Q1 2022 Ruth's Hospitality Group Inc Earnings Call
Good morning, ladies and gentlemen, welcome to today's Ruth's Hospitality group first quarter 2022 earnings conference call.
At this time all participants are in a listen only mode. Following the company's formal formal remarks, we will conduct a question and answer session.
Instructions will be provided at that time for you to queue up for questions. As a reminder, today's conference call is being recorded and now I'd like to turn the conference over to Kristy Chipman, Chief Financial Officer, and Chief Operating Officer. Please go ahead.
Thank you, Jason and good morning, everyone. Joining me on the call today is Cheryl Henry our President Chief Executive Officer, and chairperson of the Board and Mike Hi, Vice President of Finance and accounting.
Before we begin I'd first like to remind you that part of our discussion today will include forward looking statements. These statements are not guarantees of our future performance and therefore undue reliance should not be placed upon them.
We would also encourage you to refer to the Investor Relations section of our website at our HCI dot com as well as the SEC website at SEC Gov for copies of today's earnings press release, and our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating and financial results.
During this call we will refer to adjusted earnings per share. This non-GAAP measurement was calculated by excluding certain items. We believe that this measure represents a useful internal measure of performance you can find a reconciliation of adjusted earnings per share in our press release for today's call I would now like to turn the call over to <unk>.
<unk> Chief Executive Officer, Cheryl Henry.
Thank you Christine and good morning, everyone before we shared the details of the quarter I want to take a moment to acknowledge the efforts of our team members and our franchise partners over the past two years.
Their hard work and commitment brought us through extremely challenging times acquisition brief Chris have a clear leader in fine dining category.
As always our success stems from serving the highest quality food with genuine hospitality and with that as the company's foundation, we can better focus on and deliver the total return strategy that has benefited our shareholders over the years.
That strategy starts with organic growth and we're pleased to be investing more than $50 million this year and two new restaurants.
Locations, Remodels and digital technologies that drive that growth improve our guest experience and our restaurant operations.
It also includes returning excess cash to our shareholders through debt pay downs dividends and share repurchases taken together. We believe these actions will sustain the underlying growth and profitability of the business, while creating significant value along the way.
As far as the first quarter. We're pleased to have delivered solid results with year over year earnings per share growth of 17%.
This was driven by a sales recovery throughout the quarter and a continued focus on margins and it's safe to say that despite ongoing challenges like inflation and supply chain disruption. Our team has delivered an impressive start to 2022.
Our top line sales in Q1, 2019 levels and our momentum improved each month to end the quarter with comp sales exceeding 8%.
This momentum continued leaning to double digit comp sales growth and positive traffic through April .
This is especially encouraging given certain regions of the country and our private dining business remain below pre pandemic levels.
We attribute the recent demand compared to 2019 to a few factors.
An increase in our just because and special occasion visits.
Second the continued contribution of our Ruth's anywhere program.
Finally, we benefited from our digital transformation plan, which is now gaining traction.
Moving onto profitability, we posted a solid restaurant margin as labor and cost of sales stabilized during the quarter.
Christie will discuss our financial results, including labor and commodity expenses in greater detail, but it's worth noting that changes in our labor models delivered savings of approximately 156 basis points during the quarter compared to 2019.
All in all our underlying business is strong.
Confidence at our current investments, which include building new restaurants will generate solid returns.
Our focus for that development is to establish tangible cadence of new units with the goal of five to seven new restaurants annually.
In March we successfully opened our first restaurant of 2022 in Aventura, Florida and while early we are pleased pleased that it has outperformed the system and our sales expectations.
Excluding aventura, we remain on track to open a total of five new restaurants over the course of this year with two expected to open in the third quarter and two in the fourth.
In addition to those new restaurants opening we have two relocations currently under construction one in Winter Park, Florida as well as one in Woodland Hills, California. These.
These relocations reflect our new contemporary design that leverages outdoor dining spaces and larger bar areas. As we expect these restaurants to open by end of the year.
In terms of future pipeline, we are finalizing the lease for a restaurant in Albany, New York and are in the final negotiations for two additional leases when combined with leases previously signed we expect to have a total of five restaurants in the pipeline for 2023 soon and continue our work to find the best.
Sites for the future.
Despite increased material and construction costs, we remain committed to returns consistent within our historical levels.
Our investment in digital transformation is also a critical part of <unk> strategy as we outlined in early 2020, we are focused our transformation initiatives on three key pillars.
Enhancing the guest experience, reducing friction and increasing our teams productivity.
Pleased to report that during the quarter, we rolled out our proprietary platform that uses restaurant specific data to improve demand forecasts and our table management.
Well, it's only been a few weeks it has already resulted in high single digit traffic increases on the weekend, which is encouraging.
Of course investments in new restaurants, and new technology won't be successful without that people behind it and that is why we continue to invest in hiring training and deploying world class team members.
To that end, we made further progress during the quarter, adding managers through our restaurants.
Each of our locations are returning to pre print.
Sales and traffic volume.
Before I turn it over to Christy, Let me quickly summarize where we stand on our total return strategy.
As I mentioned earlier, we are investing over $50 million in capital with the majority of that investment supporting growth initiatives that we will believe.
We believe will generate a solid return for investors to complement that investment we are returning cash to shareholders through a 17% increase in our dividend payments, while also paying down $45 million in that.
We've done this while maintaining a net cash position of over $25 million.
And have roughly $25 million left on our most recent share reauthorization.
So to keep our momentum we will continue to focus on the details of execution, which includes providing an incredible dining experience for every guest every time. They visit we're not only confident that we can navigate external factors that might come our way, but also in delivering value for our shareholders and the profit I will now.
I'll turn the call over to Kristy shipments to cover the specifics of the quarter. Thank you Cheryl for the first quarter ended March 27th 2022, we reported GAAP net income of $10 4 million or 31 cents per diluted share.
This represented a 14, 1% and 16, 5% increase respectively compared to the first quarter of 2021, excluding adjustments non-GAAP diluted earnings per common share was also 31.
Total.
Revenues for the quarter increased 44, 5% to $126 1 million compared to $87 3 million in 2021 company owned restaurant sales increased 45, 4% to $118 7 million compared to $81 6 million in the prior year.
Comparable restaurant sales for the quarter increased 41, 5% versus 2021 and increased approximate that increased eight 1% compared to 2019.
Paired to 2019 by month comp sales were negative 0.2 in January positive 11, five in February and positive 14, 4% in March.
As Cheryl alluded to earlier January demand was slowed by the omicron variance, but as you can see guests rapidly return to our restaurants in February and March.
As a reminder, we took a price increase in late March of approximately three 4% on certain products, including beverages. We also recalibrated certain restaurants within pricing tiers to date, we have not seen a noticeable change in mix or traffic due to this price increase.
Franchise income for the quarter was $4 7 million up 24, 7% versus the same period last year driven by comparable domestic franchisee sales of 23, 8% and international franchise comps of 29, 5%.
Other operating income was $2 7 million up 45% versus last year.
Moving on to a restaurant expenses food and beverage cost for the quarter increased 445 basis points versus 2021. The main driver of the increase with beef, which increased approximately 37% for the periods, even though prices declined each month sequentially.
As a reminder, we have a lot on approximately 70% of our purchases during the first quarter last year.
Our total market basket increase approximately 28% compared to the first quarter of 2021, reflecting continued pressure in nearly all foods categories, including beverages.
During the quarter, we entered into a new forward pricing agreements and we are now locked for approximately 20% of total beef volumes through mid August of this year.
Labor expense for the quarter versus 2021 increased approximately 150 basis points due to the operating restrictions that existed last year.
However, when compared to 2019 labor expense for the quarter improved 156 basis points, driven by labor efficiencies, partly offset by increased wages.
Our full year guidance of 200 basis points of improvement for the year versus 2019 remains intact.
Clearly variations were considered in that guidance.
Moving beyond restaurant expenses, combined marketing and G&A as a percentage of total revenues was 11, 2% compared to 10, 5% in the first quarter of 2021, reflecting our investment in the digital transformation, we have underway and adding resources back to the business.
That said, we expect marketing and G&A to be in the range of 10, three to 10, 8% of total revenue.
As of.
March 27, we had $66 8 million of cash and our outstanding debt was $50 million. Since then we've repaid an additional $25 million in debt for a total repayments of $45 million since the beginning of 2022.
As of May 2nd our net cash position was approximately $25 million.
Finally, our board approved a second quarter dividend of <unk> 14 per share and as Sheryl noted, we have approximately $25 million remaining on our share buyback authorization.
Now I'll turn the call back to Cheryl Henry for a few closing comments.
Thank you Christie in closing, let me reiterate how pleased we are with our solid start to 2022 and a strong demand from our guests as they return to our dining room.
This brand was established by single working Moms 57 years ago. This month, we are veteran operators and franchise partners with decades of experience, who have honed their skills and agility and have continued to elevate this business and our hospitality through every hardship in downturn. We believe the company is positioned for.
Long term success I would like to thank each of our team members franchise partners and shareholders for their continued support.
For joining us on the call. This morning, and I look forward to taking your questions.
We will now begin the question and answer session. That's a good question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
Okay.
Our first question comes from Brian Vaccaro from Raymond James. Please go ahead.
Hi, Thank you and good morning.
Hoping you could give us a little more color on the sales acceleration that you saw in February and March and it sounds like a sustained in April as well and obviously exiting the Amazon impact but.
Are you seeing I guess to what degree are you seeing previously lagging regions catching up to other regions that had already recovered.
And also to what degree are you seeing business lunches and dinners recover in recent months.
Yeah, Thanks, Bryan so.
Regionally, we still we had mentioned, Hawaii, and Boston and Manhattan, specifically and they still have not fully recovered we're seeing slow recovery and a couple of those markets.
It's more in the April timeframe.
And as far as private signings during the quarter that really didnt see a recovery we are seeing a bit more of that I think as we've talked about it and people are back to work.
Beginning of March we saw a lot of back to work and I think youre starting to see that reflected in the April numbers, but we still see that as an opportunity in front of us to continue to grow through the back half of the year.
Okay.
Okay, and sorry, if I missed it but I.
I think in past quarters, you sort of stripped out Hawaii Boston Manhattan.
Can you provide the excellent comps ex those markets this quarter.
Sure.
Those markets had about a 600 basis point impact for the quarter.
Okay.
Great Great and Brian .
You mentioned the 600 to 700 in the past and you can kind of see where that where that was.
I'd say that everybody is improving including them, but as the rest of the system had positive comps.
We're still seeing that relative difference between those markets, even though they are improving from their lows theyre just not improving as quickly as the rest of the basis.
Understood, Okay, and then the quarter to date.
I just wanted to confirm you are up double digits versus 2019.
Just wanted to confirm that and then Christine could you level set what that means in terms of average weekly sales.
Yes, Brian so that it's against both but yes, 2019 as I'm speaking to specifically when I mentioned it in the script.
Yes, So 2019 average weekly sales of $108 five in period, one 141, 7% period to $1 28 in period three in the quarter was $124 seven.
I'm sorry, yes. Thank you for that I was asking about April Oh, I'm, sorry, we're up double digits.
Hi.
Hi, Brian The April average weekly sales look a lot like March in the 127 million 28 range.
Okay, Okay great.
And then.
Wanted to ask about some of the digital transformation you touched on.
Cheryl at the beginning of the call can you elaborate you talked about a high traffic high single digit traffic improvement.
With some of the new seating initiatives and the demand forecast. So just elaborate a little bit on what that means.
That's impacting the business.
Yes, so Brian I mentioned, specifically that's on the weekend I think if you go back even probably 2019, we talked about changing out some of the way the restaurants were laid out and better utilizing all of the real estate in the building. It's benefited us greatly during COVID-19, we could not have anticipated that but this is really where we're starting to see the data.
Behind the initiatives kind of combined with the work that we've done around the seating and floor plan and so we're able to on those high volume days take advantage of that and make sure we're utilizing optimum capacity in the restaurants.
Considering labor and guest experience as well until we fully enrolled towards the end of January I would say it was really in effect by the end of February beginning of March and so we're starting to see that positive impact and again, it's early but it's really behaving the way we during test believed it would behave across the system.
Okay, Great and then last one for me just on the commodity front.
Christie you mentioned that the new contract in place through August it seems like the spot market has moderated, especially on the prime side could you just touch on what you're hearing in terms of beef fundamentals.
And perhaps give us a little bit of a sense of how you expect your inflation to be in the second quarter just to make sure. We're all on the same page.
Yes. So these fundamentals first.
We continue to we continue to talk to our suppliers certainly.
<unk>.
Herd size and.
Drought conditions and things are working against us but.
And we've seen these kind of increase from the first quarter lows, but not significantly yet at this point as it comes through our system. So.
Heading into the summer, we think that beef prices are increasing from where they're at today seasonal demand type production drought higher transportation costs are at a situation, where we're keeping a good eye on while prime grading is slightly lower as well from a year ago. So I think overall.
It continues to be very difficult, which is why we are not providing cogs guidance at this point in time I think when you look at the rest of the basket.
We would expect another quarter of inflation similar to what we've seen this year, because really our inflationary pressures didn't start until the back half of 2021.
Non beef.
Non beef okay, alright, thank you I'll pass it along.
Thanks, Brian .
The next question comes from Nicole Miller from Piper Sandler. Please go ahead.
Thank you good morning, just following up on that inflation.
Topic, what was inflation in the basket in the first quarter and I think it was versus really no material inflation a year ago in the first quarter.
That's right, 28% 28, and the total basket, including beef.
In the second quarter I understand you know what.
What youre, saying about no cogs, but I guess I would say what maybe for the course of the year.
And knowing the lock I think you said through August is.
Is it the similar level of inflation than that runs through.
That framework or something higher or lower.
Are you speaking to beef, specifically, Nicole it really up to you because I'm sure you can place your Dyson I can take it either way it doesn't matter no I would say that we started to see higher beef prices in the back half of the year last year.
And so we will be coming up and comping against those higher beef prices and as I mentioned, we saw fees coming down.
Sequentially through this quarter and into April we do it is starting to come back in and trend along the historical seasonal levels and so I think that in the back half of the year beef prices will moderate.
I think from an O and similarly from an overall inflation, we start to lap a higher cost space in the back half of the year for the rest of the food item and therefore, I think it will moderate I can't I can't give you a percentage per se of what we think inflation will be its just too uncertain right now, but I do.
Do believe moderation is coming in the back half of the year.
And then switching to development are the two re lows considered within the five new stores. So it's three net are those in addition to the to the five new store openings.
Those are definitely.
Okay. Okay. So it's <unk>.
And what can you tell us about the pipeline. So one got opened right in Florida, I don't know how many more specific you want to call out, but just you know.
How is development tracking.
<unk> and for the rest of the year is at a good pace you know do they pull forward did they get pushed back how's that looking for the other four.
Yes.
Earlier this year Nicole.
Talked about getting to a more normalized cadence of five to seven I mentioned earlier, we will have five this year and then again the two the two reloads.
And we've announced two sites for 'twenty, three and I mentioned today three other that are in the final stages of lease negotiation. We expect to have soon and we continue looking I think some of the changes we talked about in the floor plan and the Dubai has opened up some opportunities for us and Thats why we said five to seven versus kind of a pre COVID-19.
In three to five and so where we are looking we will be as always careful and meticulous about how we choose our sites, but we are finding opportunities out there. So we continue with that that thought around five to seven going forward.
And just a last one I realize the question around in a recession is a little tricky in.
Even just lower GDP is painful without an outright recession you know what's interesting is if that were to be the case, you don't have any or don't have as much.
Business business to lose right that went away with Covid and did a fine job more than of replacing it with a local business gaster social user. So if we head in that direction you know what happens to the gas too has been just nothing but absolutely robust up until this point, we're still through through this.
Current today period.
Right now it is true we haven't seen I mean, we're seeing the same headlines and volatility in the market, especially this week, we have not seen that yet in our weekly.
Sales and traffic numbers, we've I've mentioned earlier we've been.
Our 57 year old company. This month, we've been through many downturns to consumer.
We'll feel an impact at some point, we believe theres some resilience to our higher end consumer and that may be what youre seeing play out right now.
We have again, a very experienced team very experienced franchisees. So we are prepared we have some always where were putting our plans together. We have guests that are more value oriented we're able to meet them, where they are in the moment and so I won't speak specifically all of the economist opine on how deep and win but I know that this team is prepared.
And we understand.
If things get tight how our guests respond, but and you're right. We were just talking about the idea that sometimes you start to see it the windshields is a little bit of the corporate dining, but given where that thing. We know we've had other revenue channels that can offset that and we're putting our plans in place and we'll be ready.
Great. Thanks again.
The next question comes from Andy Barish from Jefferies. Please go ahead.
Okay.
Good morning, how are you guys.
How are you.
I'm good thanks.
Could you just as we start to see the new unit growth.
Ramp back up can you give us a quick refresh or kind of.
New unit productivity.
What you underwrite to in terms of.
You know top line volumes, just given some of the changes you've talked about some of the smaller markets.
Youre starting to bring into the into the unit growth as well.
Yeah at Gulfstream speak broadly about the expectation for these losses. So as you mentioned smaller markets smaller boxes or patios and then the way we're thinking about it the cost as I mentioned are going up, but we're expecting more productivity out of them from top line fit standpoint, as well as when you overlay from the digital.
Initiatives.
And price as well that these volumes are or will be considered higher and we're seeing that it's early we've got a couple of them.
Boston is up now and running and so that's how we think about it broadly.
Yes, I mean, I think when you talk about it from an overall return standpoint, that's exactly right. So even though cop material costs are up.
Miller too.
That's about 20% or so.
We are also seeing the topline grow relative to the things that Sheryl mentioned and therefore from a total return perspective, we're doing well with the openings, we have and as we start to build out going forward. We're looking at.
Similar types of topline topline volume.
Okay, great. Thank you.
Just on the on the marketing and G&A excuse me obviously.
Rent heavier in the first quarter versus your guidance for the year.
Can you just give us a little color in terms of what what was going on there.
Is it the tech spend kind of upfront.
Timing.
Yeah, So certainly our tech that our digital transformation technology spend both from a capital perspective as well as an expense perspective is.
Loaded in the front half of the year.
The other thing that I would mention is we're at it you know we have started to see the lapping we added some team members last year. So from an overall G&A perspective, that's coming in and then on the marketing side, we saw gift card sales.
The strong in the first quarter and the discounts associated with those folks through our marketing line and so those those are sitting in there as well.
Interesting and then just one other thing Cheryl you mentioned Ruth's anywhere.
Where is the off premise mix and.
Is that did you call that out.
Thirdly in the winter months.
You see a little bit more of that as patios in some places are not as available.
Sure.
Just give us a little more color on that please.
Yeah. So broadly we recently there was a 100% of our business back in the early 2020.
I think we are we are finding that right balance when the demand is so high for the experiential four wall Gen.
Genuine hospitality and then just seeing it as a valuable valuable revenue channel at certain parts of the day in parts of the week and so we're balancing that.
Last year and yes to your point are seasonal so I think ever.
Other than the fourth quarter, it was a bit higher as a percentage of sales we saw Q1 as.
Amazon.
Turning to slow down and we're seeing the restaurants you can physically again, we're looking at between between three and 5% of sales still very valuable and the work. We're doing now is to understand.
Where we can turn that off if there's opportunities to take advantage of.
Capacity, that's not there can we do it and to go to go sales.
And then when we really want to make sure we're focused on the in restaurant experience.
Sure.
Awesome. Thank you very much.
Okay.
Again, if you have a question. Please press Star then one.
Our next question comes from Todd Brooks from Benchmark Company. Please go ahead.
Hey, good morning, everybody.
Good morning.
I was wondering if you could give us maybe some qualitative comments we're coming into.
Mother's day this weekend father's day graduation that occasion business what are you seeing.
Relative to maybe fiscal 19 as far as maybe pent up demand for gathering now that we're through two years of this and people are.
To an extent done with it and they want to get back out there and celebrate a bench with friends and family.
You just said it I think we are seeing a lot of that I think we saw a little during the holidays are giving to the fourth quarter, but again that was kind of overshadowed by the beginnings of an economy. So I think now we are seeing a combination of the work, especially on the holidays and Thats really high peak high.
High capacity days, the combination of the demand from the gas and being able to meet that demand through the capacity utilization platform that's in place.
So we are seeing fairly significantly over what we saw in 2019 under Mike. If you have anything you want add sure just.
The number on Easter, which was in April .
Our most recent holiday historically Easter is not as strong for us as mother's day or father's day, but its still a great holiday for us and we saw.
Performance this year, plus 30% versus 2019.
Great. Thank.
Thank you secondly.
Secondly, following up.
And I know, we spent time talking about digital transformation.
And kind of.
The table efficiency, but are there any other early wins coming out of the program that you want to highlight for us.
Yeah, I'll just mention one I mean, I think we bucket it into three places right and that was enhancing the guest experience reducing friction in the productivity of the team.
The productivity of the team work is in front of us and we've got some tests in place I'm not going to speak to specifically yet on that but I do look forward to sharing more the other one I will mention is.
We've been working on the hospitality side and I think that.
I've said this a lot is R. R K.
<unk> taking of this brand is that the idea that this is a high human touch business and we don't want to ever use a piece of data our technology and put that in front of that hospitality. So we've actually taken the approach of how do we use data and technology to enhance the hospitality and so we put.
A test in place in many of our restaurants and it seemed to be fully rolled out that gives our restaurant teams. The access to information that allows them to make the experience.
Even better for our guests and early very early but early signs are if it's paying off in.
The ratings were getting some of those experiences as well as some of the repeat visitation and so that goes to our focus on making sure whatever we put in the restaurants and whatever data we use as a benefit to the guest and ultimately to the business, but that's that's another one where we're excited about and we look forward to sharing more about in the future.
Okay, Great. Thanks, and then final question for me.
Christi, you talked about about locking in 20% of the beef needs through late summer.
Yes.
Just 20% you didn't interpret it wanted two ways one prices were coming down at that point, maybe you were hoping for more moderation. So you didnt want to lock more or your supplier partners felt.
Felt like it was okay. We're kind of we see the outlook for the back half of the year, we don't want to enter into agreements to lock more beef would you lock more if you could or do you feel there is more opportunistic levels to maybe lock more of the beef needs.
In the future Yeah, I mean, we locked for certainty right, we're not going to try to.
Time, it to get to the exact low we're going to we're going to do our best to July for certainty right now I don't have any any.
New locks to share, but we're always looking at it and making sure that.
We have a forecast out for what we think beef is going to be on the market and if a lock.
Seems to be good for us and favorable and in the money, we're going to lock as much of that belief is we can sit down with the projections we have.
And historically, how much would you run with locked typically.
Yeah, I think it's variable I mean last year. This time, we were locked in at this time, but in Q1, we were locked for 70% now we're locked for 20%. So you know again, it's just going to be based upon the volatility of the market our confidence in the projections that we have from the suppliers et cetera.
I can't I can't.
But an exact percentage for now okay.
Okay, Great. That's helpful. Thank you.
Yes.
The next question is a follow up from Brian Vaccaro from Raymond James. Please go ahead.
Hi, Thanks, sorry, if I missed it but two quick follow ups on menu pricing. If you take no additional increases could you just level set where effective pricing would be over the next couple of quarters.
Sure. So no additional pricing Q2 would be seven four.
Q3, five nine in Q4, four point out if we take no pricing for the rest of the year.
Okay.
Okay.
Whats your current posture or thinking towards potentially taking additional pricing with beef moderating et cetera.
We're going to be looking at our private dining menu more more closely in the next couple of months, So I could see us taking something small there no no.
Analysis, yet, but we always look at that about this time of the year and then as I've mentioned in the past we are we're sensitive to price, even though we've taken significantly more price over the last 12 months than we historically would have so but we're going to continue to look at it I think the inflationary trends beyond beef will continue to happen.
With labor.
All of that's going to go into our equation as we look in the latter half of the summer for.
Whether or not we should take more price okay. Okay.
And just in terms of the macro read if there are any within your business in recent weeks or months I'm not sure. How real time, you can see this but is there any change in recently on the number of celebrations birthdays et cetera.
Assume I'm not sure, but I'd assume captures maybe some more economically sensitive guests that could be fill in some of the pressure of high gas prices broader inflation et cetera are you able to see anything like that in your recent trends.
Gentlemen.
I would say not particularly it's nothing that we would call out specifically that draw.
Driving our results and nation slow down if that's what you're kind of <unk>.
Alluding to might happen.
Obviously, our jets alright.
Cross segment of the population and so I think we're all we're all in that wondering how strong are the balance sheet, how long will they be coming coming into the into the restaurants for the celebratory occasions, but I think we also know that looking at it and listening.
People are favoring services, including restaurants and experiences much more than they are hard goods and so we are going to be ready to capture as much of that as we can for the rest of the year.
That makes sense and then last one I just wanted to take another shot at commodities and I know its uncertain, but I guess just everything we know today I just didn't sort of the spirit of making sure. We're not surprised everything we know today and make sure. We're all the same page.
And I don't know, where you set the contract on the 20% obviously, but.
It seems that you step back it seems like your basket inflation could moderate towards 10%.
As a ballpark year on year in the second quarter.
Is there anything material that might be missing if you'd be willing to comment on that.
So.
I think what I said was I think Q2 is still especially if.
You exclude beef Q2 will be similar to Q1, which is you know.
19%. So I think we have one more quarter of higher inflation. When you compare it to 2021 and then it will moderate the degree with which it will moderate is really uncertain right now.
Okay, but year on year inflation on beef should moderate pretty rapidly.
In the second quarter as well right absolutely.
That is correct.
Okay I'll pass it along thank you.
Thanks, Brian .
There are no more questions in the queue. This concludes our question and answer session.
Like to turn the conference back over to Cheryl Henry for any closing remarks.
Thank you Jason and thank you all for joining the call today, we look forward to updating you again soon have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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