGL <unk> expense and potentially other OPEC.

The next question comes from Brett Levy from MKM Partners. Please go ahead.

Thank you and good morning, Bob.

Following on with Jeff's question, there I guess, if you could give a little bit more incremental detail on the technology front.

From how you're thinking about spreading the course to what level of internal disruption you might see as well as any potential operating or sales lift and then just on the menu front.

Can you give any more detail on how your new menu items are mixing what you're seeing from beer and wine test. Thank you.

Yeah, why don't I start this off for it and then maybe Joe you can add whatever additional cars lets talk about technology first we're really excited we've got a variety of initiatives.

As a foundational issue I'm excited that we're going to restore the installation of our new Pos systems. So that as Joe mentioned, we'll be doing I think we said will be about 500 by the end of the year. It's right that allows us as a platform to then have well.

Under its tablets at the table or we've got a new labor system, a new food system, all of which will be able to sort of layer on to that in terms of the digital initiative, we're rolling or digital store in the next few weeks, that's sort of foundational piece that big into as a beginning sort of end of gray.

A variety of functions that currently sort of operate on the standalone basis, it's going to be a much.

A much better experience for our guests to be able to just entered the brand and then whether they want to get on the wait list or order something.

Catering or <unk> or whatever they want to however, they want to interact with the brand.

That is not really a very disruptive in the field, that's our I.T. team and we have a digital team that will be rolling that functionality over time, what it will help in terms of empowering the guess, which will help our field. So for example.

Currently curbside is an important part of our off premise business new functionality that our digital initiative will allow was you to be able to pull up.

And on your device, let us know your the hair and also if you haven't paid already you could pay either while you are in your car on your device or it will allow server to be able to take payments through a tablet, but at your car. So some of this functionality it will be slightly down.

Corruptive as we informed.

Inform the stores and do a little bit of training, but it will really streamline the operation going forward.

In terms of the dinner menu and then I'll turn it over all get all mine and to begin with were really pleased with the guest reaction to our pardon.

Initial relaunch of the dinner menu kids.

You know what it was doing was allowing us to highlight some new craveable items as well as do a better job.

Of reminding people about our signature offers that does a better job in my opinion of highlighting our value. It's.

Difficult.

To get a read given everything going on but.

But we believe that a it is making it easier on our operators and we are getting a lot of positive feedback from our guests. So we're pleased.

So I guess, what I would add this is Joe on the investment portion probably the biggest portion I'll be around capital to support our overall Pos So with you know we we said we'll spend about approximately 100 million in capital in fiscal 21.

That's about 20% is just for our new store growth.

30% is our strategic priorities are initiatives and have that half of it is.

The Pos and really the remaining portion of that is store maintenance. So that's probably the biggest area, where you're going to see some of the investments.

The next question comes from John Tower from Wells Fargo. Please go ahead.

Great. Thanks for taking my question just a few from me more modeling that in <unk> and <unk>.

Okay [laughter] so.

So the the cost savings you outlined in the call through a 10 million realized they were the $50 million target on last call given but I believe theres also an $11 million from the previous initiative that we have there so can.

Can you just remind us whether or not that was the $50 million. In addition to the $11 million or did that include the $11 million that was already in place.

Yeah, so the $50 million Worden, new cost saving I will say that some of those were contemplated prior to when we pulled those forward so to address the $11 million just as a reminder, in fiscal 20, which.

She was $12 million in the cost saving and so it should be.

To be clear that was for initiatives that were planned and 20 and those were separate from the 50 million.

So as you forecast out than the 50 million is expected to impact for that impacted our fourth quarter of the last fiscal year, a little bit in the third quarter and you primarily see the benefits in Q1 through Q3 of fiscal 21.

Okay. Thanks.

Thank you and then just on the DNA line in the quarter itself. It seemed like it was a little bit higher than at least I was anticipating excluding the sale leaseback fees was there anything else in there that you could speak to perhaps there was some cost around getting that beer wine and they should get up and going up or some of the other investments that you are making that a bit.

Thats right now sure yeah. So as you look at the G.N.A. for the fourth quarter I'm, there what I'm spending in the fourth quarter tied to our initiatives specifically around beer and wine as you look to prior year I know some people some of the analyst.

Asians had all of the cost savings and DNA and as we've outlined about half of those should be up in labor and then most of the remaining and Gionee I will say in January there were some timing shift based on some accruals as well as I believe you just called out there there were some professional fees.

Fees associated with closing on both sale leaseback transactions.

The next question comes from Jake Bartlett from Truest Securities. Please go ahead.

Great. Thanks for taking the questions. You. My first question I have I have a couple here on the first question is just <unk> alcohol test if you could give us any color what you're seeing at the stores that you've had in test for a while now he'll be trying to kind of.

That's what the what the longer term impact might be to the model and then you mentioned that you expect it to be completely rolled out by the end of the fiscal year, what should we expect for the cadence of that I mean, you should we is it going to be a gradual will out were really kind of more worldwide.

More lumpy.

So and says I mentioned, it's currently in a about a 100 stores, which is a concentrate Florida, Kentucky in about 20 stores in Tennessee.

We anticipate it next Oh, I think the Indiana, Mississippi, Virginia in the cadences dependent to some up to a large degree on the licensing.

Requirements in the communities were in.

And to what degree and we can move through that so that's that's how the rollout on go it's difficult to predict and as I've mentioned I think we expect to happen in about 600 stores by the end of the year, but we're doing it as quickly as we can.

In terms of the performance I'd say early and there's clearly some noise due to traffic declines and then we have a new dinner menu. So we've got a lot of things going on right now, but overall, we're pleased we have not yet really started to promote it but I'm encouraged with how strong it's continued to be especially.

In Florida, where we've had the longest as I as Joe mentioned or I mentioned in my remarks, My most those continue to be the most popular but we'll continue to re look at the assortment in fact, I think we're testing some new items and our first seasonal my most and maybe it's next quarter.

Even in Florida.

So Don Jake on the financial results. It is achieving our expectations, we will like to get a little more time under our belt and hopefully we can give you a little more color on our next call.

Great and then in terms of the Pos rollout and the ultimate savings that you can achieve from that I believe that that was all part of the cause of the 2000 and I think 15 true true 18 were 17 plan work or maybe we usually are.

The last one for your target that you had a 40, new either I think a large cautionary I believe the large portion was from the Pos roll out. So if you could just remind us what kind of savings I think a big chunk was going to be software that was going to be layered onto labor isn't that a big chunk was going to be from software that was going to be later on for food costs, but just.

My name is what kind of savings you can ultimately get once that Pos system is rolled out okay. Great. Jack This is Joe so what we like about the new POS system is it provides more functionality that we will now we believe both benefits the employee experience as well as the guest experience. So.

You're right. We it enables a new system that will be implementing a new labor management system and a new food waste management system that we believe will generate savings. We believe it's honestly it's easier for the team members to use so it's easier to learn on and then from a training.

Standpoint, it enabled tablets, which were in probably close to 170 restaurants as well and the beauty of tablets is that keeps that server on the floor. So they have more time to interact with that gap. It helps with the speed of the guest.

Marianne.

And it's again easier for those team members to you and.

And then just in general it will help enable some of that digital technology that Sandy mentioned.

The next question comes from Gregory Francfort from Bank of America. Please go ahead.

Hey, Thanks for the question I had one one clarification. The two questions. The first one just on the $25 million rent common <unk> is that a gross number not excluding what you're rolling off it just to clarify that.

It said and I'm, just going to correct me, but it's a net number so its 25 million in incremental rent. That's net of all the transaction of that 8.9 million of cash rent most of its the amortization piece of it.

Got it Okay got it and then HM.

That's helpful. Then just the two questions I had to pursue them.

Margins and I think that better than than I would have expected were probably anyone would have expected three or four months ago and I think one of the important question for the investment community is.

If you go back to 100% you the recovery I guess I should say when we what do you think margins go do you think there are a couple of hundred basis points higher because of the alcohol program you guys have kind of down deficiencies in the menu do you think it may be lower because you have some incremental costs around eat the food safety.

What's your thoughts in terms of 100% you view recovery and where the margins might go on that.

So excellent question and we're all looking towards a period when we are in a more normalized time period, and we have more normalized sales I guess, what I would say is that there's going to be a number of puts and takes so from that you know on the expense side, we'll have more normalized.

Expenses kind of back in the business, but we will benefit from our accelerated cost savings of $50 million cost saving and then I guess another piece of it will be where the sales are coming from so I think we've talked a little bit by in the past that off premise sales had a slight.

The lower flow through just based on the higher.

Supply cost.

Okay.

Okay, and and then maybe my other question is.

Yes, it does.

Please move recently to do there.

Uhhuh their version of it goes to Q2, and I think the market very excited and.

I'm curious maybe sandy whats your thoughts are on our use goes kitchen I think the word loosely but your thoughts on how that plays out how cracker barrel might fit into that trend or if you guys want to participate in that trend and how it might work. Thanks.

Great well.

We we've been thinking about that as well the one thing I figured out is that people use the word goes kitchen to mean a lot of different things. So let me tell you how we're thinking about the opportunity for cracker barrel and how we intend to at least go after go after it initially so we're going to be couldn't.

Hurting one of our locations in Indianapolis actually to be a catering only kitchen and what I mean by that is it'll be a location.

<unk> will focus on just developing in that market a catering business potentially have new menu items that the stores are not really in a position to either heavy equipment.

The expertise or the time to produce it.

It will be able to concentrate sales delivery capabilities in one place where also plan to use it to do individual to go for things like door Dash, we might choose to use it to supplement the stores needs at peak holiday seasons, where sometimes our capacity.

Strain constraint at times like Thanksgiving is.

Is the is our locations ability to manage the volume of the off premise with the dining guests. So we're we're going to explore how having this asset might allow us to even further expand the seasonal business that we're doing in our stores. So.

That's the way we're going to start out looking ended I'm excited I'm to get into it and to give you an update on our next call.

The next question comes from Alton Stump from Longbow Research. Please go ahead.

Hey, good morning, everybody up you'll be for taking the call up.

Okay. One question, but just before I get to that yeah, hi, going back to the comment about heading into winter season, you know Andrew Outdoorsy to guess on my math right over 40% of your stores or it's sunbelt states. So to speak I would take that people would actually why did you all say more often.

You know in the past is you know versus the mid summer and wrong about or just kind of what's the thought process is as far as that offsetting obviously up north where crude won't be as much outdoor seating.

[noise] Oh, you're you're right, we're hoping that Tom you know, we have a nice dry fall through the sunbelt and through Florida, and you certainly are able and lots of.

Lots of places, where we do business, we believe we will be able to leverage our outdoor seating.

For as for the the majority of the year, but.

Even here in Tennessee, we do have days, where you would not want to sit outside.

Yeah that makes sense and then you know kind of the big question, Richard it's going to pick back over the last six months out so kind of you know being up 35% over sales here for Q.

That's what kind of other things you have learned over the last six months to use you know.

Once you do eventually get past coded you know to help bolster your law.

Helped bolster your long term goal so.

Lots of lots of learnings and I think and.

Anyone who has after going through this is hopefully take a minute to figure out what what have they learned and how they can apply it to being even better going forward. So.

We've learned that the brand can be more innovative than maybe we expected our operators and their capacity and resilience and dealing with a rapidly changing environment has been just absolutely phenomenal just magnificent.

I think that we have realized that our guests are are forgiving in these times and they have been really flexible when it does come to.

Weather, we've had to open and then re close in response to a particular communities requirements or whether weve had menu items or a temporary shortages and the items or limited menus to deal with the realities in particular locations. You know, we we have front porch.

Dining and we had a loving it and our guests love it but we weren't really designed to do that so it's a little bit more difficult on our servers.

To take care of the guess out there and there's a lot of.

That that they've been really flexible and giving us the freedom to try some things I think that was a big learning.

We we didn't learn but I was pleased to have confirmed that we have a lot of employees who were.

Ready willing and able to come back when we needed them to and that has been.

Great benefit to us that door brand and our guests and then we learned about how loyal our guests or to the brand and how much they missed.

Oh, the food, we offer and how much I think our brand and the experience and our brand reminds people of just safer happier times and that role we play for them and you know their families whether they're celebrating something or they're just all trying to get.

Back to normal.

Great. Thanks, so much for color.

The next question comes from Robert Derrington from Telsey Advisory. Please go ahead.

Thank you Susan can you give us a little bit of color. When you talk about the digital store rollout are we talking about an upgraded and improved ALP.

Can you give us some kind of color on them, how it essentially will help the business.

Yes, yes, it is an upgraded.

AP, so you're probably if it's kinda hundred 50 stores, if you happen to be in the proximity of one of those and you were to log onto our App and will redirect you to the new cracker barrel lap and what it does is give you a much more integrated.

And improved user experience.

For both ordering food. So it's just the way it helps you navigate the menu and customize your water is more clear as well as.

Attach retail to it so that's what the initial pilot is really foundations about integrating what you get on the wait list in a way that we think that guest will understand better and will be a better experience and then as I mentioned on that.

Platform, we intend to then add additional functionality that will help us be able to personalize and you know remember you personalize make suggestions customized and then eventually support a loyalty program.

That's great and as a follow up you know traditionally in the southeast and I think a lot of parts of the country.

You know football season is a really big time for travel per week and four.

Morning Breakfast Sephora game, you'll the fact that so many schools are essentially kind of shutting down or really dramatically restricting the number of consumers who can go to a football game does it does it give you any pause for concern.

Or there are no programs that can offset though you know what.

You know what would a perspective there.

Well, you've just said just just one of the many issues that we have Ben I'm trying to understand the impact of as we think about our sales expectations for the full I mean, you're you're right those those football weekend that.

The biggest issue schools, that's not going to happen in the same way they certainly did before [noise] well.

Whether that'll be offset with families who would have flown somewhere and now their vacation plans are going to be get the family in a car and just travel somewhere by car and do smaller vacations, and maybe that will be a benefit to us as an offset you know were hoping so but although the football weekend.

This might be the big events that you remember, but you know just whether or not kids are going to go back to school and stay in school and the soccer tournaments and just the normal movement of.

Of the country, if we're going to have to see how it how it plays out in the fall and and what we hope is that we're going to be a brand. They trust. It will be an experience that they have confidence in and that we will be there.

Staffed and ready to go whenever they try to use us.

This.

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

So the last several months have presented significant disruptions and unprecedented challenges, which we're likely to be facing for some time.

But that said I have great confidence in our brand and in our company's future Cracker barrel remains a trusted and highly differentiated brand with loyal guests. We believe we have a strong value proposition with great appeal in any economic environment, and we're confident that we have the right business priorities and plans.

In place to further strengthen our brand and our business model and to drive long term value creation. So thanks.

So thank you all for joining US today, we appreciate your interest and support.

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

[noise].

[noise] HM.

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[music].

Good morning, and welcome to the Cracker barrel fiscal 2024th quarter earnings call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero after todays presentation.

[laughter].

There will be an opportunity to ask questions.

I would now like to turn the conference over to Adam Hannah manager of Investor Relations. Please go ahead.

Quarter non-GAAP financial measures are adjusted to exclude the fees related to two sale leaseback transactions and noncash gain on sale of assets related to the sale leaseback transaction that occurred during the fourth quarter.

Non cash impairment charges related to store assets and their related tax impacts.

Full fiscal year non-GAAP financial measures are adjusted for the items listed above as well as expenses related to kind of a 19, an impairment charge related to our equity investment and Patrick also show and their related tax impact of these items.

Last page of the press release includes a reconciliation from the non-GAAP information to the GAAP financials.

On the call with me. This morning are cracker barrels president and CEO, Sandy Cochran Senior Vice President and CFO, Joe Gorder, and Vice President Finance and Jeff Wilson.

Sandy will begin with a review of the business and Joe or review the financials and outlook.

We'll then open up the copper questions for Sandy Jill and Jeff.

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 now.

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.

We caution our listeners and readers and 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 filed with or furnished to the SEC.

Finally, the information shared on this call as valid as of todays 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 barrels President and CEO Sandy Cochran Sandy.

Thanks, Adam Good morning, everyone. Thank you for joining us and I hope everyone's continuing to stay safe and healthy.

Since we last spoke in early June our business and the casual dining industry have unsurprisingly remained pressured due to the pandemic, but despite this very pleased with the progress we've made on our recovery.

She initiatives in recent months.

While we anticipate dealing with pandemic related challenges for some time I believe the decisive actions, we've taken to strengthen our business model bolster liquidity.

Data operations have us well positioned to successfully navigate this environment.

Confident our fiscal 2021 business priorities and the corresponding plans will further strengthen our leadership position in cash.

Casual dining and drive long term value creation.

Ill discuss some fourth quarter highlights and speak to you about our priorities and plans for fiscal 2021, then Joe will review, our fourth quarter financial results and our liquidity comment on our expectations for fiscal 21, as well as our sales performance quarter to date.

Before I go on I want to common channel, we staffing and our commitment to ensuring a safe and healthy environment in our stores our may.

Through the fourth quarter, approximately 80% of our core for us and return to work.

I'm also impressed with our operators commitment to ensuring a safe environment for both our guests and our employees.

I believe these factors have been well continue to be important in the current environment.

Especially proud of how our store managers and hourly team members continue to deliver our mission of placing people during these difficult times.

I want to again express my gratitude to all of our employees for the excellent job they've done over the past several months.

We were pleased with our sales trend and the sequential monthly improvements we saw in the fourth quarter.

For both store restaurant sales decreased 39.2% in the quarter.

Proving from down 59% in May to down 28.2 in July.

This improvement has continued into fiscal 21.

We believe this trend has been driven by our reopened dining rooms sales improvements at stores with open dining rooms increased demand and the success of our off premise and menu initiatives.

Additionally, we believe these results reflect the strength of our brand our strong everyday value on the trust our loyal guests have allowed us to deliver great safe experience with genuine hospitality.

Even when the hospitality is delivered with the face mask on.

We also believe we benefited from summer travel.

The demand for off premise dining has remained strong in the fourth quarter, we leverage successful initiatives such as third party delivery curbside pickup and are.

And our family meal baskets offering maintained its popularity with our guests.

Supported by our work to further enhance our off premise operations. These sales grew approximately 145% over the prior year quarter.

<unk> represented approximately 35% of fourth quarter restaurant sales compared to approximately 8.6% in the prior year quarter.

During the fourth quarter, we rolled out the new lunch and dinner menu that is part of our menu evolution initiative the.

The menu includes new craveable offerings, such as chicken pot pie and Maple Bacon grilled chicken, which are available every day.

Well as new daily specials, such as Saturday country, fried pork chops since Sunday pop rest supper.

Additionally, we believe the new simplified menu results and increased consistency in execution.

That better highlights our signature offerings value and variety.

This is a significant initiative, which we've been taking a phased approach and I continue to be pleased with the results.

It began with the introduction of our signature fried chicken platform in fiscal 2019.

I am looking forward to the future menu innovation, we have planned as part of this initiative in fiscal 21.

Continue to make progress on the addition of a beer and wine program to remain.

As a reminder, the time of our last earnings call. This test was an approximately 20 stores.

Currently these offerings are available in approximately 100 stores based.

Based on the favorable results, we'll be introducing the beer and wine program to the majority of our system in fiscal 21.

And we expect it to be in approximately 600 stores by the end of the fiscal year.

I remain excited about this initiative and in addition to the financial benefits. We believe these offerings support the guest experience by providing additional variety.

The performance of this initiative has been in line with our expectations and while it is mostly targeted enhancing the dinner day part or most of us have proven to be quite popular in the breakfast and lunch day parts.

I was also pleased with our retail performance this quarter, especially considering the headwinds our retail business is facing as a result of our dining room closures in capacity restrictions.

Teams were focused on managing inventories and strong sales in categories, such as furniture to corn assess release contributed just topline retail performance that exceeded our internal expectations.

We believe consumers are looking for affordable ways to improve and update their homes during the pandemic and that our offerings in these categories strongly appeal to guests.

Provided a compelling price value relationship.

Fiscal 2020 was unlike any year, we've ever experienced and the challenges presented by the pandemic have.

Will persist into our fiscal 21.

Build on these priorities to drive performance and long term value creation amid this challenged environment.

Our fiscal 21 priorities include the following.

First and most importantly, ensuring the health and safety of our guests and employees.

Second driving restaurant sales by leveraging our new menu introducing additional craveable offers and further growing our off premise business.

Third driving retail sales by increasing off premise attachment and optimizing our floor space for the current reduced capacity environment.

Fourth enhancing our digital infrastructure and evolving our digital strategy to drive sales and improve the guest experience across all channels.

And last accelerating the growth of Maple Street Miskin company.

And I want to speak to some highlights of our fiscal 21 business plans and priorities.

Our first in top priority is ensuring the health and safety of our guests and employees.

Our elevated health and safety measures remain in place and our teams continue to do an excellent job diligently executing the procedures and protocols and adapting to a dynamic situation.

We're committed to prioritizing and we will be investing in health and safety over the long term and we believe this emphasis has and will continue to strengthen the trust that both guests and employees have in our brand.

Culinary plans are focused on driving frequency by leveraging our new menu and introducing new craveable offerings during the fiscal year.

For example, our Q1 menu promotion features our new chicken pot pie the highlight of our new menu.

Being supported by an integrated marketing campaign that includes national TV.

Fiscal 21, we're focused on growing our various off premise channels by building brand awareness and affinity.

Optimizing off premise operations.

And leveraging initiatives such as curbside pickup in third party delivery.

Additionally, we will be testing to new off premise formats grab and go and a dedicated catering kitchen.

We believe grab and grow will drive incremental to go purchases from our dining guests and can build off premise behaviors and guess that may not use that to go channel as often.

Our dedicated catering kitchen is designed to improve our ability to meet demand in high volume markets and drive productive growth in catering.

These tests are launching this month and will share additional details in future updates.

I continue to be impressed with the adaptability of our teams and I'm pleased with how we've been able to quickly and successfully introduce initiatives such as front porch timing.

This is currently available in approximately 350 stores and has helped mitigate the impacts of the capacity restrictions.

Additionally, in certain locations. We've also set up tables than the intense in our parking lots.

Teams are focused on ensuring we deliver hospitality to our guests whether their dining in our stores on our front porch picking up in order to go.

And we continue to adjust our operations to support the guest experience for all of these occasions.

In retail we are currently focused on our core holiday business, which accounts for a significant portion of our annual retail sales.

In our retail stores are presently set the fall and holiday Assortments.

We're encouraged by the early performance of these Assortments and believe our affordable and unique holiday decor and merchandise will resonate with guests in the current environment.

Our teams continue to work on optimizing the floor space in response to the capacity restrictions.

Additionally, we are focused on driving higher retail attachment for off premise occasions, and this will be a key priority for the teams throughout the fiscal year as we evolve our assortments and the location of merchandise targeted for off premise gas.

In fiscal 21 will be enhancing our digital infrastructure and evolving our digital strategy to drive sales and improve the guest experience across all channels.

The coming weeks, we'll be launching our digital store to our system, which is a new digital platform that provides an integrated and improved user experience for guests ordering food and retail.

It is foundational for future planned initiatives that we believe will further enhance the guest experience and in power gas by giving them more control over their journey.

In addition to increasing convenience, we believe the digital store and these initiatives allow us to extend our hospitality in new ways.

The digital store is already live in approximately 150 stores and the initial response has been positive as we've seen strong user engagement.

No other technology initiatives that will provide additional guest experience enhancements as well as cost savings opportunities as our new Pos system.

We had suspended our roll out do the pandemic and I'm looking forward to resuming the implementation.

Approximately 175 stores currently have the new Pos than we planned for approximately 500 stores to habit by the end of the fiscal year.

I continue to be impressed with how the Maple Street team is navigating difficult environment and I'm excited about the brand's future.

The resilience that demonstrated during the pandemic has reinforced the attractiveness of the concept and their business model.

We have a high degree of confidence in this brand and we anticipating seeing up to 15 new units this year.

Lastly, before turning it over to Jill I'll update you on our capital allocation strategy.

Continue to work closely with the board to ensure we have the appropriate capital allocation strategy.

We believe we are well positioned from a liquidity standpoint, and remain committed to our highly disciplined and balanced approach to capital allocation.

Top priority is investing in cracker barrel and maple straight.

Regarding the regular dividend our board continues to evaluate the environment and intends to reinstate the dividend as soon as is prudent to do so.

And lastly, we're evaluating our debt levels and we'll be normalizing our leverage both by reducing debt and by increasing EBITDA.

And with that I'll now turn it over to Jill.

Good morning, and thank you Sandy in light of the ongoing impact of Kobe 19, My prepared remarks will focus on our fourth quarter financial performance and our liquidity position then I will provide some comments on our outlook for fiscal 2021, and our recent sales trends.

I would like to begin by discussing our financial performance for the fourth quarter of fiscal 2024.

For the quarter, we reported total revenue of $495.1 million.

Decrease of 37.1% compared to the prior year quarter.

Our restaurant revenue decreased 38.2% to $401.5 million and our retail revenue decreased 31.7% to $93.5 million.

Despite the headwinds from the pandemic, we were pleased with the improvement we saw throughout the quarter in our comparable store restaurant sales.

Fourth quarter comparable store restaurant sales decreased 39.2% with sequential monthly improvements from down 59% in may to down 28.2% in July being.

The improvement during the quarter was broad both geographically and across Dayparts with our dinner daypart remaining the strongest and the breakfast Daypart thing the biggest improvement we build.

We believe our topline results have been supported by summer travel improvements in dining room capacity.

Initiatives, such as our new lunch and dinner menu and in a portion of our stores. The addition of front porch dining and the introduction of beer and wine.

Yeah.

Now moving on to expenses overall, we were pleased with our manageable expenses during the quarter as well as the cost savings, we achieved as part of our business model improvement initiatives.

Total cost of goods sold in the quarter was 30.5% of total revenue versus 28.8% in the prior year quarter.

We delivered restaurant cost of goods sold of 24.7% of restaurant sales, which was relatively flat versus the prior year quarter.

Our retail cost of goods sold was 55% of retail sales versus 48.7% in the prior year quarter. This.

This 630 basis point increase was primarily due to employee discounts and increased use of markdowns as our.

As our merchandising team aggressively work to manage our inventory.

I'm really proud of our retail teams, who have been diligently working to ensure appropriate inventory levels and deliver improved retail sales in a difficult environment.

Our operators continued to do a nice job managing labor this quarter as labor and related expenses were $187.8 million or 37.9% of revenue compared to $276.2 million or 35.1% of revenue in the prior year costs.

Peter.

Other operating expenses were $141.3 million or 28.5% of revenue in the fourth quarter compared to a $164.5 million or 20.9% of revenue in the prior year quarter.

These fees were partially offset by approximately $3 million in cost savings realized during the quarter from our corporate restructuring initiatives.

GAAP operating income was $40.1 million or 8.1% of revenue on.

On an adjusted basis operating loss was $20 million.

Net interest expense for the quarter was $9.9 million compared to $3.9 million in the prior year quarter the.

The increase in interest expense was primarily due to higher debt as a result of drawing on our revolving credit facility in order to bolster our liquidity.

Our effective tax rate for the fourth quarter was 16.8% compared to an effective tax rate of 13.9% in the prior year quarter.

This increase was primarily driven by deferred taxes recorded as part of the sale leaseback transaction that occurred in the fourth quarter.

We reported fourth quarter GAAP earnings per diluted share of one dollar and five cents and adjusted earnings per diluted share was a loss of 85 cents.

Earnings initiatives, drawing down on our revolver.

Exercising our accordion feature and completing a sale leaseback transaction we.

We believe these actions combined with the strong performance of our operations teams have put us in a strong financial position.

I would now like to spend time discussing our two sale leaseback transactions that.

The first transaction closed in the fourth quarter and involved a group at 64 properties that were part of a previous sale lease back that was set to expire in 2021.

We entered into a new lease agreement with better terms that will result in cash rent savings of approximately $30 million over the life of the 20 year agreement.

Additionally, we entered into a second transaction to further bolster our liquidity. This transaction closed in the first quarter of fiscal 2021 and resulted in US selling 62 properties for approximately $150 million. We believe the company is historically strong financial performance.

Helped facilitate the transaction and secure and attractive long term rates.

Quarter results also included $5.7 million in fees related to the two sale leaseback transactions.

Adjusted fourth quarter operating income and adjusted EPS results I referenced earlier exclude this gain and these fees as well as noncash impairment charges related to store assets.

Adjusted EPS also excludes the related tax impacts from these items.

We anticipate the second sale leaseback will result in a noncash gain on sale of assets of approximately $218 million in our first quarter of fiscal 2021.

Actions.

Our cash rent will increase $8.9 million versus the prior year, which includes the reduction in rent from the better terms of the first transaction as well as the increase in cash rent for the group of stores in the second transaction that are now being leased.

I now want to walk you through our change in cash from the end of the third quarter through the end of August.

We ended our third quarter with $363 million of cash on hand.

At the beginning of our fourth quarter, we exercised an accordion feature an increased our borrowings by approximately $40 million.

During the fourth quarter, we generated approximately $64 million and operating cash flow, primarily driven by our improvement in comparable store sales.

Some of the cash from our improved performance was used to invest in our key initiatives such as our digital guest experience enhancements expansion of the new Pos system, and our beer and wine initiatives.

We ended the fourth quarter with $437 million of cash.

The sale leaseback transaction, we closed on in August further increased our cash and we ended the month of August with approximately $565 million of cash.

We believe our strong liquidity position enhances our flexibility both for managing through the environment.

And as we consider capital allocation going forward.

Before moving to our outlook.

I would like to comment on Maple streak, we are pleased with their performance and with their resilience during the pandemic as all of their stores are open with limited dine in service.

We continue to believe they have strong unit economics, which in a normal environment includes targeted eightys over $1 million store level, EBITDA over 17% and the build out cost of less than $750000.

We are excited about accelerating maple streets growth and anticipate opening up to 15 stores in fiscal 2021 and.