Q1 2021 Cracker Barrel Old Country Store Inc Earnings Call
The cracker barrel at school 2021 first quarter earnings call.
All participants will be in listen only mode true need assistance. Please signal conference specialist by personal Starkey followed by <unk>.
After his presentation on the opportunity to ask questions.
No at this event is being recorded.
[music].
Oh, okay.
Mr Mann.
Manager of Investor Relations. Please go ahead.
Thank you good morning, and welcome to Cracker barrels first quarter fiscal 2021 conference call on webcast.
Morning <unk>.
Press release announcing our first quarter results.
This press release at on this call.
From a non-GAAP financial measures for the first quarter ended October 30 at 2020.
At first quarter non-GAAP financial measures are adjusted to exclude the gain on sale of assets related to the sale leaseback transaction that occurred during the first quarter guidance.
Cash amortization of the asked at recognized from the gains on the sale leaseback transactions expenses related to the proxy contest initiated by affiliates of start RV glory and their related tax impacts.
The company believes that excluding these items from its financial results provides investors with end have to understanding of the company's financial performance.
This information is not intended to be considered in isolation or as a substitute for net income of core earnings per share information on prepared in accordance with GAAP.
The last page of the press release includes a reconciliation from GAAP to non-GAAP information to the GAAP financials.
On the call of me this morning on Cracker barrels president and CEO of Sandy Cochran.
Senior Vice President and CFO, Jill Golder end, Vice President of about 10 day, possibly.
Anyone of again with the review of the business and Joe will review the financials and outlook. We will then open up the call for questions for Sandy Joe and John.
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.
These are known as forward looking statements, which involve risks and uncertainties and in many cases are beyond management's control and may.
<unk> actual results to differ materially from expectations.
I caution our listeners generators on considering forward looking statements and information.
Any of the factors that could affect results are summarized on the cautionary description of risks and uncertainties found at the end of the press release at are described in detail at our reports that we filed with or furnished to the FCC.
Finally, the information shared on this call at the validation of today's date on the company undertakes no obligation to update at except as may be required under applicable law.
Ill now turn the call ever at a 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.
Good day I'm going to begin my prepared remarks by briefly discussing our first quarter performance and then I'll touch on our Q2 plants provide an update on our initiatives at comment on our outlook.
You can see from our press release, we deliver at first quarter results at significantly improved upon the previous quarter.
Comparable store restaurant sales declined 16.4% in the quarter improving from down 39.2 per cent in the fourth quarter.
I believe our results demonstrate that we have the right strategy in place and underscore the strength of our brand on the trust our guests have enough to deliver a great sales experience.
The health of safety of our guests on employees remains a top priority our elevated procedures remain in place on we continue to learn and modify our processes based on C.D.C. state and local health Department guidelines.
I'm proud of how our teams continue to adapt to a dynamic situation, while delivering hospitality door and guess what other dining at our stores on our front porch picking up in order to go.
From a coronary standpoint, this past quarter was the first full quarter in which our new lunch and dinner menu was available in all stores.
Updated menu introduced every day offerings, such as our new chicken pot pie, which we featured on Q1.
And maple they can't grilled chicken most of what you've been very popular.
We believe the redesign menu reinforces our strong value proposition and underscores our variety of both of which are differentiators for our brand.
The demand for off premise remain strong during the quarter, we continue to focus on leveraging successful initiatives such as third party delivery at curbside pickup.
Enhancing our on premise operations at building brand awareness of affinity.
Comparable store off premise sales per 122 per cent compared to the prior year quarter end represented approximately 25% of total restaurant sales compared to approximately 9% in the prior year quarter.
I was very pleased with our retail performance on a quarter as we again delivered topline retail performance that exceeded our internal expectations.
Comparable store retail sales declined 8.1 per cent in the first quarter compared to a decrease of 32.3% on the fourth quarter.
The core personal care in furniture were among our top performing categories and we also saw strength in our Christmas assortment of as guests continue to look for affordable ways to celebrate the holidays in their homes during the pandemic.
In short we had a solid first quarter on which we saw improvements of both comparable store sales on an adjusted earnings per share compared to the fourth quarter did.
Additionally, we generated positive cash flow was strengthened our liquidity position on.
We ended the first quarter with nearly $600 million on cash.
We were hoping the days of significant dining room closures at capacity restrictions were behind us, but unfortunately in recent weeks, we've seen nationwide research on says and many of our stores have been impacted would close dining rooms or more restrictions on capacity.
It remains a fluid situation that could worsen regardless of the headwinds that we may face I firmly believe that we are well positioned to navigate this environment and I have great confidence in our plans on initiatives.
As many of you know our second quarter of typically one of the busiest quarters on cracker barrel has always had a strong connection with the holidays.
Well at this year's holiday season, it's already been on will continue to be starkly different than in years past, we're focused on providing comfort hospitality at a safe experience for our guests whether their dining in our stores or enjoying our scratch cooking meals in their homes.
Second quarter is a key period of our off premise business and we believe the strong demand for heat and sort of offerings reflects the trust guess haven't cracker barrel to provide a delicious home store meal. During these special holiday occasions.
In anticipation of family celebrating holidays differently. This year, we introduced new offerings for those were hosting smaller groups of friends and family.
In addition to our traditional heat <unk> serve fees that stores up to 10 for hundreds of 39 99, we introduced a new smaller heat and sort of family dinner offering that serves up to six guests for 69 99.
Additionally, our country fried, Turkey, which is currently being featured in our seasonal menu promotion. It's also available as a family meal baskets at 39 99.
We were pleased with the Thanksgiving week sales at those off premise offerings on we're excited about our holiday Ham heat sort of offerings that are available in December.
In retail we are focused on our core holiday themes and on providing unique merchandise at compelling price points with an emphasis on value gift, giving season on the core.
Oh, we're pleased with the response that yes of had to our Assortments.
We are managing our inventories very closely for stores close dining rooms at more severe capacity restrictions. Our teams are really focused on sell through of on merchandise on.
Stores with opened dining rooms were focused on supplementing our assortments to ensure appropriate inventory levels, particularly given our strong first quarter retail sales and our conservative Boston, that's an unusual dynamic and I believe the team is doing a good job managing true the situation.
I've already touched on our dinner menu and on premise initiatives and I want to give you an update on several of our other initiatives beer and wine digital store and Maple straight.
We remain excited about our beer and wine and there should have approximately 250 stores currently have beer and wine but.
At the stores, what these offerings beer and wine sales were approximately 1% of dine in restaurant sales during the first quarter, which we achieved with limited merchandising and we believe beer and wine sales have been highly incremental.
We've been pleased with the early results of this initiative.
And we believe that over the next 12 months, we can more than double the percent of beer and wine sales as a percentage of dine in restaurant sales.
We look forward to completing the rollout and we expect that by the end of the fiscal year, nearly 600 stores will have beer and wine offerings.
At this time, we don't anticipate introducing beer and wine beyond the 600 stores, mainly due to the substantially higher cost of licenses and the remaining markets.
Another key initiative is our digital store, which we launched on the first quarter.
As a reminder of this is a new digital platform that provides an integrated at improved user experience and it's foundational for future of planned initiatives that we believe will further enhance the guest experience.
We're encouraged by the initial results on looking forward to leveraging its capabilities going forward.
We believe the digital store and other planned technology initiatives allow us to extend our hospitality in new ways of.
Increased convenience and empowered guests by giving them more control over their journey.
I now want to provide an update on Maple Street I remain pleased with their performance on how they've navigated through the pandemic, which has reinforced our confidence on the brand on its business model.
We remain optimistic that we will achieve targeted day you the use of over $1 million.
Similarly to cracker barrel Maple Street saw strong improvement in their first quarter comparable store sales, which grew by approximately 20 per cent compared to the prior year quarter.
These results include the benefit of being opened on Sunday in the current year.
Their performance has been in line with our expectations on we're looking for true introducing this exciting brand to many new guests and we remain confident that maples true well make a meaningful contribution to our results over the long term.
In closing I'm pleased with the strong improvement we saw on the first quarter results and with the progress we're making on key initiatives.
We are however, anticipating significant headwinds in the coming months at our outlook remains cautious due to the recent nationwide resurgence isn't cove at 19, and the resulting increased restrictions that have been imposed in many of our communities as well as the related impacts to the of cost me in consumer spending.
While we expect greater headwinds through at least the remainder of the second quarter I'm highly confident in our ability to navigate through this on certain environment for several reasons.
First we have a strong balance sheet and ample liquidity.
Second we have already demonstrated we can successfully adapt and manage through an environment, where significant dining room closures and now we have the benefit of our learnings on experience from earlier in the year.
Third our initiatives remain relevant even in a more challenged environment and while the recent resurgence as may slow down some of our initiatives. We will continue to make prudent investments to drive long term value creation.
And lastly, and most importantly work trust to differentiated brand with a loyal guests and with that I'll turn it over to jail.
Good morning, and thank you Sandy today, my prepared remarks will focus on our first quarter financial performance updates on our strategic initiatives and our liquidity position then.
Then I will provide an update on recent sales trends and comment on our outlook.
We'd like to begin by discussing our financial performance for the first quarter of fiscal 2021.
For the quarter, we reported total revenue of $646.5 million, a decrease of 13.7 per cent compared to the prior year quarter.
Our restaurant revenue decreased 15.1% to $515.2 million and our retail revenue decreased 7.6% to $131.2 million.
We were pleased with the improvement we saw in our comparable store restaurant and retail sales compared to the previous quarter compare.
Comparable store restaurant sales improved from down 39.2% in the fourth quarter to down 16.4% in the first quarter.
The sales and from that was broad both geographically and across day parts of this.
South was our strongest performing region dinner.
<unk> remained at the strongest day part and all three day parts on solid improvements.
We believe our first quarter topline results were driven by improvements in dining room capacity, our new lunch and dinner menu.
On premise initiatives.
And for a portion of our stores front porch dining out.
Our first quarter comparable store restaurant sales consisted of a traffic decline of 18.3% and a 1.9% increase in average check which included core menu pricing of approximately 1%.
Off premise sales grew 122 per cent compared to the prior year end represented approximately 25% of total restaurant sales.
Comparable store retail sales improved from down 32.3% in the fourth quarter to down 8.1% in the first quarter driven by strength in categories, such as decor personal care and furniture.
Now moving on to expenses.
Total cost of goods sold in the quarter was 30.8% of total revenue versus 29.3% in the prior year quarter.
Our restaurant cost of goods old was 25.7 per cent of restaurant sales versus 24.6% in the prior year quarter.
It's 110 basis point increase was primarily driven by commodity inflation of 1.9% outpacing our core menu pricing as well as changes to many of them.
Our retail cost of goods old was 50.6% of retail sales versus 49.6% in the prior year quarter. This 100 basis point increase was primarily driven by lower initial margin.
Labor and related expenses were $227.2 million or 35.1% of revenue in the first quarter compared to $263.3 million or 35.2 per cent of revenue in the prior year quarter.
This 10 basis point decrease was primarily due to our cost savings initiatives.
Partially offset by sales de leverage of fixed costs and wage inflation outpacing core menu pricing wage inflation on a constant mix basis was approximately 2.5%.
Other operating expenses were 100 of $61.3 million or 25% of revenue in the first quarter compared to $162.9 million or 21.7 per cent of revenue in the prior year quarter. This 330 basis point increase was primarily driven by sales day.
Leverage.
General and administrative expenses in the first quarter were $39.6 million.
When excluding approximately $5.2 million related to our proxy contest general and administrative expenses in the first quarter were $34.4 million or 5.3% of revenue compared to $39.6 million or 5.3% of revenue in the prior year quarter.
Our current year results include approximately $3 million of realized cost savings and lower general expenses due to the ongoing impact of Cove. At 19. This was partially offset by approximately $1 million in one time expenses related to our beer and wine initiatives.
GAAP operating income was $237.1 million or 36.7 per cent of revenue adjusting for the gain from the sale leaseback transaction that closed in August the non cash amateurs Asian of the at that recognized from the gains on the sale leaseback transactions and expenses related to our per.
Hoxsey contest adjusted operating income was $27.7 million or 4.3% of total revenue at.
Adjusted EBITDA was $54.1 million.
Net interest expense for the quarter was $10.7 million compared to $3.6 million in the prior year quarter.
The increase in interest expense was primarily due to higher debt at the result of drawing down on our revolving credit facility in order to bolster our liquidity.
Our effective tax rate for the first quarter was 24.6 per cent compared to an effective tax rate of 17.7% in the prior year quarter. This.
This increase was primarily driven by a reduction in tax credits and taxes on the sale leaseback transaction in the current year.
We reported first quarter GAAP earnings per diluted share of $7, an 18 cents.
Adjusting for the items outlined in our press release and the related tax effects at.
Adjusted earnings per diluted share were 69 cents.
I now want to speak to our liquidity position.
We ended the first quarter with $597.6 million of cash compared to $437 million at the end of the fourth quarter.
The increase in our cash was driven by the sale leaseback transaction and the cash we generated from operations.
We continue to believe we are in a strong financial position due to the active management of our balance sheet and the actions we have taken to strengthen our liquidity.
We believe our strong liquidity position enhances our flexibility both from managing through the environment and as we consider capital allocation going forward the book.
Board continues to evaluate the environment and our debt levels and they will maintain a balanced approach to capital allocation and we'll 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.
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 earnings guidance, although I still want to provide some forward looking commentary.
We are on track to achieve our sustainable cost savings target of $50 million.
In the first quarter, we achieved approximately $12 million on cost savings, which brings the total amount realized to date to approximately $25 million.
We expect to achieve the remaining balance of our target over the next two quarters.
We anticipate that slightly more than half of the savings will come from labor and related.
And approximately 20% from GSK with the majority of the remaining savings coming from other operating expenses.
As we have discussed there will be offsets to these cost savings, which can be grouped into three categories.
First we're making investments on labor and supplies to support our enhanced health and safety protocols.
Second we other expenses related to our strategic initiatives.
In fiscal 2021, we expect approximately $8 million of one time expenses NGL day of which approximately $6 million are related to beer and wine and approximately $2 million are associated with our digital initiatives.
Third we anticipate a net 20 million dollar expense related to our sale leaseback transactions, which consists of approximately $25 million of rent of which about $9 million is cash.
Offset by approximately $5 million in reduce depreciation.
We now expect commodity inflation on a constant mix basis of 2% to 2.5% due to higher projected costs in fruits and vegetables pork and beef.
We expect an effective tax rate of 19% to 20 per cent for the full year.
Well, we were pleased with our overall sales improvement in the first quarter as a result of the recent resurgence as of co that we've seen an increase in the number of dining room closures and didn't capacity restrictions, which are negatively impacting our restaurant and retail sales.
Quarter to date preliminary comparable store restaurant and retail sales are down approximately 20 per cent compared to the prior year.
As a reminder of the month of November is a unique month for us due to the fact that Thanksgiving week is typically our highest volume week and includes the benefit of our special occasion on premise offerings.
While we were pleased with our Thanksgiving week results, the rising coded cases, and the related impact have created meaningful headwinds in our outlook remains cautious.
We've seen significant variation between stores that are limited to on premise only end stores that have opened dining rooms.
As of the beginning of this week approximately 100 stores had close dining rooms.
Our full second quarter comparable store sales will be highly dependent on the number of of dining room closures and the level of capacity restrictions in our system as well as guests willingness to eat out although.
Although our outlook is cautious on the environment is uncertain. We believe we are well positioned and we are highly confident in our plans and our ability to navigate these challenges at.
And with that I will turn it over to the operator for questions.
Well now begin the question and answer so Oh.
Good question my per store the one on your books at home phone.
For use of the speakerphone, please pick up your handset before pressing the keys.
Withdraw your question. Please press Star then two.
At this time of pause momentarily to assemble the roster.
First question is from Alton Stump of Longbow Research. Please go ahead.
Great. Thank you God and get people call just talk.
Current back to the point that you made your you know what.
You know I guess could it be a huge weak for you guys as you know during the month.
That's what the interplay was between obviously there once people traveling but I did at <unk>. They were at wants more groups on average the country might fit well with other he observed no.
That's a whole platform so.
I was curious as to kind of what the puts and takes were particularly over the holiday at what.
What that might portend to your you know from the Christmas holiday season as well.
Great. Good morning, and thank you Alton, yes, overall Thanksgiving from a weak standpoint, it's one of our highest volume week and we were pleased with our overall performance, especially in light of the current environment.
As we look at our sales our heat and sort of sales were better than what we had expected primarily due to the shift to our off premise as well as the introduction of the smaller on premise offering that sandy talked about in her prepared remarks, both of those were were very popular.
So we were pleased with the overall demand and believe that that really underscores how the offerings really resonated with our guests on.
On the travel side, you're right. It was its a noisy quarter at that noisy time for us. It does seem like people were less likely to travel and probably are going to be less likely to travel during the holiday season, given the resurgence Inc. Co bid of so that said.
Even though travel was probably down in the aggregate for US we do believe that overall, we're poised to benefit from those guests when travel kind of opens back up.
So is that helpful Alton.
That's great color and then I guess, just one quick follow up you know as far as unit builds or has there been any slowdown recently because of the surge.
Okay as far as your plans to build over the course over next couple of quarters.
So old and you're talking about building new units yes.
Oh I see so our you know our unit expectations may be impacted by kind of at I mean, some of it is <unk> per cracker barrel, we have modest number of new units that were looking at opening this year.
So that's still in flux as we look at Maple Street, I'd say, we're being opportunistic and patient you know that team is in the process of building the pipeline for opening new units. So right now they are solidifying the pipeline and frankly as we get through probably.
The next quarter, we'll be able to provide more color on where we are with at <unk> excellent question.
Got it makes sense. Thanks, so much.
The question comes from Joel former of Gordon Haskett. Please go ahead, great. Thanks, and good morning, guys. On you did touch on him with Dot 100 restaurants, roughly that that are closed for only I think that's about 14% of the system, but.
I'm just curious what type of same store sales headwind did that creates a lot for that quarter to date same store sales number.
Oh, Hey, Jeff to Santiago, Nice store and maybe set the question up a little bit of at least what I think the question of the then I'll turn it over to Jill I assume what you're trying to understand at some a little more.
Granularity behind our second quarter sales trend so from can probably at imagine we're dealing with.
Sort of groups of stores and and the way. We're categorizing them is you know were dining rooms are opened greater than 50 per cent at water expectation is there now inside that they're depends on to what degree you might be a tourist location and how that's impacting your business than we've got dining rooms opened but.
Less than 50% of we've got some communities, where it's only 25 and they've gone backwards, then weve got off premise only but guests are allowed into the retail store and they can come into the restaurant, we have expectations. There and then we have curbside on like where guests are not even allowed at sort of in the building and that's at that.
Yeah at it on additional category so our operators.
And these categories are changing they are going in and out of these.
Rules, if you will sometimes with only a couple of days notice and it's unclear how long they'll be in it which is creating an interesting environment for operators to predict demand as it relates to labor and other retail teams as I mentioned embarked prepared remarks, those are very different end.
Vitamins. So if you were to look under the Q2 sales from what you see as sort of a conglomerate. It's on each of those categories has different trends and we're monitoring each of them.
I'll add to jewels, we were pleased with Thanksgiving and I was particularly pleased with how the operators of delivered the sales, which true <unk> point largely shifted as people either couldn't travel or couldn't be on the dining rooms are just weren't comfortable eating in the dining rooms too.
Heat and serve and off premise, but how the operators navigated through all that chaos often at the very last minute. So that just sort of maybe.
Repeats again sort of how complex the situation I'll turn it over to Joe was whether you want to add any numbers to that.
So I think Jeff I would remind you. So we said in our prepared remarks on the first quarter. We had about 20 stores that locations had close dining room. So now as Sandy said in her prepared remarks, we're running about 100 dining rooms, close currently and that 20 stores in the <unk>.
First quarter that was at the end of the first quarter.
So that's definitely had a big impact that's the biggest impact and the change in trend that you're seeing to sandys point, it's a really a fluid situation and you know we're working on trends and certainly trying to help our operators managed through it as well I guess you know all of that said just remind everyone as we talked about.
You know we've got a strong balance sheet, we're on a good cash position to manage through this with our operations team. So we're really focused on.
Favoring a great guest experience and the health and safety of our teams and our GAAP.
That's helpful. On just one more follow ups. So if my information is correct it looks like a state like Kentucky.
Moving to roughly 6% of the system at some point in the last few weeks that's day did suspend indoor dining so the question is.
How did your off from a strategy change how quickly does it change sort of how adept are you guys on sort of reacting or responding to these <unk>.
Mitigation efforts that seem to be picking up speed.
Well at the strategy, we at we'd gone into it with thinking about the assortment, we assume that a lot of guests may even if the dining rooms were opened either wouldn't be able to get end or wouldn't be comfortable. So that's why we created this new smaller heat and sort of all for which we thought would be.
Good day.
The appropriate kind of offer for the for the needs of our guests.
As of the dining rooms closed at the two teams work very hard to move the inventory around.
Right. So that we had more of the supplies in inventory to support more of that kind of business on whether that's the the Turkey or the supplies that you need in order to do the heat and sort of and then we had some really creative things being done by operators a couple of our Kentucky stores close to the 10.
Let's see border I know, we're doing some of the production for stores in Tennessee that allowed the stores in Tennessee to take more business because we were at we had the the production capacity.
From the Kentucky stores. So our operators are doing everything they could to sell everything they could to in whatever way of guest wanted to use us.
All right. Thank you.
Thank you. The next question comes from Jake Bartlett through Securities. Please go ahead.
Great. Thanks for taking the question on your money is really about the run rate of the business I know so you have on its change from the first half of the of the month of November to the back half with the store closings I'm really in the last two weeks you could you help us understand it seems great I would think that that the trends at just selling.
Great at much lower in the back half of <unk>.
On first is that negative 20% on but any help there would would would be it would be useful at helpful. On me at all so just or just to clarify are you.
He said that the Thanksgiving had very strong sort of but was Thanksgiving sales did that.
Help or hurt your relative to that negative 20%. So so potentially kind of excluding Thanksgiving day, maybe even the run rate.
Could be could be a little bit lower.
So Jay Theres a lot in there great question.
So let me start kind of on the overall business from a margin standpoint, if that's helpful. So.
Think about the business in the near term you know clearly in the first quarter, our margins were pressured by the by the overall lower sales and really the de leverage we benefited from the cost savings actions that we've put in place and that was partially offset by the p. an l. impact from the sales.
At least back end the investment in some of our initiatives. So we mentioned that we had about a million dollars of beer and wine in the first.
First quarter as we look at the second quarter, we would expect margins to be similarly pressured clearly the deceleration in the top line would have an impact as well as our on premise offerings. As you think about the heat and serve although they have a great penny per share.
GAAP at their overall Cogs and packaging costs are higher so from a margin standpoint, they add more pressure, but great at.
Any profit there so as well as in the second quarter, we'd expect to see additional investments as we roll out our beer and wine initiatives. So that's kind of the nearer term impact.
From a margin standpoint, looking at at kind of broadly.
Or longer term from at our margin impact we feel really good at about the actions that we had taken so that hopefully post code bed of we're in a good position the $50 million in cost savings that we've taken out of the business will benefits.
Certainly that will be partially offset by the net 20 million dollar impact from of the sale leaseback transaction, but overall those actions were very beneficial I guess were what we don't know is postcode at kind of what that mix of sales looks like not only how much will be on premise, but what the different drive.
Average within on premise and those have modestly lower margin so that could have an impact as well of the timing of our initiative as we rollout our initiatives. Although you know, we're really confident that digital at our other initiatives will create value over the longer terms over the longer term, we think we're going to be at at great space.
Yeah.
So hopefully that's helpful. As you think about it from short term and the longer term business model aspect.
Yeah that is helpful. You I was actually also you'll focus on on the sales level as we try to think about the.
Run rate of the of the business you know.
November was negative 20 per cent, but is it fair to assume that that it's significantly lower.
<unk> <unk> at the month yeah.
Yeah, that's like the <unk> of $30 million question, you know, there's just so much noise and selling much change in the regulatory environment and how that consumer at feeling it's really hard for us to predict what the rest of the quarter will be like but that's on the reason why we wanted to share with you all what our current trends of looks at.
Like so you can understand how we ended the first quarter and what it looked like at the start of the second quarter right, but I guess I guess could you tell us what the in terms of current trends with the last two weeks versus the first two weeks of the month just given how much has changed.
Oh, it's just it's again, it's just so noisy, especially we got the holiday in there it's at two noisy that.
To parse <unk>, Okay, and the whole day was was that a.
Plus or minus in true that 20% threat.
So the only way of foods [laughter]. Unlike other here.
But I'll move on.
Good at all.
Looking first at the same way so I guess, just if we wanted to I didn't mean to be helpful. Yeah. We want to provide information that we think is helpful. So we think at quarter to date trend is the most helpful. At where you got it. Okay. I appreciate that just one question on on pricing one person at your pricing and seems like you inflow.
No I don't think you gave your outlook for labor cost inflation, which we would be helpful. But the true true to that you wouldn't have per cent commodities you imply some de leverage. So this is at 1% of what you plan for the year or is that just timing issue and I'm. You know end you will take more pricing of leader of the year. Yeah. So you might remember that at the end of the last quarter, we talked.
About the fact that we were going to be cautious on pricing. So we didn't go in with more modest pricing at the beginning of the year. We do believe that we will approach that 2% for the for the total year end then yeah. We mentioned that we saw at step up in that commodity inflation and we expect.
Act wage inflation in the true and a half to 3% range.
Great. Thank you very much I appreciate your walk on strike.
Next question comes from Brett Levy MKM partners. Please go ahead.
Oh, great. Thanks, just following up on a on Jeff and Jack's question, and then a couple of others.
You are.
Are you able to quantify.
Just what the drag is from those the 20 stores in first quarter and 100 stores I just think that's the that's the simplest way to ask it and then also when you think about on premise of especially in those 20 in the end 100 stores that have posted on average what have you seen in terms of.
Retention.
Of of off premise, how does that compare to the peak in those markets.
When you were on premise only or how they've been running when you had the dining rooms open and then on change Act on another question.
So maybe I'll start and then turn it over to give me a break channel so.
Oh, yes, yes, we would be able to Brad quantify each category I think were well.
But we're not going to each category, except to say that the best performing stores are the ones where their dining rooms are opened at very high capacity and we have lots of guess at continue to want to comment on with US on all three day parts and so on.
And the worst performing stores or you don't know the ones at the other end to end as they shift.
At.
It was a number of shift at changes obviously, the old I'm on I'm, explaining to you, which probably didn't need to be explained.
It's just so much noise over the next at particularly as we look for the rest of the quarter with a holiday trends and what we expect for travel and vacation and people celebrating that we were just not comfortable offering any more granular guidance yeah.
And then I would just add you know on your question about how much of the off premise sales have we retained it again that is noisy because if you think about it we started opening up dining rooms in may they opened up to a different level than in some areas. They stepped back down. So overall it it's hard to just give.
You end number and Weve retained X percent I mean, what you can see clearly at our first quarter performance with off premise sales growing a 122% and representing about 25% of our restaurant sales. We were pleased with that overall performance clearly some of that is driven by the closures and.
You know, we're just not sure what that level is going to look like post total, but our goal is to retain a large portion of our off premise sales as dining rooms reopened but you know.
With that share at this point.
Then just one of them last a technical question sales of any of your units returned to positive comp territory and if so.
Any any willingness to share of is it.
Handfuls of the percentages of 5% something like that thanks.
Yeah, it actually somehow of its been terrific like I said, our operators are doing everything you know just our outdoor dining and the kind of things. They are doing to capture all of the demand. That's there has been really impressive yes, we have a handful of stores that have gotten to positive comp.
And I guess, Joe unless you want to add more of that's probably.
Just read so.
And I guess, then just turning in a different direction just on the technology from.
What have you seen in terms of your ability to integrate the Pos systems.
Are you seeing any productivity enhancement end and what kind of progress at you're making on your on the mobile and digital initiate in the middle of the Q handle other S.
Right. So this is Joe I'll start with the POS. So currently we've got about 250 stores have the new Pos system in it and you know we're hopeful that we'll roll out another couple of hundred you know through the end of the fiscal year you know the Pos from a cash from that team member standpoint, it's just.
It's easier for the team to use and train on and you're right. It does set the foundation for some of our other technologies like some of the pieces that digital will use and tablet we.
We've certainly found tablets can be very beneficial in the stores that have then for our curbside on some of the off premise piece of it and then I guess I can turn it over to sandy to comment on digital which we're very early on that story. Yeah. So we rolled that on Q was pretty big milestone.
On [noise] was pleased with the early results it was an important component.
On end of our Thanksgiving of performance and we did see improvements in conversion rate. So people that went on line to order, we're able to do so so overall pleased with the start of it looking forward to.
Ah the planned initiatives at old they won't be able to add to it as we go forward from there there were some hiccups at banks at we almost we saw so much traffic that it was well it was a lot more than we had expected. So we learned a lot as we stress the system for sort of for that day and.
So on I'm pleased with the progress we're making there.
Next question is from Joe on power of Wells Fargo. Please go ahead.
At some follow ups to earlier comments first on on the comment earlier in the script the idea of doubling the beer and wine mix within the dining rooms of I think it's one per cent in the 250 stores today.
In terms of thinking about that going forward will that include greater merchandising within the stores. It sounds like to your point earlier, that's not necessarily happening today.
So, yes, and it's part of you know, we don't really have anything on our tables in our dining rooms on the Cove at environment, we don't ever oil lamps or the dessert cards on the table tennis, which was merchandising that would have been a great place to tell our guests about the new beverage.
Each program at a lot of our guess they know the menu so well they don't actually look at it.
So and then so what we're using now is what we can we of posters as you walk into the dining room and so on but I think as we go back to a more normal environment will have more opportunities to tell the story more effectively.
And I think as we get experience just having it for a lot of our restaurants. They only just rolled it out so our servers are still getting comfortable with all the fact of we have a new beverage program and how to how to offer it on.
So I'm pleased with the results broadly speaking that we have now but do believe that at pinned of can double as we do as we get more experience and do a better job of promoting the offering.
Okay. So just to clarify that does not at 2% number. So it does not really include merchandising on the tables, but just broader awareness growth.
I think it's both I think it's going to take some merchandising on the table or doing a better job now we've got some places that have had it for a while and that are close to that now. So I think sometimes gets just have to find it as they visit us and maybe they're there for an occasion, where it makes sense. So I think.
It's kind of take a variety of things to achieve it but I'm optimistic that we can get there.
Okay, and then just switching gears a little bit obviously, you're off premise business has been very successful there at the pandemic and hitting 25% mix on the most recent quarter is great.
I am curious sort of how you're thinking about the on premise business and how that might be evolving your in store value as well right. So today a lot of your off premise is bulkier larger size orders a family of products you can serve six to 10 less than six I'm curious on.
Are you seeing much interest from consumers to kind of go smaller lot sizes occasions, as well, so and what that might potentially mean for your menu overtime, whether it be in store or off premise. For example, you know at does it make sense at some point you should have some handheld sandwiches that aren't necessarily.
The that much of a feature for the on premise today.
Oh, So let me take a stab at first so first of all despite the fact that in the month of November and the second quarter may be can general individual to go is the overwhelming majority of the on premise business its over 60% and so.
So most of our to go are still guess that go on line or call. The store on walk in and they just order one or two entrees you know at <unk> and at that that's probably what you're thinking for all from now for holidays in particular on what we found during the pandemic Steve's fan.
Only meal baskets, where a great solution for a certain need that we hope will now that we've introduced at continue in non holidays with our family meal baskets and that we've even had more of an opportunity to introduce the heat and serve which just as a holiday offer we do at Thanksgiving.
On Christmas Easter.
And we tried something last year on mother's day. So these big packaging. This is really more of a November of thing.
Now secondly, though there's a lot of work being done from on Poland Aerie team about what is the right kind of what is the right additions to the menu to meet the needs of a guess at wants to use the brand off premise on your point about you know handheld lunch is one example, and they've actually does.
On some things that I think are really interesting, taking our meat loaf and making it was terrific fam, which with it and at.
And some things so that we could actually put into a box and and offer a two to be maybe something people would be interested in particularly at lunch. So the colon Mary team is working on what we could do to supplement the menu maybe off premise only handheld desserts things like that.
And I'm I'm looking forward to rolling or testing some of those things on.
On the latter half of this year through next.
Got it. Thank you appreciate that and then just pivoting to the retail business obviously.
I've been struck by how strong the business. It has trended throughout the crisis and I'm just curious if you've picked up anything you know having to scramble throughout this crisis.
To manage that business have you learned anything that's going to stick on the inventory management side ended at future and perhaps how this digital platform that you've just rolled out will help.
Either manage inventory Oh, well, yeah, I guess help manage inventory better than at about.
[noise] Oh, we've learned a lot about inventory management and GAAP.
Laura did at Xplore and her team our retail team did an excellent job heading into the pandemic of cutting inventories and in some cases I think she'd say.
It was old Ah Ah interesting lessons learned because we had great sell through and we don't we probably realize there's probably some areas. We could do we can get better sell through with less maybe the visual merchandising impact of fewer items allowed the guest to really see the product almost more effectively.
So I think there's there's lessons learned about that they have had to scramble Bose. We went into the country went into the year with conservative buys and then we had this phenomenal sell through in the first quarter. So they've had to add things.
And some themes that we're actually going to be bringing end soon that'll give us maybe some new areas that we some new demand at we'll see was available to us.
Digital side, we're working hard to understand the opportunity to attachment to an on premise bye.
That's been more interesting because just the fact that you're coming in to buy you know dinner, one night, but it's hard to kind of get a bead on exactly what we might be able to offer you to add to it they're trying a lot of things I think that the digital store will allow.
Was that when you go on line to order to prompt you on that May give us some learnings on.
And we're also really working on what we merchandise near the to go pick up station to see whats getting traction book, but we probably got a long way to go to really figure that out of completely.
Okay, great. Thank you very much appreciate the time.
Our next question comes from Paul Brooks of C.L. King. Please go ahead.
Hey, good morning, everybody just a few questions for you.
First of all you look back to the first quarter could you maybe share with us if you're looking at the three most of the quarter what the strongest.
Same store sales performance might at that we're just trying to gauge how good the business Scott before we had the comfort for sure.
So great question, you know, you'll remember when we were going into the quarter I'm on the first quarter. We had said we were down approximately 15 20 per cent kind of going in so there there was some improvement as at quarter went on but you know we don't want to get in.
True.
Any particular month, what I would say is the improvement that we saw within the first quarter. You know it was it was really broad you know apart from the capacity.
Strict trends, we improved across all of the day parts at dinner day parts on continue to be the strongest the weekend dinner at still where we tend to run into more of our capacity constraints as well as kind of branch time breakfast and lunch on Sundays.
You know the south was our strongest performing region, but again that might of been.
More aligned with where the capacity constrictions, where front porch dining and things like yeah, Yeah, and we did benefit in the stores that had front porch dining they picked up at about a point and overall sales and again much of that was during that capacity.
Restricted time periods, where you know kind of like the weekend.
Okay, Great and then not.
Looking for specifics on sort of quarter to date trends, but you talked about the four buckets of stores and how fluid.
Things are with stores moving between the buckets, but if you look at.
Just one constant buckets of the stores that have stayed in guiding rooms greater than 50%.
How variable is that performance spend relative to the performance that you saw in Q1.
I'm just trying to get because a couple of couple of times said you've talked about at the customer may not be is willing to come into the restaurant or I'm, just trying to get a sense or consumer attitudes teaching across all the different opening side of this is at the store or our sales pretty consistent that's more of the number of stores moving between the four buckets.
Cost of the decline in same store sales relative to this quarter.
[noise], there's so much.
I know that it would be so helpful for us to be able to kind of your view on more clarity, but it really is both we've got some communities where I do believe that the concerns in the community about the issue broadly is reducing people's interest in dining and we.
We've got other communities where.
Oh, they don't seem at all impacted by the recent resurgence is in terms of of what's happening there.
We've got some stores that maybe they were more travel related and that at the absence of the travel leading into the season, we believe had an impact on them.
And just tearing it all apart is very difficult.
But generally I'm trying to think of some of it would be helpful. But generally the stores that were had sort of as much capacity as they can get my dining room at head off premise.
We continue to be pleased with their performance.
Okay. That's helpful. Thank you and then a final question on book.
Beer and wine you talked about the progression from.
What percent of dining room sales to 2% over hopefully in the coming year.
Part of your assumptions or if you could maybe talk about the assumptions as far as how much of that is related to.
Ah ticket growth with customers versus how much of.
You're attributing to more frequency with the of the availability of and water sources.
Oh, So Todd said the one per cent that we referenced was on same restaurant sales impact from at check standpoint, So that's mix from.
Reading that traffic patterns, and if we're able to growth traffic in this environment. We just have not been able share read that.
Okay. So the eventual moved a one to two were attributing that to to check impact on them.
As of frequency benefit of it could be an incremental tailwind money that's right. They ask you for clarifying that yet.
Okay, great. Thank you both very much appreciate it thanks.
Thanks Todd.
Next question from.
Gregory Francfort of Bank of America. Please go ahead.
Hey, Thanks for the question I had to end.
First of is how would you at as pieces of Spike from coaches of started to get how you manage labor costs and employee turnover on keeping employees on the staffing in the stores that have had to shut down again I'm just sort of curious how you kind of magnitude at night at one of them.
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So thank you for the question other than that it is how they've done an excellent job of it but it's been tough.
No each of the stores is.
First there are just spending time understanding what state that store is gonna be end and predicting b.
Oh, how the demands kind of calm because that has implications on what kind of label we bring in at how much clearly off premise use of some different taught you don't need hosting and a cash condition. The same way. So the managers I mentioned that now the good news about the last few weeks of spend at our off premise business has been so strong.
That we're of largely able to put.
On a lot of people to work.
Doing something in the store and the field had been focused a lot on cross training, which has given them on flexibility.
So I think right now they're doing a good job of managing it but it is difficult and it hasn't been at has required us to pivot at the last minute to accommodate all the changes.
Got it that's old woman and then secondly, I had one question on just on if you look out.
You know there there's so much talk about sales this week or next week at all on this but.
As you look out at a nine months from now at 12 months or whenever I guess this is over.
What are your expectations from maybe what is changed in and I guess I ask you within the context of.
You think consumer wallets will be under lot of pressure on do you think cracker barrel EPS to adjusted EPS. How do you think cracker barrel failures in that sort of environment I don't know if that's a positive or negative for your business from a share or whatever perspective. Thanks, yes.
Yes, so I think that's a a big end and and important question that probably everybody is sort of thinking about a week.
We went into this thinking it was going to be a difficult economic environment and if anything the recent resurgence of have even increase the uncertainty.
About the duration and maybe the magnitude of the economic impact as we come out of it so the unemployment rates improved but it's still relatively high.
The the enhanced on them from the stimulus on the unemployment benefits I think we're providing us or did provide some level of installation and now it's unclear to what degree those will continue.
So you know we expect the consumer to be challenged for some time.
And and and we believe that our brand is well positioned to perform well in that environment. You know Weve got loyal guests. They trust us were highly differentiated a every day value high quality food all the reasons people love US we think.
We'll be one of the reasons they will trust us to comment on with us when it's all over.
You know from a macro cost standpoint, all last June of two to touch on that because what I kind of touched on is at the top line.
And how that's going to shift on Prem and dining room weve already spoken to in terms of consumer preference, but in terms of the cost variables and labor and food maybe you can speak coming out of this store using yeah, no I'm great follow up because we you know we talked about the fact that even in the near term we seen more of an acceleration in.
And commodity costs now some of that was due to the wildfires out in California, but end even like on the beach side, where we saw at accelerate it was a lot of a little bit of combination of demand starting to increase at all so since that hurts at been called there's there was a.
Lot of product there so as businesses kind of rebound there may continue to be pressure on that front.
And then on you know the wage slate of the wage inflation level. You know we mentioned we think for US it will be in the 2.5% to 3% range. It seems more broadly it had moderated but where that ends up I'm.
Not sure of it so we're definitely at still gonna have those inflationary pressures that will continue to put pressure on the overall business.
Thank you.
End of your question. Please press Star then one.
At this time, we have no further questions like that sort of the conference over to Sandy Cochran for closing remarks. Please go on.
Thank you all for joining us today, so while we continue to face the disruptions and challenges from this.
I remain highly confident in our brand and in our ability to navigate through this uncertain environment. We appreciate your interest and support and we hope everyone has a safe and happy holiday.
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Conference is now concluded.
Thank you reported in todays presentation, you may now disconnect.