Q4 2023 Cracker Barrel Old Country Store Inc Earnings Call

Good day and welcome to the Cracker barrel fiscal 2023 fourth quarter conference call all participants will be in listen only mode.

You need assistance. Please signal conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions.

To ask a question you May press Star then one on your Touchtone phone to withdraw your question.

<unk>. Please press Star then two.

Please note. This event is being recorded I would now like to turn the conference over to cable it beyond its please go ahead.

Thank you good morning, and welcome to Cracker barrels fourth quarter fiscal 2023 conference call and webcast. This morning, we issued a press release announcing our fourth quarter results.

In the press release and on the call when we refer to non-GAAP financial measures for the fourth quarter ended July 28, 2023, as well as our expectations for the first quarter.

The non-GAAP financial measures are adjusted to exclude the expected noncash amortization of the assets recognized from the gains on the sale and leaseback transactions certain expenses related to our CEO transition and a corporate restructuring charge. The company believes that excluding these items from its financial results.

<unk> 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 and earnings per share information prepared in accordance with GAAP.

The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials.

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

CEO elect Julie Masino is senior Vice President and CFO Craig <unk>.

Damian Craig will provide a review of the business financials and outlook.

Then open up the call for questions for Sandy Craig and Julie.

This call statements may be made by management of their beliefs and expectations regarding the company's future operating results and 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 X.

Vacations.

We caution our listeners and readers in considering forward looking statements and information many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release.

And are described in detail in our reports that we file with or furnish to the SEC.

Finally, the information shared on this call is valid as of today's date.

The company undertakes no obligation to update it except as may be required under applicable law.

I will now turn the call over to Cracker barrels President and CEO Sandy Cochran Sandy.

Thank you and good morning, everyone.

This morning, we reported total quarterly sales of $836 7 million and an adjusted operating income margin rate of five 3%, which was approximately a percentage point higher than the prior year fourth quarter.

As we said on our last earnings call, our fourth quarter began slowly.

Well, we had expected the traffic would improve in June and July with the onset of the summer travel season.

Unfortunately, this didn't materialize and our restaurant and retail sales performance came in below our expectations.

Although they have stabilized we believe these fourth quarter traffic trends will continue through most of the first quarter as well.

We are of course, taking actions to address them as I'll get to later in the call.

In the face of the topline challenges that we experienced in the fourth quarter. Our teams worked hard to control costs.

Unknown Executive: 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.

Between their efforts pricing and inflationary easing, we were able to deliver higher fourth quarter margins than in the prior year, despite our lower traffic levels.

Unknown Executive: After today's presentation, there will be an opportunity to ask question. To ask a question, you may press star then one on your touchtone zone. To withdraw your question, please press star then two.

Of course, there are other bright spots in the quarter as well, particularly in certain areas likely to help us in the longer term.

Unknown Executive: Please note this event is being recorded.

Kaleb Johannes: I would now like to turn the conference over to you, Kaleb Johannes. Please go ahead. Thank you.

Our operations teams focused intently on the guest experience operational excellence staffing and retention and we made and continue to make meaningful headway in these areas.

Sandra Cochran: Good morning and welcome to Cracker Barrel's fourth quarter fiscal 2023 Conference call and webcast. This morning, we issued a press release announcing the fourth quarter results. In the press release and on the call, we would refer to non-gap financial measures for the fourth quarter and July 28, 2023, as well as our expectations for the first quarter. The non-gap financial measures are adjusted to exclude the expected non-cash amortization of the assets recognized from the gains on the sale and lease back transactions.

We continued our successful deployment of back of the house technology, which will be foundational for us going forward.

And despite a very challenging environment, our retail product assortment resonated with our guests and our teams managed inventories exceptionally well and delivered solid retail margins, even in the face of lower traffic.

Sandra Cochran: Certain expenses related to a CEO transition and a corporate restructuring charge. 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 an isolation or as a substitute for net income and earnings per share information prepared in accordance with GAP.

We launched our loyalty program Cracker barrel rewards internally in late July and I'm excited to announce that it'll be available to guests across the country by the end of this month.

We believe our loyalty program will be a key traffic driver for us over the long term and I'll speak in more detail about the program later in the call.

Unknown Executive: The last pages of the press release include reconciliation from the non-gap information to the GAP financials.

From a full year perspective, we achieved our ambitious goal of growing our catering business above $100 million and we delivered $30 million in sustainable cost savings.

Sandra Cochran: On the call with me this morning, our Cracker Barrel's president and CEO, Sandy Cochran. CEO elect Julie Feltz-Messino and senior vice president and CEO Craig Pamelis. Danny and Craig will provide a review of the business, financials, and outlook. We will then open up the call for questions for Sandy Craig and Julie. On this call, statements may be made by management of their beliefs and expectations regarding the company's future, operating results and expected future events.

We opened a total of 12, new Maple Street, and two new cracker barrel locations and we returned more than 133 million to our shareholders in the form of dividends and share repurchases.

Although we believe that the traffic pressures that we're experiencing reflect a challenged consumer environment.

Sandra Cochran: These are known as forward looking statements which involve risks and uncertainties that in many cases are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnished to the SEC. Finally, the information shared on this call is valid as of today's date.

We also believe they were exacerbated by our marketing and media strategy.

Unknown Executive: The company undertakes no obligation to update it except as may or to be required under applicable law.

The volume and substance of our marketing messages in the fourth quarter were not as effective as we'd wanted.

Particularly against the backdrop of a highly competitive and promotional marketplace.

We lowered our advertising spend because we traditionally found advertising to be less impactful in the fourth quarter and instead invested funds in store staffing and labor, which we think are a longer term imperatives.

And although we focused our messaging on value our message did not breakthrough against the highly promotional advertising we saw from our competitors.

Finally, we think we still have opportunities with regard to the guest experience.

Sandra Cochran: I will now turn the call over to cracker barrels president and CEO Sandy Cochran. Sandy? Thank you. Good morning, everyone. This morning we reported total quarterly sales of 836.7 million and an adjusted operating income margin rate of 5.3 percent which was approximately a percentage point higher than the prior year fourth quarter. As we said in our last earnings call, our fourth quarter began slowly, but we had expected the traffic would improve in June and July with the onset of the summer travel season.

I'd like to turn it over to Craig now for a more detailed look at the quarter from a financial perspective and to discuss our outlook.

Greg its Don I'll come back and comment on the actions, we're taking to address our traffic situation and position us to change our trajectory in 2024 correct.

Thank you Sandy and good morning, everyone.

As Sandy noted for the fourth quarter, we reported total revenue of $836 $7 million, an increase of 0.8% over the prior year quarter.

Restaurant revenue increased two 6% the 679 $3 million and retail revenue decreased six 6% to $157 $4 million versus the prior year quarter.

Sandra Cochran: Unfortunately, this didn't materialize, and our restaurant and retail sales performance came in below our expectations. Although they've stabilized, we believe these fourth quarter traffic trends will continue through most of the first quarter as well. We are of course taking actions to address them as I'll get to later in the call. In the face of the top line challenges that we experienced in the fourth quarter, our teams worked hard to control costs.

Parable store total sales, including both restaurants and retail grew by 0.5%.

Comparable store sales grew by two 4% over the prior year, driven primarily by approximately eight 7% pricing.

Our average check results included a favorable menu mix of approximately 1%.

Which continues to be driven by our culinary strategy.

Sandra Cochran: Between their efforts, pricing, and inflationary easing, we were able to deliver higher fourth quarter margins than in the prior year despite our lower traffic levels. Of course, there were other bright spots in the quarter as well, particularly in certain areas likely to help us in the longer term. Our operations teams focused intently on the guest experience, operational excellence, staffing and retention, and we made and continued to make meaningful headway in these areas.

Providing guests with upgrade and add on options such as our <unk> premium sites beverage program and the $5 take home offerings.

Anticipating a question you might have.

We do not believe our pricing strategy negatively impacted our fourth quarter or I'll call. It traffic in any meaningful way.

As we've commented before we.

We have consistently taken and continue to take a very thoughtful and deliberate approach to pricing.

While our recent price increases have been higher than historical levels.

Sandra Cochran: We continued our successful deployment of Back of the House Technology, which will be foundational for us going forward. And despite a very challenging environment, our retail product disortment resonated with our guests, and our teams managed inventory exceptionally well and delivered solid retail margins even in the face of lower traffic. We launched our loyalty program, Cracker to announce that it will be available to guests across the country by the end of this month.

We track guests value perceptions through a variety of means.

We closely monitor our competitive price points and measure the impact of our pricing actions against the control group to ensure we have not triggered adverse guest behaviors.

We have not seen a negative impact to traffic from our pricing actions.

Even in the currently sensitive environment.

That said, we believe price increases taken by the entire restaurant industry, maybe having a cumulative effect on dining behaviors and we will continue to be mindful of the consumer and competitive environment and the markets. We serve as we make pricing decisions going forward.

Sandra Cochran: We believe our loyalty program will be a key traffic driver for us over the long term, and I'll speak in more detail about the program later in the call. From a full year perspective, we achieved our ambitious goal of growing our catering business above 100 million, and we delivered 30 million in sustainable cost savings. We opened a total of 12 new maple streets and two new Cracker Bro locations, and we returned more than 133 million to our shareholders in the form of dividends and share purchases.

Off premise sales were approximately 17, 2% of restaurant sales as Sandy noted, we were especially pleased with the performance of our catering business, which grew over 35% in the quarter and we achieved our goal of growing it to a $100 million channel this fiscal year.

Comparable store retail sales decreased six 8% compared to the fourth quarter of the prior year.

Although retail sales remained soft we have been pleased with how our team has effectively managed our markdowns and inventory levels.

Sandra Cochran: Although we believe that the traffic pressures that we're experiencing reflect a challenged consumer environment, we also believe they were exacerbated by our marketing and media strategy. The volume and substance of our marketing messages in the fourth quarter were not as effective as we'd wanted, particularly against the backdrop of a highly competitive and promotional marketplace. We lowered our advertising spend, because we traditionally found advertising to be less impactful in the fourth quarter, and instead invested funds in store staffing and labor, which we think are longer-term imperatives. And although we focused our messaging on value, our message did not break through against the highly promotional advertising we saw from our competitors. Finally, we think we still have opportunities with regards to the guest experience.

Moving onto our fourth quarter expenses.

Total cost of goods sold in the quarter was 38% of total revenue versus 32, 9% in the prior year quarter.

Restaurant cost of goods sold in the fourth quarter was 26, 6% of restaurant sales versus 28, 7% in the prior year quarter.

This 210 basis point decrease was primarily driven by total menu pricing of eight 7%, which is inclusive of carryforward pricing for fiscal 2022, and new pricing for fiscal 2023.

Commodity deflation was approximately 0.8% driven principally by lower pork and poultry prices.

Fourth quarter retail cost of goods sold was 48, 8% of retail sales versus 49, 4% in the prior year quarter. This 60 basis point decrease was primarily driven by lower freight and lower markdowns.

Craig Pommells: I'd like to turn it over to Craig now for a more detailed look at the quarter from a financial perspective and to discuss our outlook. When Craig is done, I'll come back and come in on the actions we're taking to address our traffic situation and position us to change our trajectory in 2024.

Our inventories at quarter end were $189 million compared.

Compared to $213 million in the prior year.

Craig Pommells: Craig?

Craig Pommells: Thank you, Sandy, and good morning, everyone. As Sandy noted, for the fourth quarter, we reported total revenue of $836.7 million and increased of 0.8% over the prior year quarter. Restaurant revenue increased 2.6%, the $679.3 million and retail revenue decreased 6.6%, the $157.4 million versus the prior year quarter. Comparable store total sales, including both restaurant and retail, grew by 0.5%. Comparable store sales, grew by 2.4% over the prior year, driven primarily by approximately 8.7% price in.

With regard to labor costs, our fourth quarter labor and related expenses were 36, 5% of revenue.

Versus 35, 5% in the prior year quarter.

This 100 basis point increase was primarily driven by our investments in additional labor hours to support the guest experience.

Our orly restaurant wage inflation on a constant mix basis was four 5%.

Adjusted other operating expenses were $23 zero percent of revenue versus 23, 3% in the prior year quarter.

This 30 basis point decrease was primarily driven by lower utilities and maintenance expenses.

Our general and administrative expenses in the fourth quarter were four 5% of revenue versus three 9% in the prior year quarter.

Craig Pommells: Our average check results included a favorable menu mix of approximately 1%, which continues to be driven by our culinary strategy of providing guests with upgrade and equity. We can add on options such as our shareable barrel bites, premium sides, beverage program, and $5 take home offerings. Anticipating a question you might have, we do not believe our price and strategy negatively impacted our fourth quarter or our current traffic in any meaningful way.

This 60 basis point increase primarily resulted from more normalized incentive compensation.

All of this culminated in GAAP operating income of $41 $2 million adjusted for the noncash amortization of the asset recognized on the gains on the sale and leaseback transactions operating income for the quarter was 44 4 million.

Craig Pommells: As we have commented before, we have consistently taken and continued to take a very thoughtful and deliberate approach to pricing. While our recent price increases have been higher than historical levels, we track guest value perceptions through a variety of means. We closely monitor competitive price points and we measure the impact of our pricing actions against the control group to ensure we have not triggered adverse guest behaviors. We have not seen a negative impact to traffic from our pricing actions, even in the currently sensitive environment.

Or five 3% of revenue.

Net interest expense for the quarter was $4 5 million compared.

Compared to net interest expense of $2 $6 million in the prior year quarter. This increase was a result of higher interest rates.

Our GAAP effective tax rate for the fourth quarter was negative two 1% the negative tax rate was driven by increased credits on lower than expected earnings.

On an adjusted basis, our effective tax rate for the quarter. It was zero percent.

Fourth quarter GAAP earnings per diluted share were $1 68.

Craig Pommells: That said, we believe price increases taken by the entire restaurant industry may be having a cumulative effect on dining behaviors and we will continue to be mindful of the consumer and competitive environment in the markets we serve as we make pricing decisions going forward. Off-premise sales were approximately 17.2% of restaurant sales. As Sandy noted, we were especially pleased with the performance of our catering business which grew over 35% in the quarter and we achieved our goal of growing it to a $100 million channel this fiscal year.

And adjusted earnings per diluted share were $1.79.

In the fourth quarter EBITDA was $72 1 million.

Or eight 6% of total revenue.

Now turning to capital allocation <unk> balance sheet.

We remain committed to a balanced approach to capital allocation.

Our first priority remains investing in the growth of Cracker barrel Maple Street beyond that we plan to return capital to our shareholders, while maintaining appropriate flexibility and a conservative balance sheet.

In the fourth quarter, we invested $36 $9 million in capital expenditures, we ended the quarter with $415 million in total debt.

Craig Pommells: Comparable store retail sales decreased 6.8% compared to the fourth quarter of the prior year. Although retail sales remains soft, we have been pleased with how our team has effectively managed our markdowns and inventory levels. Moving on to our fourth quarter expenses, total cost of goods sold in the quarter was 30.8% of total revenue. New, versus 32.9% in the prior quarter. Restaurant cost of goods sold in the fourth quarter was 26.6% of restaurant sales, versus 28.7% in the prior quarter.

Leverage ratio was one five times, which is within our target range of one three times to one seven times.

Lastly, as we announced in our press release, the board declared a quarterly dividend of $1 30.

I would now like to speak to our outlook and provide some additional color on the guidance in this morning's release.

Historically, we have typically provided full year guidance. However, we have decided to only provide Q1 guidance at this time, given the uncertainty in the environment and our CEO transition.

Craig Pommells: This 210 basis point decrease was primarily driven by total menu pricing of 8.7%, which is inclusive off, a modesty deflation was approximately 0.8%, driven principally by lower pork and poultry prices. Fourth quarter, retail cost of goods sold was 48.8% of retail sales, versus 49.4% in the prior quarter. This 60 basis point decrease was primarily driven by lower freight and lower marked homes. Our inventory at quarter end were $189 million, compared to $213 million in the prior year.

Turning to our guidance.

As we've mentioned traffic.

Traffic has remained pressured during Q1 and for Q1, we currently anticipate total revenue of 800 million to $850 million.

We anticipate opening one to two new cracker barrel stores and four to five new Maple Street during the quarter.

We expect Q1 commodity deflation of approximately 1% to 2%.

Wage inflation on a constant mix basis of 4% to 5%.

We anticipate a Q1 adjusted operating income margin of between $2, two 5% and three 5%.

Craig Pommells: With regard to labor costs, our fourth quarter labor and related expenses were 36.5% of revenue, versus 35.5% in the prior quarter. This 100 basis point increase was primarily driven by our investments in additional labor hours to support the guest experience. Our early restaurant wage inflation on a constant mixed basis was 4.5%. Adjusted other operating expenses were 23.0% of revenue, versus 23.3% in the prior quarter. This 30 basis point decrease was primarily driven by lower utilities and maintenance expenses.

And capital expenditures of $27 million to $32 million.

Our adjustments to operating income include expenses related to our sale leaseback transaction.

Our corporate restructuring charge and.

And certain expenses related to our CEO transition.

All of which are detailed in the footnotes to our reconciliation table at the end of our earnings release.

Randy will describe our plans to improve our profit performance momentarily, while delivering an improved topline performance is our top priority. It is also imperative that we continue to shore up our business model and improve profitability.

Craig Pommells: Our general and administrative expenses in fourth quarter were 4.5% of revenue, versus 3.9% in the prior quarter. This 60 basis point increase primarily resulted from more normalized incentive compensation. All of this culminated in gap operated income of $41.2 million, adjusted for the non-cash amortization of the asset recognized from the gains on the sale and lease back transactions, operated income for the quarter was $44.4 million, or 5.3% of revenue. Net interest expense for the quarter was $4.5 million, compared to net interest expense of $2.6 million in the prior year quarter.

We were pleased that we delivered $30 million of sustainable cost savings in fiscal 'twenty three.

And we anticipate we will deliver approximately $13 million in additional savings again in fiscal 'twenty four although I do want to note that we expect these savings to be partially offset by investments in labor and loyalty.

I'll now turn the call back over to Sandy So she may share additional details around our business plans.

Thank you Craig.

We are aggressively taking steps to recover traffic above industry levels and to adjust our business model to ensure our financial strength while doing so.

Craig Pommells: This increase was a result of higher interest rates. Our gap effective tax rate for the fourth quarter was negative 2.1%. The negative tax rate was driven by increased credits on lower than expected earnings. On an adjusted basis, our effective tax rate for the quarter was 0%. Fourth quarter gap earnings per deluded share were $1.68, and adjusted earnings per deluded share were $1.79. In the fourth quarter, EBITDA was $72.1 million, or 8.6% of total revenue.

We are and we'll be doing this on a number of fronts, both shorter and longer term.

In the shorter term, we are focused on marketing the guest experience retail sales.

Pairing for the important holiday season, which occurs during our second quarter.

And the launch of our loyalty program, so I'm going to go through each of these with you.

With regard to marketing we've increased our media spend and are focusing our marketing on our core guests of all ages and more pointed value messaging, particularly around lunch and dinner.

Craig Pommells: Now, turn into capital allocation and our balance sheet. We remain committed to a balanced approach to capital allocation. In the fourth quarter, we invested $36.9 million in capital expenditures. We ended the quarter with $415 million in total debt. Our leverage ratio was 1.5 times, which is 1.5 million in total debt. It is within our target range of 1.3 times to 1.7 times.

For example, we've added media presence and avenues like college football NASCAR to drive top of mind awareness.

Our advertising around the breakfast day part has been effective at improving traffic and we will now increase our emphasis on lunch and dinner, where we've underperformed.

By focusing on craveable favorites that appeal to all rguest segments like southern fried chicken.

We'll also be advertising sharper price points, such as branch all day, starting at 899.

And continuing to showcase our variety with our over 20 under 12 campaign.

Craig Pommells: Lastly, as we announced in our press release, the board declared a quarterly dividend of $1.30. I would now like to speak to our outlook and provide some additional color on the guidance in this morning's release. Historically, we have typically provided full year guidance. However, we have decided to only provide Q1 guidance at this time, given the uncertainty in the environment and our CEO transition. Turning to our guidance, as we've mentioned, traffic has remained pressured during Q1, and for Q1, we currently anticipate total revenue of $800 million to $850 million. [inaudible] Although, I do want to note that we expect these savings to be partially offset by investments in labor and loyalty.

Finally, we're introducing a new physical menu format that tested well and includes imagery that we believe will appeal to our guests and drive check.

With regard to the guest experience, we will continue to focus on staffing retention in hospitality.

All of which are linchpins for sustainable traffic.

We're encouraged by the improvements that we've seen in these areas and our guest experience metrics, which fell below our historically strong levels as we re staffed and retrained coming out of the pandemic.

And we will continue to invest in more front of the house hours to deliver the hospitality for which we're now.

We will also continue our investments in training and development simplifying operations and improving our manager experience by streamlining or eliminating work that draws them away from the dining rooms their employees and their guests.

As for retail our retail teams will continue to manage inventories and emphasize sales behaviors that drive conversion.

We're also reworking some of our merchandising displays to be even more effective and impactful than they already are.

With respect to our important second quarter. We believe we are well positioned to have a strong holiday season, and deliver continued growth in our already robust catering and occasion channels.

From a culinary perspective, we will lean into our core holiday offerings, such as country fried, Turkey and sent them enroll pie that we know are strong traffic drivers and that along with our retail offerings underpinning our holiday season.

Finally, we are launching our cracker barrel rewards loyalty program that we believe will be a meaningful traffic driver as well as a key source of guest insight and data, although it will take time to build awareness and participation.

As I said earlier the program will be going live by the end of the month and we believe it has the potential to be the best most engaging loyalty program in the full service dining industry.

Sandra Cochran: I'll now throw the call back over to Sandy, so she may share additional details around our business plans. Thank you, Craig. We are aggressively taking steps to recover traffic above industry levels and to adjust our business model to ensure a financial strength while doing so. We are and we'll be doing this on a number of fronts, both shorter and longer terms. In the shorter term, we are focused on marketing, the guest experience, retail sales, preparing for the important holiday season, which occurs during our second quarter, and the launch of our loyalty program.

And will help us further extend our hospitality into the digital realm.

Based off our iconic peg game participants will earn pegs for each dollar they spend with us both restaurant and retail.

And we will be able to use those pegs for rewards at various levels.

The program this game aside, allowing guests to earn additional pegs through fund challenges as well as surprise and delight events.

We've been testing it with positive results among our own employees, who we know will be the best ambassadors for the program and key to its rollout.

Sandra Cochran: So I'm going to go through each of these with you. With regard to marketing, we've increased our media spend, and are focusing on marketing on our core guests of all ages, and more pointed value messaging, particularly around lunch and dinner. For example, we've added media presence in avenues like college football and NASCAR to drive top of mind awareness. Our advertising around the Brexit State Park has been effective at improving traffic, and we'll now increase our emphasis on lunch and dinner where we've underperformed by focusing on craveable favorites that appeal to all our guest segments like southern fried chickens.

To further drive awareness and enrollment we will be launching a multichannel media campaign and I'm delighted to announce that we'll be partnering with Dolly Parton in late October to highlight the program and to promote Dollies highly anticipated collaborative album, Rockstar, which will be.

Available in our stores.

Regarding longer term initiatives, we are undertaking extensive research with both current and lapsed guests.

In partnership with outside firms to further understand the current competitive environment and our place in it including our strengths opportunities brand positioning.

Sandra Cochran: We'll also be advertising sharper price points, such as brunch all day starting at 8.99, and continuing to showcase our variety with our over 20 under 12 campaign. Finally, we're introducing a new physical menu format that tested well and includes imagery that we believe will appeal to our guest and drive chat. With regard to the guest experience, we will continue to focus on staffing, retention, and hospitality, all of which are lunchpins for sustainable traffic.

And to identify actionable strategies to capitalize on our learnings.

We're also conducting a deeper dive review of our store base to better leverage our presence in certain trade areas and we will be considering physical design and refreshment opportunities, which will be informed by the research we're undertaking.

From a culinary perspective will remain focused on menu innovation driven by the needs of our most loyal guests and our desire to affinity groups.

While at the same time pursuing menu simplification to help our operators and improve efficiency.

Sandra Cochran: We're encouraged by the improvements that we've seen in these areas, and in our guest experience metrics, which fell below our historically strong levels as we restapped and retrained coming out of the pandemic. And we will continue to invest in more front of the house hours to deliver the hospitality for which we're known. We will also continue our investments in training and development, simplifying operations, and improving our manager experience by streamlining or eliminating work that draws them away from the dining rooms, their employees, and their guests.

Finally, as Craig noted, we'll continue to identify sustainable cost savings and expect an additional 30 million in FY 'twenty for effectively matching the savings that we delivered in FY2023.

All of the initiatives I just reviewed will be led by my successor, Julie Self Masino, who our board appointed after a multiyear succession planning process.

Julie had the chance to spend several days with our entire field leadership at our biannual managers conference in Orlando, a month ago and she has been warmly embraced by the entire cracker barrel family.

Sandra Cochran: As for retail, our retail teams will continue to manage inventories and emphasize sales behaviors that drive conversion. We're also reworking some of our merchandising displays to be even more effective and impactful than they already are. With respect to our important second quarter, we believe we are well positioned to have a strong holiday season and deliver continued growth in our already robust catering and occasion channels. From a culinary perspective, we will lean into our core holiday offerings, such as Country Five Turkey and Cinnamon Roll Pie, that we know are strong traffic drivers, and that, along with our retail offerings, underpan our holiday season.

We look forward to Julie's leadership as we tackle the challenges before us.

Before we open things up for your questions I want to offer Julia chance to say a few words Julie.

Hello, everyone. It's a pleasure to be with you all as you would expect over the last few weeks I've been busy onboarding visiting stores and getting to know the brand and our team.

Even after this short time, it's clear to me that the things that drew me to this opportunity and iconic brand with passionate and loyal guests, who love US great scratch made food and retail products profound mission of pleasing people and talented and passionate people who are deeply committed to delivering on this mission are all right there.

Although traffic is challenged the fact is our absolute traffic numbers would be the envy of many brands.

Sandra Cochran: Finally, we're launching our Cracker Bear Awards loyalty program that we believe will be a meaningful traffic driver, as well as a key source of guest insight and data, although it will take time to build awareness and participation. As I said earlier, the program will be going live by the end of the month and we believe it has the potential to be the best most engaging royalty program in the full service dining industry and will help us further extend our hospitality into the digital realm.

All that to say I'm confident that we have the core elements to address our current challenges and regain lost ground.

I'll be digging in with Sandy and our teams on both the shorter and longer term initiatives that she mentioned and will be solidifying my own views after doing some more of listening and observing I.

Look forward to speaking with you further in November and of course in subsequent calls when I'll have more to share with you.

On a personal note I am grateful not only for the opportunity to lead this great brand, but for both Sandys leadership over the last 12 years and our ongoing partnership as I settle into the role.

Sandra Cochran: Based off our iconic peg game, participants will earn pegs for each dollar they spend with us, both restaurant and retail, and will be able to use those pegs for rewards at various levels. The program is gamified, allowing guests to earn additional pegs through fun challenges, as well as surprise and delight events. We've been testing it with positive results among our own employees, who we know will be the best ambassadors for the program and key to its rollout.

I've been around restaurant and retail my whole life and the chance to be able to leverage my experience of our company with its rich history and brighter future as cracker barrel is truly exciting.

I'm looking forward to getting to work and interacting with you more over the coming months and I appreciate the chance to say Hello Sandy.

Thanks, Julie as you all know Julie has a long track record of driving growth and innovation and I have no doubt that she will bring that experience to bear as we tackle our challenges and position the brand for the future.

Sandra Cochran: The further driver awareness and enrollment will be launching a multi-channel media campaign, and I'm delighted to announce that we'll be partnering with Dolly Parton in late October to highlight the program, and to promote Dolly's highly anticipated collaborative album, Rockstar, which will be available in our stores. Regarding longer-term initiatives, we are undertaking extensive research with both current and last guests in partnership with outside firms to further understand the current competitive environment and our place in it, including our strengths, opportunities, brand positioning, and to identify actionable strategies to capitalize on our learnings.

Now, let's take your questions.

Thank you.

We will now begin the question and answer session.

I ask a 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 our roster.

Our first question comes from Jeff Farmer with Gordon Haskett. Please go ahead.

Great. Thank you best of luck Sandy and welcome to Julie.

With that.

A few questions. So can you help me understand the same store sales expectations that are captured in our Q1 revenue guidance of I believe it was $800 million to $850 million.

Sandra Cochran: We're also conducting a deeper dive review of our store base to better leverage our presence in certain trade areas, and we'll be considering physical design and refreshment opportunities, which will be informed by the research we're undertaking. From a culinary perspective, we'll remain focused on menu innovation driven by the needs of our most loyal guests and our desired affinity groups, while at the same time pursuing menu simplification to help our operators and improve efficiency. Finally, as Craig noted, we'll continue to identify sustainable cost savings and expect an additional $30 million in FY24, effectively matching the savings that we delivered in FY23.

Hi.

A few questions one.

Well, so Jeff what I would say there is it's a fairly it's a fairly wide wide range and we don't really have you know a lot of new units in the plan. So that's the way we're thinking about this is Craig by the way and good morning. The way we're thinking about the first quarter is our best.

Lincoln is approximately in the middle of the range.

If the environment were to get tougher we would probably be at the lower end of the range at the same time, we've taken a number of actions to shore up traffic in particular.

<unk> to our advertising and messaging and so on to the degree that those things are highly effective that would move us to the high end of the range.

Julie Masino: All of the initiatives I just reviewed will be led by my successor, Julie Self-Mecino, who are board appointed after a multi-year succession planning process. Julie had the chance to spend several days with our entire field leadership that are by annual manager's conference in Orlando a month ago, and she's been warmly embraced by the entire Cracker Girls family. We look forward to Julie's leadership as we tackle the challenges before us.

Okay.

Just following up on that so second question, so expected menu pricing in Q1 and Q2 for you guys.

So for overall four.

For for Q1, the way that we think about.

Pricing there are a couple you know a couple of elements. One is the price that we're wrapping on and then we also have the new price. So for our actual net new price that were added in for Q1 is relatively low but the price.

Julie Masino: Before we open things up for your questions, I want to offer Julie a chance to say a few words. Julie? Hello, everyone. It's a pleasure to be with you all. As you would expect, over the last few weeks, I've been busy on-boarding, visiting stores, and getting to know the brand and our team. Even after this short time, it's clear to me that the things that drew me to this opportunity and iconic brand with passionate and loyal guests who love us, great scratch made food and retail products, profound mission of pleasing people, and talented and passionate people who are deeply committed to delivering on this mission are all right there.

Cumulatively bit over year over year would be somewhere in the six two.

6% to 7% range for for Q1 total pricing in fluid in it.

The additional pricing from Q1 enterprise year round.

67% in Q1 and cumulative if I got that and then do you have.

Julie Masino: Although traffic is challenged, the fact is our absolute traffic numbers will be the envy of many brands. All that to say, I'm confident that we have the core elements to address our current challenges and regain lost ground. I'll be digging in with Sandy and our teams on both the shorter and longer term initiatives that she mentioned and will be solidifying my own views after doing some more listening and observing. I look forward to speaking with you further in November and of course in subsequent calls when I'll have more to share with you.

Cumulative.

Number for Q2 as well can we expect that six to seven sort of hold into Q2.

Well, we're not sure and much beyond Q1 at this time I'll build a little bit more just to help with that question because we are moderating our pricing our incremental pricing as we go through the fiscal year and we're comping at a higher price.

<unk> expectation there would be over a combined year over year price would come down meaningfully over the course of the year and you would expect it to be at its peak at approximately.

Julie Masino: On a personal note, I am grateful not only for the opportunity to lead this great brand but for both Sandy's leadership over the last 12 years and are ongoing partnership as I settle into the role. I've been around restaurant and retail my whole life and the chance to be able to leverage my experience for a company with as rich of a history and bright of a future as Cracker Barrel is truly exciting. I'm looking forward to getting to work and interacting with you more over the coming months and I appreciate the chances to say hello. Sandy?

Approximately Q1.

Okay. That's helpful. And then final question for me it looks like the adjusted operating income margin guidance.

For the Q1 is now 2.25 to $3 two 5% range, that's quite a bit below where you were.

A year ago I believe its 3.6% so I'm just trying to understand there.

Sandra Cochran: Thanks Julie. As you all know, Julie has a long track record of driving growth and innovation and I've no doubt that she will bring that experience to bear. As we tackle our challenges and position the brand for the future.

I'm, just thinking about the restaurant level margin versus G&A.

What is what is basically representing about 100, plus plus basis point margin headwind.

Unknown Executive: Now let's take your questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone home. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will cause momentarily to assemble our roster.

The <unk> operating margin relative to a year ago. So just key drivers there from across the restaurant level margin is that much lower G&A higher how should we be thinking about your bits and pieces of the moving pieces to get them at a lower operating income guidance income margin guidance.

The big levers are going to be we see improvements in cost of goods sold so that will be favorable, but that's being offset by to some degree deleverage to some effect, but also the investments that we're making in labor no cracker barrel of our business model is high.

Jeffrey Farmer: The first question comes from Jeff Farmer with Gordon Haskett. Please go ahead. Great. Thank you. Best of luck, Sandy and welcome to Julie. With that, a few questions. So can you help me understand the same sort of sales expectations that are captured in that Q1 revenue guidance? I believe it was 800 to 850 million. You said a few questions.

Traffic really good value great hospitality and we are while we've made a lot of progress on kind of regain in our historical leadership role in hospitality, we're not back to peak levels. So we're investing in labor in order to deliver that and we think over time that will be AEP.

Tailwind for us so we have higher labor lower Cogs, we havent been higher advertising as well because with traffic being softer we have deployed more advertising.

Craig Pommells: Jeff, what I would say there is it's a fairly wide range and we don't really have a lot of new units in the plan. So the way we're thinking about, this is Craig by the way, the way we're thinking about the first quarter is our best thinking is in the approximately in the middle of the range. But if the environment were to get tougher, we would probably be at the lower end of the range.

<unk>.

On a national basis, but we're also doing test and test and learn.

In different parts of the country and lastly, as a sub components of G&A in Q1, we have higher.

<unk> expense manager and training expense and that is in preparation for a quarter or two sandy shared we're really proud of the work that we've done and the team has delivered with the catering business that kids, where an opportunity is greater even more so in Q2, and we want to ensure we're fully prepared for that.

Craig Pommells: At the same time, we've taken a number of actions to ensure a traffic in particular updates to our advertising and messaging and so on. To the degree that those things are highly effective, that would move us to the high end of the range. Strange. Okay, just following up on that, so second question, so expected menu pricing in Q1 and Q2 for you guys? So for overall for Q1, the way that we think about price in, there are a couple elements.

So we have invested in additional an additional managers to ensure that we are delivering that at 100%.

Craig Pommells: One is the price that we're wrapping on and then we also have the new price. So for our actual net new price that we're adding for Q1 is relatively low, but the price cumulatively, it's over year over year, would be somewhere in the six to six to seven percent range for Q1 total price in it. In the fluid in it, the additional price from Q1 and the prior year wrap. So 67 percent Q1 cumulatively got that, and then do you have a cumulative or a number for Q2 as well, can we expect that six to seven sort of hold into Q2?

Okay. Thank you very much.

[noise].

Our next question comes from Todd Brooks with the Benchmark Company. Please go ahead.

Hey, good morning, and congrats Andy and welcome Julie as well.

Couple of questions for you one following on kind of Jeff's pricing question, but from a more.

Peter Radical standpoint, Craig I know you talked about the guest value perceptions.

<unk>.

Been unchanged, even though I think since <unk>.

Sure.

2021 menu pricing, probably between 15 and 17%.

How do you how do you measure that their value perceptions arent changing as their situation changes.

As things are getting tougher or savings rates are down energy costs, Rob student loan payments restarting again.

Are there value perception static or how are you monitoring.

Those perceptions as you continue to take incremental price with it seems like each.

Craig Pommells: Well, you know, we're not sharing much beyond Q1 at this time, you know, build a little bit more just to help with that question, because we are moderating our pricing, our incremental price, and as we go through the fiscal year, and we're coming on higher price, you know, the natural expectation, there would be a combined year over year price, would come down meaningfully over the course of the year. And you'd expect it to be as peak and approximately in approximately Q1.

Each menu opportunities.

Good morning, Todd.

Good question.

The way that we evaluate that is one is the absolute value that we're delivering measured against ourselves, but we also measure our value scores primarily against the marketplace because the market's been very dynamic. It has been a very high inflation period over a number of years so in terms of value.

We measure ourselves against our result and measure ourselves against.

Craig Pommells: Okay, that's helpful. And final question for me, it looks like the adjusted operating income margin guidance for the Q1 is in that 2.25 to 3.25 percent range, that's quite a bit below where you were a year ago, I believe it's 3.6 percent. And so I'm just trying to understand there in terms of thinking about the restaurant level margin versus GNA, what is basically representing that 100 plus basis point margin had wind for the F1 Q operating margin relative to a year ago.

Our competition. We did also know within their prepared remarks that we do believe there is a reaction from consumers to just general generally higher prices in casual dining and full service dining more broadly we think we're well positioned with within that though we think our <unk>.

Ricin is good we think we're very competitive we think we are a great value, but I do think there is a factor to prices as a whole in the macro economic environment and the amount of <unk>.

Craig Pommells: So just key drivers there for the across the restaurant level margin is that much lower, GNA higher, how should we be thinking about your bits and pieces or the moving pieces to getting that lower operating income, income margin guidance. I think the big levers are going to be we see improvements in cost of goods sold, so that will be favorable. But that's being offset by, to some degree, the leverage to some effect, but also the investments that we're making in labor.

Full service visits that are available as a result of that.

And I'll add a little bit to that too Todd I think.

And as Chris pointed to we use the quantitative.

Control group to see what kind of impact on our pricing decisions. We made we continue to look at.

Ourselves versus competitors. What we also are spending a lot of time listening to guests' reactions either through.

Conversations with our operators or <unk>.

Craig Pommells: Our business model is high traffic, a really good value, great hospitality. And we have, while we've made a lot of progress on kind of weekend in our historical leadership role in hospitality, we're not back to peak level, so we're investing in labor in order to deliver that. And we think over time that will be a big tailwind for us. So we have higher labor, lower cost, we have a bit higher advertising as well, because with traffic being softer, we have deployed more advertising, on a national basis, but we're also doing tests and learn in different parts of the country.

The feedback that we get and we manage our we're monitoring check management tactics. So we are looking very closely at things like beverage attachment.

Sure Besides premium sides and all of the things that would indicate to us that the consumer situation has changed meaningfully and most importantly that we need to change our strategy to address it.

Okay very helpful. Thanks to both just to follow up on that.

You talked about your value relative to competitors in the current environment.

We're seeing more kind of price promotion activity.

From some of the full service operator universe out there cracker barrels, obviously been a brand where values inherent in lateral length itself to kind of an everyday value approach to the.

Craig Pommells: And lastly, as a subcomponent of GNA in Q1, we have higher MIT expense, manager and training expense. And that is in preparation for a recorder too. Sandy Sheard, we're really proud of the work that we've done in the team of delivered with the catering business. That catering opportunity is greater or even more so in Q2, and we want to ensure we're fully prepared for that. So we have invested in additional managers to ensure that we are delivering that at a hundred percent. Okay, thank you very much.

The brand and how you communicate that.

Passengers are getting.

More overtly competitive with price points and special offers what arrows are kind of in cracker barrels quiver.

To pull if you do you feel like you need to compete a little bit more around the value of the experience.

Well, we we did see the competitors doing just that we think the quarter got significantly more promotional than we were anticipating and many of the competitors are not only getting sharpen the price point, but they also increased their level of advertising sort of with that new.

Todd Brooks: My next question comes from Todd Brooks, where's the benchmark company? Please go ahead.

Todd Brooks: Hey, good morning, and congrats, Sandy, and welcome, Julie, as well. A couple of questions for you. One, falling on kind of Jeff's pricing question, but from a more theoretical standpoint, Craig, I know you talked about that the guest value perceptions have been unchanged, even though I think since 2021, many pricing's up probably between 15 and 17%. How do you measure that their value perceptions aren't changing as their situation changes? So as things are getting tougher, savings rates are down, energy costs are up, student loan payments restarting again, are there value perceptions static, or are how are you monitoring those perceptions as you continue to take incremental price with it seems like each menu opportunity?

<unk>.

I think what we're what we're doing now.

Your point everyday value has always been a hallmark of the brand and we have worked hard to invest in value. Despite.

Despite the price increases that we've been taking over the last few years. We still think we have ensure that there is everyday value at every day part on the menu. So that our guests can come in and whether they're looking for a low price point or it's more of a celebratory indulgent occasions, so that they can find that.

On the menu.

So we're continuing to ensure we have that optionality on the menu we're not taking.

We're protecting for example, mamas pancake breakfast, which is a phenomenal value at 899 pancakes.

<unk> eggs and all of that we didn't raise the price.

Craig Pommells: Good morning, Todd. It's a good question. The way that we evaluate that is one is the absolute value that we're delivering measured against ourselves, but we also measure our value scores primarily against the marketplace, because the market's been very dynamic. It has been a very high inflation period over a number of years. So in terms of value, we measure ourselves against ourselves and measure ourselves against our competition. We did also know within the prepared remarks that we do believe there is a reaction from consumers to just generally higher prices in casual dining and full service dining more broadly.

To ensure that we were able to deliver high value.

The breakfast day part and of course breakfast is available all day, but also we're trying to do a better job of telling that story in our own media and marketing messaging. So what you'll see as we went through the quarter and now is more of our television advertising for example, highlighting both are strong.

Price point like 899 breakfast all day as well as.

A great price points and variety at lunch and dinner, so whether it's chicken and dumplings or country fried steak or some of these other really great items.

But it's a backdrop as competitors have gotten more promotional.

Craig Pommells: We think we're well positioned within that, that we think our pricing is good, we think we're very competitive, we think we're a great value, but I do think there is a factor to prices as a whole in the macro economic environment and the amount of full service visits that are available as a result of that. I'll add a little bit to that too, Todd. I think, you know, it's correct to point into, we use the quantitative control group to see what kind of impact our pricing decisions we make.

And more aggressive in their advertising, we are working hard to do an even better job of ensuring that we remind our guests of the value that we have every day and I'm sure. They don't forget about that.

Great and one more follow up and I'll jump back in queue. So just when you talk about.

The elements on the menu that you can look at there is everyday value.

Elements, if you look at.

This quarter versus the prior quarter, how is the sales mix.

Everyday value type of an.

Craig Pommells: We continue to look at ourselves versus competitors, what we also are sending a lot of time listening to guest reactions, either through conversations with our operators, or just the feedback that we get. And we manage our monitoring check management tactics, so we are looking very closely at things like beverage attachment, shareable sides, premium sides, and all of the things that would indicate to us that the consumer situation has changed meaningfully and most importantly, that we need to change our strategy to address.

Items changed.

Order over quarters, the consumer has gotten a little bit more challenged.

Hi, This is Craig what we what we've seen over the quarter is our breakfast business has done better than our lunch and dinner business. So overall, we're seeing a higher mix of our breakfast items items that Sandy mentioned in particular so that's.

Craig Pommells: Okay, very helpful. Thanks to you both.

Merrily, where we're seeing the shift.

Yeah.

Okay, great. Thanks.

Our next question comes from Katherine Griffin.

<unk> of America. Please go ahead.

Craig Pommells: Just a follow-up on that. You talked about your value relative to competitors and in the current environment. We're seeing more kind of price promotion activity from some of the full service operator universe out there. Cracker Barrel's obviously been a brand we're values inherent and it's allowed itself to kind of an everyday value. So, approach to the brand and how you communicate that. If competitors are getting more overtly competitive with price points and special offers, what arrows are kind of in Cracker Barrel's quiver to pull if you do feel like you need to compete a little bit more around the value of the experience.

Hi, Thanks for taking my question.

Wanted to ask sort of a follow up to an earlier question just on decomposing be that traffic trends I'm curious how much of the traffic in for Q. You think was loss to promotional intensity by competitors and then how much of it do you think could have been recaptured by taking.

Different marketing tactic and then sort of how should we think about that in the context of your <unk>.

Expectations.

Hi, Catharine its Greg so.

Yeah.

We think a meaningful part of our.

Traffic for four months in the fourth quarter was really comprised of two things. One is we were really ramping down or a messaging a repeat messaging in Q4, while competitors.

Craig Pommells: Well, we did see the competitors doing just that. We think the quarter got significantly more promotional than we were anticipating and many of the competitors are not only getting sharp in the price point, but they also increase their level of advertising sort of with that news. I think what we're doing now, to your point, everyday value has always been a hallmark of the brand and we have worked hard to invest in value by despite the price increases that we've been taking over the last few years.

And as we noted the environment was a bit more promotional so relative to our total traffic we think it's a significant part.

Part of that I don't know that we're prepared to call out a specific a specific number but that is a shift that we saw in the environment that.

Craig Pommells: We still think we've ensured that there's everyday value at every day part on the menu so that a guest can come in and whether they're looking for a low price point or it's more of a celebration. So, we're continuing to ensure we have that optionality on the menu. We're not taking, we're protecting, for example, Mama's pancake breakfast, which is a phenomenal value at 899 pancakes, meat, eggs and all that. We didn't raise the price to ensure that we were able to deliver high value both at the breakfast point, of course, breakfast is available.

<unk> added with our shift in performance. So we think there's a bit of a macro component. We think there is a competitive intensity component.

And we think we also we're spending less at a time, others, who are spending more but.

But we also believe we've got some ground to recover with our historical leadership role in hospitality. So we think those are some of the biggest drivers that impacted our Q4. Some of that is pretty sure some of that short term and some of that longer term.

Okay. Thank you and then maybe actually just following up on that in terms of where you're seeing promotional intensity.

You know sort of where where where is that is it mostly and you know maybe your breakfast competitors or in varied menu I guess I'm trying to understand you know.

Craig Pommells: But also we're trying to do a better job of telling that story in our own media and marketing messaging. So what you'll see is we went through the quarter and now is more of our TV advertising, for example, highlighting both a strong price point like 899 breakfast all day as well as great price points and variety at lunch and dinner. So whether it's chicken and dumplings or country fried steak or some of these other really great items, but it's a backdrop as competitors have gotten more promotional and more aggressive than their advertising. We are working hard to do an even better job of ensuring that we remind our guests of the value that we have every day and sure they don't forget about that.

Yeah, where the promotional intensity is just because there've been other casual dining concepts that have taken.

Unknown Executive: Great.

<unk> taken actually a different tact, where theyre not discounting as much though.

You know I'm curious kind of what you're seeing specifically in terms of which of your peers, maybe which day parts, you're seeing more pressure on on promotions.

We see an attack. After this is Craig again, we've seen that intensity across the really across a number of different segments. We've seen as an family at breakfast in particular, we've also seen it especially in the bar and grill.

Segment.

Also.

It is relatively broad based certainly not with every competitor, but if you just look back at the last few months on our advertised price points there've been a lot of advertised price points. There have also been a lot of you know all you can eat type.

Craig Pommells: And one more follow up and they'll jump back in queue. So just when you talk about the elements on the menu that you look at is everyday value elements. If you look at this quarter versus the prior quarter, how is this sales? mixed of everyday value type of items changed, quarter over quarters, the consumers gotten a little bit more challenged. Thanks.

Type of offers in the marketplace and not.

Not only in family or in one particular segment, we've seen it really across you know across the board at family for breakfast, we've seen at the bar and Grill, we've seen it and we've seen it in other areas also.

Craig Pommells: Hi, this is Craig. What we've seen over the quarter is our breakfast business has done better than our lunch and dinner business. So overall we're seeing a higher mix off our breakfast items that Sandy mentioned in particular. So that's primarily where we're seeing the shift.

Unknown Executive: Okay, great. Thanks.

Great. Thank you so much I'll get back in the queue.

Our next question comes from Jake Bartlett with Securities. Please go ahead.

Great. Thanks for taking the questions. My first is on the margin guidance in the first quarter and I just wanted to make sure I understood.

What might be kind of more of a temporary headwind versus ongoing maybe.

Maybe if you can kind of quantify how much higher marketing costs in.

Katherine Griffin: Next question comes from Katherine Griffin with Think of America. Please go ahead. Hi, thanks for taking my question. I wanted to ask sort of a follow up to an earlier question just on decomposing the traffic trends. I'm curious how much of the traffic in 4Q you think was lost to promotional intensity by competitors and then how much of it do you think could have been recaptured by taking a different marketing tactic.

In the quarter will be pressuring margins.

And a little more detail about how G&A is going to play and I look at G&A on an absolute basis.

It's down about 15% versus the third quarter. So if you can help us understand what the right run rate on a quarterly basis just in the first quarter is just those moving pieces in the first quarter margin guidance. Thank you.

Hey, Jake it's Greg again.

Yes, as it relates to the first quarter there I guess a couple of data points to think about there. If you go back and look at our Oh why for four months in the prior year.

Katherine Griffin: And then sort of how should we think about that in the context of your 1Q expectations? Hi, Katherine. That's Craig. So we think a meaningful part of our traffic performance in the 4th quarter was really comprised of two things. One is we were really ramping down our messaging or paid messaging in Q4 while competitors were ramping up and as we noted the environment was a bit more promotional. So relative to our total traffic, we think it's a significant part of that.

We had the lowest oi in Q in Q1.

And then it.

Moved around a bit from their improved significantly in Q2 and so on.

I don't anticipate that.

That will have a significantly different pattern of Oi in in fiscal 'twenty. Four so that's one data point. The other data point is in Q1 and G&A in particular, we will have a higher level, a meaningfully higher level of spending for managers and <unk>.

Katherine Griffin: I don't know that we're prepared to call out a specific number, but that is a shift that we saw in the environment that coincided with our shift in performance. So we think there's a bit of a macro component. We think there is a competitive intensity component. And we think we also were, you know, spend at less of the time others were spending more. But we also believe we've got some ground to recover with our historical leadership role in hospitality. So we think those are some of the biggest drivers that impacted our Q4.

Training than we did in in Q4.

And we also have additional investments in other areas to support loyalty and so on.

So quite a few moving pieces there, but we are investing more in Q1 in the prior year Oi was the lowest it had been for the year in Q1 as well so as we look back to Q4 and why it was so low you know a part of that incentive comp and that's effectively one time.

But a part of that was also we were managing the spend and so to some degree we're managing the spend and based on how the how the company is performing but we do expect a higher level of G&A in Q1, especially as we ramp up for Q2 and get the loyalty program rolled out.

Craig Pommells: Some of that's short term and some of that's longer term. Okay. Thank you. And then maybe actually just following up on that in terms of where you're seeing promotional intensity. So where is that? Is it mostly in maybe your breakfast competitors or in varied menu? I guess I'm trying to understand where the promotional intensity is just because there have been other casual dining concepts that have taken actually a different tact where they're not discounting as much.

Great and then my next question was about the balance sheet and about about the dividend.

Given the margin guidance.

The first quarter, it's very clear that EPS is going to be much less than that and then the $1. Three that you just declared for the dividend. So how how should investors be thinking about that dividend payout kind of moves at least earlier to over 100%.

Craig Pommells: So, you know, I'm curious kind of what you're seeing specifically in terms of, you know, which of your peers maybe which day parts you're seeing, you know, more pressure on on promotions. We've seen that tack after this cricket game. We've seen that intensity across the really across a number of different segments. You know, we've seen it in family at breakfast in particular. We've also seen it, especially in the bar and grill segment also.

Are you comfortable.

Creasing the leverage.

You've talked about the target of one three to one seven.

Are you comfortable having that go above that range to sustain the dividend.

Other questions Im getting is about.

Sure.

The balance sheet and kind of your ability to do more sale leasebacks.

If that is appropriate.

What how many stores are unencumbered for instance, just what's what.

Craig Pommells: So it is, you know, it's relatively broad based certainly not with every competitor. But if you just look back at the last few months on advertised price points, there have been a lot of advertised price points. There've also been a lot of, you know, all you can eat type type of offers in the marketplace and not only in family or in one particular segment. And we've seen it really across, you know, across the board, our family for breakfast. We've seen it in the bar and grill. We've seen it in other areas also. Great. Thank you so much.

As you look at the balance sheet how.

How comfortable are you focusing on that maintaining that dividend.

Even as EPS is somewhat challenged near term.

The capital allocation topic, which I think is broadly the your question is a very big one for the board and.

They've continued to take a consistent approach there which is the primary.

Purpose primary objective is to grow cracker barrel and Maple Street, and then beyond that we'll return capital to shareholders in the form of a dividend or share repurchase for the last year or so that dividend has been really compelling and you combine that with our kind of stated desire to maintain a.

Katherine Griffin: I'll get back in the queue.

Jake Bartlett: My next question comes from Jake Bartlett with Joe Securities. Please go ahead. Great. Thanks for taking the questions. You know, my first is on the margin guidance in the first quarter. And I just want to make sure I understood, you know, what might be kind of more of a temporary headwind versus ongoing? Maybe if you can kind of quantify how much higher marketing costs in the quarter will be pressuring margins. You know, and a little more detail about how GNA is going to play in.

Some flexibility on the balance sheet, maintaining a reasonable leverage ratio and so on so I think it's a part of a broader dividend as a part of our broader capital allocation decision is a very big topic. It's one that's off the top of the list.

For the board and they will continue to be incredibly thoughtful about it but I think the takeaway. There is there has not been a shift that's probably the most important thing there has not been a shift in a row.

Jake Bartlett: I look at GNA on an absolute basis. It's down about 15 percent versus the third quarter. So if you can help us understand what the right run rate on a quarterly basis, you know, just in the first quarter is just those moving pieces in the first quarter margin guidance. Thank you.

Capital allocation framework.

Okay. Okay.

I know youre not giving.

Annual guidance here, but hopefully I'm wondering if there is some pieces that you can that you might have some visibility before.

Craig Pommells: Hi, Jake. It's Greg again. Yes, as it relates to the first quarter, there I guess a couple of data points to think about there. If you and go back and look at our OI performance in the prior year, you know, we had the lowest OI in queue in queue one. And then it moved it on a bit from there and proved significantly in queue two and so on. I don't anticipate that we'll have a significantly different pattern of OI in fiscal 24.

Craig Pommells: So that's one data point. The other data point is in in queue one in GNA in particular, we will have a higher level, a meaningfully higher level of spending for managers in training that we did in in queue four. And we also have additional investments in other areas to support loyalty and so on. So quite a few moving pieces there, but we are invested more in queue one in the prior year or OI once the lowest it had been for the year in queue one as well.

<unk> takes the reigns things like like Capex.

Rough idea of what we should expect for Capex or new units at Maple Street, Greg maybe some of the kind of the bigger picture.

Items in 2000 and for guidance, but hopefully you can provide even if it's not specifically on margins and such.

I mean, we can stop directionally about a couple of the big levers without getting too specific. So for example in I would say commodity inflation, we expect commodity inflation to be much more modest than its been.

Historically.

Wage inflation, we expect to moderate a bit from fiscal 'twenty three levels, but we do think wages wages will likely remain higher than the long term run rates, but more moderate than.

Hum.

What we saw pre Covid for example in terms of new units given the environment we are moderating.

Craig Pommells: So as we look back to queue four and why it was so low, you know, a part of that incentive comp and that's effectively one time. But a part of that was also we were managing the spending. So to some degree, you know, we're managing the spending based on how the company is performing. But we do expect the higher level of GNA in queue one, especially as we ramp up for queue two and get the loyalty program rolled out. Great.

Our new unit growth to some degree Q1, we still have a little bit more in there, but we're moderating that we're still growing new units, but we're moderating the level and the amount of spend that we're putting against that for for the time being.

In terms of Capex. There are there are other areas that you know.

We are constantly evaluating what we're thinking about all of that is a part of the broader capital allocation conversation.

Jake Bartlett: And then my next question is about the balance sheet and about the dividend. You know, given the margin guidance, you know, in the first quarter, it's very clear that, you know, EPS is going to be much less than the dollar three that you just declared for the dividend. So, you know, how should investors be thinking about that dividend as your payout kind of lose at least a little earlier to over 100%. You know, are you comfortable increasing the leverage? I know you've talked about the the target of 1.3 to 1.7. You know, are you comfortable having that go above that range?

Okay. Thank you so much.

Our next question comes from Dennis Geiger with UBS. Please go ahead.

Thank you and congratulations to Sandy and Julie I have another one as it relates to 24 at a at a high level I think he gave right which is really helpful. Some kind of key points to be thinking about in 'twenty, four which is helpful.

How about on the CEO transition side of things and maybe.

Craig Pommells: So sustain the dividends. Other questions I'm getting is about, you know, your, you know, the balance sheet and kind of your ability to do more sales specs if that is appropriate. You know, what, you know, how many stores are unencumbered, for instance, just what, what, you know, as you look at the balance sheet, you know, how comfortable are you, you know, focusing on that, you know, maintaining that dividend, you know, even as, as EPS is someone challenged New York.

Keeping some of that flexibility and guidance depending on what plans look like for the year is there anything that at a very high level.

Sure.

What could move the outlook or numbers for 'twenty, four but might it be maybe remodels that you referenced.

Other areas of reinvestment, whether it's technology or otherwise.

Recognizing there's a reason you're not speaking to today, but anything high level to share on some things that lease buckets et cetera that might move the needle as we think about some strategic opportunities this year or two to help us think through 'twenty four.

Craig Pommells: The capital allocation topic, which I think is broadly, you know, your question is a very big one for the board, and you know, they've been really compelling. And you combine that with, you know, our kind of stated desire to maintain a, some flexibility in the balance sheet, maintain a reasonable leverage ratio, and so on. So I think it's a part of a broader, the dividend is a part of a broader capital allocation decision.

Hi, Dan its Greg again.

For now we would say it's still early days in that regard.

The macro environment is particularly challenging in a bit more uncertain and.

July is off to an outstanding start with really only been here for a month. So I think it's still early days and really too early for us to make any comments about that.

It makes sense, one more sort of related to some of that Craig and team if I could.

Sandy has as you and the board did the surge in.

You saw the opportunity with jewelry based on some of her strengths thinking about store development.

Craig Pommells: It's a very big topic. It's one that's at the top of the list for the board, and there will continue to be incredibly thoughtful about it. But I think the takeaway there is there has not been a shift. That's probably the most important thing. There has not been a shift in a capital allocation framework.

Innovation across technology menu et cetera, and her.

Prior opportunity.

You can speak to and I know you're doing some work with some consultants it sounds like but kind of on the on what you think some of the longer term opportunities that you've been working on and maybe remain longer term opportunities for the brand again, whether it's on the tech side innovation.

Craig Pommells: Okay. And you know, I know you're not giving you annual guidance here, but hopefully, I mean, I'm wondering if there's some pieces that you can that you might have some visibility. You know, if you really pick the reins, things like like catbacks, you'll rough idea of what we should expect for catbacks or new units at Maple Street and Cracker Barrel. Maybe some of the kind of the bigger picture, you know, items in 24 guidance that hopefully you can provide even if it's not specifically on margins and such.

Growth, which is encompasses a lot of things any very high level comment could speak too as we as we kind of look out longer term.

Well I think you've kind of summer there's a lot of the reasons why we thought Julie or the board thought Julie would be the.

Eight liter for this sort of next the next 50 years here at Cracker barrel.

Her experience with brands, who have very successfully both evolved.

Craig Pommells: We can talk directionally about a couple of the big levelers without getting, you know, two specific, you know, so for example, you know, I would say commodity inflation. We expect commodity inflation to be much more modest than it's been historically wage inflation. We expect to moderate a bit from fiscal 23 levels, but we do think wages, you know, wages will likely remain higher than the long term run rate, but more moderate than what we saw, you know, pre COVID, for example, in terms of new units.

I mean look at Taco Bell and the kind of thing they've done and how successful they've been I think and remaining.

Relevant despite being around a long time and then the technology I think Starbucks has been an amazing example of a brand that is sort of in my opinion has got you know amazing guest facing technology to make the experience just so simple you kind of can't help yourself.

They'll go more frequently she's also got retail experience, which is for our brand really important.

Our retail segments is strong it's profitable and it is a very key component of the cracker barrel experience. It's also surprisingly for a lot of people complex and I think julie's background on both sides of this really positioned her to be able to think about.

Craig Pommells: Given the environment, we are moderating new unit growth to some degree, you know, Q1, we still have, you know, a little bit more in there, but we are moderating that we're still growing new units, but we are moderating the level and the amount of spend that we're putting against that for the time being. In terms of CAPEX, there are there are other areas that, you know, we're constantly evaluated, but we're thinking about all of that as a part of the broader capital allocation conversation.

To bring in technology to a brand that's 54 years old too.

Jake Bartlett: Okay, thank you so much.

Evolve the brand in a way that will both be familiar and comfortable to our loyal long term gas, but make it interesting and relevant to our newer guests and maybe people, who don't know us at all and to introduce things like technology.

Dennis Geiger: Next question comes from Dennis Geiger with UBS, please go ahead. Thank you and congratulations to Sandy and Julie, I have another one as a relate to 24 at a high level, I think he gave Craig, which is really helpful, some, you know, kind of key points to be thinking about in 24, which is helpful. How about on the CEO transition side of things and maybe, you know, keeping some of that flexibility and guidance, depending on what plans look like for the year, is there anything at a very high level, you know, to share on, you know, sort of what could move the outlook or numbers for 24, what might it be, maybe remodeled that you referenced other areas of reinvestment, whether it's technology or otherwise.

Things like our loyalty program in a really brand appropriate way.

It's not easy to do lastly, one of the questions sort of spoke to the idea that you might need to do refresh I think thats been certainly on our list. The thought about how do you whether you and how do you think about the interiors of our stores and ensuring.

And that those interiors sort of.

Reflect the same level of freshness and modernization to be both appealing, but comforting if you've been coming for years. So I think julie's an innovative flexible later she loves the brand jumped in with both feet is that demand for both legs.

Craig Pommells: Recognizing there's a reason you're not speaking to it today, but anything high level to share on some things at least buckets, et cetera, that might move the needle as we think about, you know, some strategic opportunities this year to help us think through 24. Hi, Dennis, it's Craig again. I think for now we would say it's still early days in that regard. The macro environment is particularly challenging a bit more uncertain and, you know, Julie is often a standard start, but she's really only been here for a month.

N D.

And I think we're just really excited to have her here.

That's helpful.

One more quick one and apologies if I'm.

Craig Pommells: So I think it's still early days and really too early for us to make any comments about that. Makes sense. One more sort of related to some of that Craig and team if I could. You and the board did the surge and saw the opportunity with Julie based on some of her strengths, thinking about store development, innovation across technology, menu, et cetera, in her prior opportunity. Anything you can speak to, and I know you're doing some work with some consultants that sounds like, but kind of on what you think some of the longer term opportunities that you've been working on and maybe remain longer term opportunities for the brand again, whether it's on the tech side, innovation growth, which encompasses a lot of things.

If I missed just by cohort.

The traffic softness.

Can you speak at all to whether it's age.

<unk> income et cetera, just.

What you saw in the quarter from from that perspective, if you're providing there.

Yeah.

I'll kind of tell you that broadly what we saw or traffic declines were broad based but they were.

They were against all of the age cohort switch.

Which was a bit of a shift the younger cohort held up better than the over 65.

But but it had been doing even better in the quarters prior on the over 65.

We just have not yet recovered the visits with that group to the extent, we thought we would really since the pandemic whether it was in the beginning a.

Health concerns and then the pivot from health to value concerns as we've kind of talked about here we've got consumers.

It's a mixed picture right. We've got consumers that we think are very value conscious and we think that group as you know.

Craig Pommells: Any very high level comments to speak to as we kind of look out longer term. Well, I think you kind of summarized a lot of the reasons why we thought Julie or the board thought Julie would be the great leader for this sort of next, the next 50 years here at Cracker Barrel, you know, her experience with brands who have very successfully both evolved. I mean, look at Taco Bell and the kind of thing they've done and how successful they've been, I think in remaining relevant despite being around a long time.

Over 65 group is particularly value conscious.

And so we just haven't seen the recovery of that group and the way we would be.

The income level or traffic declines were actually larger in the 60 to 80000.

And plus cohorts the lower income cohorts held up better maybe that's not surprising due to the strong value proposition that we have in the.

Craig Pommells: And then the technology, I think Starbucks has been an amazing example of the brand that has sort of, in my opinion, has got, you know, amazing guest facing technology to make the experience just so simple. You kind of can't help yourself, but go more frequently. She's also got retail experience, which is for our brand, really important. You know, our retail segment is strong, it's profitable and it is a very key component of the Cracker Barrel experience.

When you are managing your visits I believe you'll go to brands you Trust, where you know you're going to get value and you're going to get an experience that kind of makes it worth you youre going out. That's why are you know the brand positioning.

Warm us fatality plentiful portions fair price.

Of just good food I think will work.

Craig Pommells: It's also surprisingly a lot of people complex and I think Julie is background on both sides of this really position her to be able to think about how to bring in technology to a brand that's 54 years old to evolve the brand in a way that will both be familiar and comfortable to our loyal long term guests. But make it interesting and relevant to our newer guests and maybe people who don't know us at all and to introduce things like technology, things like our loyalty program in a really brand appropriate way, which is not easy to do.

Even if what we're moving into is a more competitive value conscious consumer.

Thank you very much sandy.

Our next question comes from Alton Stump with loop capital. Please go ahead.

Great. Thank you good morning, Ed.

Just want to say congrats sandy under 12 years.

Miss you, but.

Look forward, obviously to working.

With the new team.

I just wanted to quickly I know what the.

Of course, the top of the hour here, but just.

Wanted to ask you about your loyalty rollout how much of an opportunity that is kind of going back to your comments about younger consumers. That's always been a group that you guys have tried to expand with maybe I'm a little older.

On average versus some of your peers and so how much of an opportunity you think royalty could be to capture more of those younger consumers to come to your brand.

Craig Pommells: Lastly, one of the questions sort of spoke to the idea that you might need to do refresh. I think that's been certainly on our list, the thought about how do you weather you and how do you think about the interiors of our stores and ensuring that those interiors sort of reflect the same level of freshness and modernization to be both appealing. But comforting, if you've been coming for years, so I think Julie is an innovative, flexible leader. She loves the brand, jumped in with both feet, is that the men for both legs are in deep.

I don't think we're ready to quantify them looking at Craig I doubt he's going to give any numbers. We certainly done a lot of modeling about it. It takes time, so that'll get everybody signed up they have to visit frequently enough to earn but what I will say is that a year at least to go. So after we did a re.

<unk> segmentation study, we looked at the segments and one of the interesting findings was really across age cohorts more than I was expecting to see.

The existence of a loyalty program was important both to our loyal guests.

Sandra Cochran: And I think we're just, you know, really excited average, here. It's helpful, Fannie. One more quick on an apologies if I missed. Just by cohort, some of the traffic softness, can you speak at all to whether it's age, demographic, income, et cetera, just what you saw in the quarter from that perspective if you're providing that? Yeah, we'll kind of tell you broadly what we saw. Our traffic declines were broad-based. They were against all of the age cohorts, which was a bit of a shift.

<unk> and our younger are younger technology in general is more important to a younger guest but the loyalty program.

I'm up surprisingly high on the list. So we are.

Optimistic that this will be something that they've hoped we would do and will we will get you.

Great sign ups, a lot of learnings and so on this is actually an area that Julie has quite a bit of experience and she spent.

A bit of time since she's been here just in understanding what the program is in and our rollout plan I'm. Julie do you have anything you'd like to maybe add to it sure. Thanks, Sandy Hi, Alton.

Sandra Cochran: The younger cohort held up better than the over 65, but it had been doing even better in the quarter's prior. On the over 65, we just have not yet recovered the visits with that group to the extent we thought we would really sense the pandemic, whether it was in the beginning, health concerns, and then the pivot from health to value concerns. We've kind of talked about here. We've got consumers. It's a mixed picture, right?

Yeah right.

I'm excited about with the loyalty program and I think what our guests will enjoying those is that one they can earn across restaurant and retail, which if you think about it that's pretty distinctive and a key differentiator for us as a brand.

We have both of those.

Experiences available to our guests, we're allowing them to earn a cross sell that's number one and secondly every item, whether it's restaurant or retail on our menu is eligible.

Sandra Cochran: We've got consumers that we think of very value conscious, and we think that group is, you know, the over 65 group is particularly value conscious. We just haven't seen the recovery of that group in the way we would. The income level, our traffic declines, were actually larger in the 60 to 80,000 and plus cohorts. The lower income cohorts held up better. Maybe that's not surprising due to the strong value proposition that we have.

To earn them to earn points and our in our pegs and our highly differentiated scheme here.

You can actually redeem across everything except for alcohol. So that is really another key point and then finally.

Just to Andy's point, we know technology is important to a lot of our consumers, but even if like youre not super into technology, we're allowing you to earn points outside of the App, which is really distinctive in the industry and will allow everybody to participate and let everybody know that we value them and that we value their visits with us and.

They can participate in what we believe will be a really exciting program. So it seems excited it's rolling out in the next couple of weeks and we're optimistic about what it'll do for the brand.

Sandra Cochran: When you are managing your visits, I believe you'll go to Brands You Trust, where you know you're going to get value, and you're going to get an experience that kind of makes it worth you going out. That's why our, you know, the brand positioning, warm up fatality, plentiful portions, fair price of just good food, I think, will work, even if what we're moving into is a more competitive value conscious consumer.

Got it great. Thank you so much Julien sorry, if I color. That's all I have I'll hop back in the queue.

Thanks Oscar.

Okay.

Our next question comes from Andrew Baum with L. C.

C L. King. Please go ahead.

Thank you I wanted to follow up on the loyalty program question.

You sort of it's the best in class or.

Is that something you worked with consultants and got a third party or is that just your sense of you're doing your own.

Alton Stump: Thank you very much, Sandy.

Benchmarking and looking at your competitors.

And beyond that could you kind of give us kind of give us a sense of.

Alton Stump: Our next question comes from Alton Stalkwood Loop Capital. Please go ahead. Great. Thank you.

Especially if it's a benchmark number or a third party what youre hearing.

Alton Stump: Good morning, and, you know, just want to say congrats, Sandy, on your 12 years. We'll certainly miss you, but, you know, look forward, obviously, to working, you know, with the new team soon. You know, I just want to ask quickly, I know what the, you know, what's the top of the hour here, but just, you know, want to ask about your low to roll out, how much an opportunity that is, you know, kind of going back to comments about, you know, with younger consumers.

Best in class loyalty program, what you believe.

Kind of means for the business in terms of.

Eventually.

Boosting the traffic.

Hi, Andrew it's Craig.

Potentially best in class I think as Julie talked about we believe the loyalty program is it has more or more options is really well branded you can earn we earn pegs are what we call over points.

Alton Stump: That's always been a group that you guys have, you know, tried to expand with, you know, maybe a little older set on average versus some of your peers. And so how much of an opportunity you think loyalty could be to capture more of those younger consumers to come to your brand. I don't think we're ready to quantify. I'm looking at Craig. I doubt he's going to give you any numbers. We've certainly done a lot of modeling about it.

Both for Diamond for in restaurant as well as retail you can accrue the points through an app you can accrue them at the at the register as well you earn.

Alton Stump: It takes time. So, that'll get everybody signed up. They have to visit frequently enough to earn. It's really across age cohorts. More than I was expecting to see the existence of a loyalty program was important. And both to our loyal guests, older and our younger, our younger technology in general is more important to a younger guest, but the loyalty program came up surprisingly high on the list. So, we are optimistic that this will be something that they've hoped we would do and we will get great signups, a lot of learnings and so on.

Neil at different levels. So we have different status levels. So as we went through and we did a lot of this internally, but we also have a loyalty export with a lot of experience who has done this in retail Amit compared elements of different loyalty programs, it's certainly across the restaurant industry.

He really check in all of the boxes I believe in the restaurant industry and many of the boxes and broader and broader retail.

While we believe is best in class is.

Is what we're seeing when we compare two family dining and casual dining.

Yeah.

But would you be willing to give us maybe a range of what expectation for what it should do for the business ultimately.

We're still in early days on on that one I think it's going to be a big driver for us not only in terms of the appeal.

Alton Stump: This is actually an area that Julie has quite a bit of experience. And she's spent quite a bit of time since she's been here just in understanding what the program is and our rollout plan. And Julie, do you have anything you'd like to maybe add to it?

And it's kind of short term ability to drive repeat.

Repeat visits.

Our ability to market the company more broadly using the data that we'll get from that program. We think that will have a longer term benefit in better equipping us with our broader marketing communications to make that more targeted and more effective and more efficient.

Julie Masino: Sure. Thanks, Sandy. Hi, Alton. Yeah. What I'm excited about with the loyalty program and I think what our guests will enjoy most is that one, they can earn across restaurant and retail, which if you think about it, that's pretty distinctive and a key differentiator for us as a brand because we have both of those experiences available to our guests who are allowing them to earn across both. So, that's number one. Secondly, every item, whether it's restaurant or retail on our menu, is eligible to earn points in our pegs in our highly differentiated scheme here.

Julie Masino: And you can actually redeem across everything except for alcohol. So, that is a really another key point. And then finally, to Sandy's point, we know technology is important to a lot of our consumers. But even if you're not super into technology, we're allowing you to earn points outside of the app, which is really distinctive in the industry and will allow everybody to participate and let everybody know that we value them and that we value their visits with us and that they can participate in what we believe will be a really exciting program.

Yeah.

Got it appreciate that and just I wanted to ask about the traffic. It was helpful to hear about the different segments and so on and cohorts, but can you give us a sense of how it it's the cadence by month.

And specifically did it did it slow down get worse or did you just not improve as expected.

Throughout the quarter and obviously into the current quarter.

Broadly speaking in that one on our prior earnings call. We shared that while we had done relatively well in Q3, we were ahead of the industry.

We shared that we saw a deceleration in traffic as we moved into the fourth quarter and so far we've said that our first quarter remains remains pressured so without getting too prescriptive around it we would say.

Both at the beginning of that and where we are today remains fairly fairly soft without a big French.

Julie Masino: So, teams excited, rolling out the next couple of weeks and we're optimistic about what it will do for the brand. God, great. Thank you so much Julie. Sandy, if I call her, that's all I have. I will hop back in the queue. Thank you both.

<unk> changed one way or another we are pleased with some of the progress that we've made at breakfast with the advertising that we've put forward.

To be pleased with our catering business, which is growing even in spite of.

Andrew Wolf: Our next question comes from Andrew Wolfe with CLK. Please go ahead. Thank you.

Challenge in a challenging environment and I think in addition to being placed with breakfast.

Andrew Wolf: I want to follow up on the loyalty program question. You know, you asserted that it's the best in class or is that something you know you work with consultants and got a third party or is that just you know your sense of it doing your own benchmarking and looking at your competitors. And beyond that, could you kind of give us kind of give us a sense of You know, especially if it's a benchmark number or a third party, you know, what you're hearing, you know, a best-in-class loyalty program or what you believe kind of means for the business in terms of, you know, eventually boosting the traffic.

The dinner day part weekends have been strong which have been it's important for this brand.

And so that that's been a trend that we've been encouraged by.

Got it thank you very much.

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

Hey.

Well before we sign off first I want to thank everyone on this call and for all of your well wishes and I want to say, thank you to our employees and to our shareholders. It's been a privilege to lead this brand for 12 years, we've navigated some challenges, especially in the recent year.

Andrew Wolf: Hi, Andrew, it's Craig. I think, you know, potentially best-in-class. I think as Julie talked about, we believe the loyalty program is, it has more or more options. It's really well branded. You can earn, we earn pegs or what we call our points, both for dining and both for in restaurant as well as retail. You can accrue the points through an app. You can accrue them at the app. The register as well.

And we're clearly facing some challenges today.

Cracker barrel is one of the most differentiated brands in the industry and I have complete confidence that under Julies leadership, our teams and our company will continue to thrive.

<unk>.

Andrew Wolf: You earn meals at different levels. So we have different status levels. So as we went through and we did a lot of this internally, but we also have a loyalty export with a lot of experience was done this in retail and we compared, you know, elements of different world programs. Certainly across the restaurant industry, we really check in all of the boxes, I believe, in the restaurant industry and many of the boxes, in broader, in broader retail. Well, we believe it's best-in-class is what we're seeing when we compare to family dining and casual dining.

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

Craig Pommells: But would you be willing to give us maybe a range of expectation for what it should do for the business ultimately? We're still in early days on that one. I think it's going to be a big driver for us, not only in terms of the appeal and it's kind of short-term ability to drive, you know, repeat visits. But in our ability to market the company more broadly using the data that we'll get from that program, we think that will have a longer term benefit in better equipping us with our broader marketing communication to make that more targeted and more effective and more efficient. Got it, appreciate that.

Craig Pommells: And I wanted to ask about the traffic, it was helpful to hear about the different segments and so on and cohorts. But can you give us a sense of how it, the cadence by month, and specifically did it slow down, get worse, or did you just not improve as expected, you know, throughout the quarter and obviously into the current quarter? I've seen a broadly speaking on that one on our prior earnings call, you know, we shared that, you know, while we had done relatively well in Q3, we were ahead of the industry, we shared that we saw a deceleration in traffic as we moved into the fourth quarter.

Craig Pommells: And so far, you know, we've said that our first quarter remains, you know, remains pressure. So without getting too prescriptive around it, we would say, you know, both at the beginning and where we are today, remains, you know, fairly, you know, fairly soft without a big trend, you know, trend changed. One, we are another, we are pleased with some of the progress that we've made at breakfast with the advertising that we've put forward.

Craig Pommells: We're continue to be pleased with our patrons. Business, which is growing even in spite of a challenging, challenging environment. And I think in addition to being pleased with Brexist, as opposed to the dinner day part, weekends have been strong, which have been, it's important for this brand, and so that's a trend that we've been encouraged by.

[music].

[music].

Good day and welcome to the Cracker barrel fiscal 2023 fourth quarter conference call.

All participants will be in listen only mode.

Should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

After today's presentation there'll be an opportunity to ask questions.

To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.

Please note. This event is being recorded I would now like to turn the conference over to cable I'd be honest. Please go ahead.

Thank you good morning, and welcome to Cracker barrels fourth quarter fiscal 2023 conference call and webcast. This morning, we issued a press release announcing the fourth quarter results.

In the press release and on the call when we refer to non-GAAP financial measures for the fourth quarter ended July 28, 2023, as well as our expectations for the first quarter. The non-GAAP financial measures are adjusted to exclude the expected noncash amortization of the assets recognized from the gains on the sale.

And leaseback transactions certain expenses related to our CEO transition and a corporate restructuring charge. The company believes that excluding these items from its financial results provides investors with an enhanced understanding of the company's financial performance. This.

This information is not intended to be considered in isolation or as a substitute for net income and earnings per share information prepared in accordance with GAAP.

The last pages of the press release include 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.

CEO elect Julie Masino is senior Vice President and CFO Craig <unk>.

Damian Craig will provide a review of the business financials and outlook. We will then open up the call for questions for Sandy Craig and Julie.

On this call statements may be made by management of their beliefs and expectations regarding the company's future operating results and expected future events.

These are known as forward looking statements, which involve risks and uncertainties that in many cases are beyond management's control and may cause actual results to differ materially from expectations.

We caution our listeners and readers in considering forward looking statements and information many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release.

And are described in detail in our reports that we file with or furnish to the SEC finally.

The information shared on this call is valid as of today's date.

The company undertakes no obligation to update it except as may be required under applicable law I will now turn the call over to cracker barrels president and CEO .

Sandy Cochran Sandy.

Thank you and good morning, everyone.

This morning, we reported total quarterly sales of $836 7 million and an adjusted operating income margin rate of five 3%, which was approximately a percentage point higher than the prior year fourth quarter.

As we said on our last earnings call, our fourth quarter began slowly well we had expected the traffic would improve in June and July with the onset of the summer travel season.

Unfortunately, this didn't materialize and our restaurant and retail sales performance came in below our expectations.

Although they have stabilized we believe these fourth quarter traffic trends will continue through most of the first quarter as well.

We are of course, taking actions to address them as I'll get to later in the call.

Unknown Executive: Got it, thank you very much. This concludes our question and answer session.

In the face of the topline challenges that we experienced in the fourth quarter. Our teams worked hard to control costs.

Between their efforts pricing and inflationary easing, we were able to deliver higher fourth quarter margins than in the prior year, despite our lower traffic levels.

Of course, there are other bright spots in the quarter as well, particularly in certain areas likely to help us in the longer term.

Our operations teams focused intently on the guest experience operational excellence staffing and retention and we made and continue to make meaningful headway in these areas.

Sandra Cochran: I would like to turn the conference back over to Cindy Caulklin for any closing remarks. Okay, well, before we sign on off first, I want to thank everyone on this call and for all of your well wishes, and I want to say thank you to our employees and to our shareholders. It's been a privilege to lead this brand for 12 years. We've navigated some challenges, especially in the recent years, and we're clearly facing some challenges today. But Cracker Barrel is one of the most differentiated brands in the industry, and I have complete confidence that under Julie's leadership, our teams and our company will continue to the five. Thank you.

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

We continued our successful deployment of back of the house technology, which will be foundational for us going forward.

And despite a very challenging environment, our retail product assortment resonated with our guests and our teams managed inventories exceptionally well and delivered solid retail margins, even in the face of lower traffic.

We launched our loyalty program Cracker barrel rewards internally in late July and I'm excited to announce that it'll be available to guests across the country by the end of this month.

We believe our loyalty program will be a key traffic driver for us over the long term and I'll speak in more detail about the program later in the call.

From a full year perspective, we achieved our ambitious goal of growing our catering business above $100 million and we delivered $30 million in sustainable cost savings.

Unknown Executive: Good day and welcome to the Cracker Barrel fiscal 2023 fourth quarter conference call.

We opened a total of 12, new Maple Street, and two new cracker barrel locations, and we returned more than $133 million to our shareholders in the form of dividends and share repurchases.

Unknown Executive: 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.

Unknown Executive: After today's presentation there will be an opportunity to ask questions. To ask a question you may press star then one on your touch tone phone. To address your question please press star then two. Please note this event is being recorded.

Although we believe that the traffic pressures that we're experiencing reflect a challenged consumer environment.

Kaleb Johannes: I would now like to turn the conference over to Kaleb Johannes. Please go ahead. Thank you.

We also believe they were exacerbated by our marketing and media strategy.

The volume and the substance of our marketing messages in the fourth quarter were not as effective as we'd wanted particularly against the backdrop of a highly competitive and promotional marketplace.

We lowered our advertising spend as we traditionally found advertising to be less impactful in the fourth quarter and instead invested funds in store staffing and labor, which we think are longer term imperatives.

And although we focused our messaging on value our message did not breakthrough against the highly promotional advertising we saw from our competitors.

Finally, we think we still have opportunities with regard to the guest experience.

Sandra Cochran: Good morning and welcome to Cracker Barrel's fourth quarter fiscal 2022. This morning we issued a press release announcing the fourth quarter results. In the press release and on the call when we refer to non-gap financial measures for the fourth quarter ended July 28, 2023 as well as their expectations for the first quarter. The non-gap financial measures are adjusted to exclude the expected non-cash amortization of the assets recognized from the gains on the sale and lease back transactions.

I'd like to turn it over to Craig now for a more detailed look at the quarter from a financial perspective and to discuss our outlook.

Greg, It's Jon I'll come back and comment on the actions, we're taking to address our traffic situation and position us to change our trajectory in 2020 for Greg.

Sandra Cochran: Certain expenses related to a CEO transition and a corporate restructuring charge. 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 an isolation or as a substitute for net income and earnings per share information prepared in accordance with gaps. The last pages of the press release include reconciliation from the non-gap information to the gap financials.

Thank you Sandy and good morning, everyone.

As Sandy noted for the fourth quarter, we reported total revenue of $836 7 million.

Sandra Cochran: On the call with me this morning, our Cracker Barrel's President and CEO, Sandy Cochran, CEO-elect Julie Fells Masino and Senior Vice President and CEO of Craig Pommells. Stany and Craig will provide a review of the business, financials and outlook. We will then open up the call for questions for Sandy, Craig and Julie.

An increase of 0.8% over the prior year quarter.

Unknown Executive: On this call, statements may be made by management of their beliefs and expectations regarding the company's future, operating results and expected future events. These are known as forward-looking statements, which involve risks and uncertainties that in many cases are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release. And our describe in detail in our reports that we file with or furnished to the SEC.

Restaurant revenue increased two 6% the $679 $3 million and retail revenue decreased six 6% to $157 4 million versus the prior year quarter.

Unknown Executive: Finally, the information shared on this call is valid as of today's date. The company undertakes no obligation to update it except as may or to be required under applicable law.

Parable store total sales, including both restaurants and retail grew by 0.5%.

Comparable store sales grew by two 4% over the prior year, driven primarily by approximately eight 7% pricing.

Our average check results included a favorable menu mix of approximately 1%.

Which continues to be driven by our culinary strategy.

Providing guests with upgrade and add on options such as our <unk> premium sites beverage program and the $5 take home offerings.

Anticipating a question you might have.

We do not believe our pricing strategy negatively impacted our fourth quarter or our current traffic in any meaningful way.

As we've commented before we.

We have consistently taken and continue to take a very thoughtful and deliberate approach to pricing.

While our recent price increases have been higher than historical levels.

We track guests value perceptions through a variety of means.

We closely monitor our competitive price points, and we measure the impact of our pricing actions against the control group to ensure we have not triggered adverse guest behaviors.

We have not seen a negative impact to traffic from our pricing actions.

Even in the currently sensitive environment.

That said, we believe price increases taken by the entire restaurant industry may be having a cumulative effect on dining behaviors and we will continue to be mindful of the consumer and competitive environment and the markets. We serve as we make pricing decisions going forward.

Off premise sales were approximately 17, 2% of restaurant sales.

Sandy noted we were especially pleased with the performance of our catering business, which grew over 35% in the quarter and we achieved our goal of growing it to a $100 million channel this fiscal year.

Comparable store retail sales decreased six 8% compared to the fourth quarter of the prior year.

Although retail sales remained soft we have been pleased with our team has effectively managed our markdowns and inventory levels.

Moving on to our fourth quarter expenses.

Total cost of goods sold in the quarter was 38% of total revenue versus 32, 9% in the prior year quarter.

Restaurant cost of goods sold in the fourth quarter was 26, 6% of restaurant sales versus 28, 7% in the prior year quarter.

This 210 basis point decrease was primarily driven by total menu pricing of eight 7%, which is inclusive of carryforward pricing for fiscal 2022, and new pricing for fiscal 2023.

Commodity deflation was approximately 0.8% driven principally by lower pork and poultry prices.

Fourth quarter retail cost of goods sold was 48, 8% of retail sales versus 49, 4% in the prior year quarter. This 60 basis point decrease was primarily driven by lower freight and lower markdowns.

Our inventories at quarter end were $189 million.

Compared to $213 million in the prior year.

With regard to labor costs, our fourth quarter labor and related expenses were 36, 5% of revenue.

Sandra Cochran: I will now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran. Sandy? Thank you. Good morning, everyone. This morning, we reported total quarterly sales of 836.7 million and an adjusted operating income margin rate of 5.3%, which was approximately a percentage point higher than the prior year fourth quarter. As we said in our last earnings call, our fourth quarter began slowly. What we had expected the traffic would improve in June and July with the onset of the summer travel season.

Versus 35, 5% in the prior year quarter. This 100 basis point increase was primarily driven by our investments in additional labor hours to support the guest experience.

Sandra Cochran: Unfortunately, this didn't materialize and our restaurant and retail sales performance came in below our expectations. Although they've stabilized, we believe these fourth quarter traffic trends will continue through most of the first quarter as well. We are, of course, taking actions to address them as I'll get to later in the call. In the face of the top line challenges that we experienced in the fourth quarter, our teams worked hard to control costs.

Our hourly restaurant wage inflation on a constant mix basis was four 5%.

Sandra Cochran: Between their efforts, pricing and inflationary easing, we were able to deliver higher fourth quarter margins than in the prior year despite our lower traffic levels. Of course, there were other bright spots in the quarter as well, particularly in certain areas, likely to help us in the longer term. Our operations teams focused intently on the guest experience, operational excellence, staffing and retention, and we made and continued to make meaningful headway in these areas.

Adjusted other operating expenses were $23 zero percent of revenue versus 23, 3% in the prior year quarter.

This 30 basis point decrease was primarily driven by lower utilities and maintenance expenses.

Our general and administrative expenses in the fourth quarter were four 5% of revenue versus three 9% in the prior year quarter.

This 60 basis point increase primarily resulted from more normalized incentive compensation.

All of this culminated in GAAP operating income of $41 $2 million adjusted for the noncash amortization of the asset recognized on the gains on the sale and leaseback transactions operating income for the quarter was 44 4 million.

Or five 3% of revenue.

Net interest expense for the quarter was $4 5 million.

Compared to net interest expense of $2 $6 million into prior year quarter. This increase was a result of higher interest rates.

Our GAAP effective tax rate for the fourth quarter was negative two 1%.

The negative tax rate was driven by increased credits.

Lower than expected earnings.

On an adjusted basis, our effective tax rate for the quarter was zero percent.

Fourth quarter GAAP earnings per diluted share were $1 68.

And adjusted earnings per diluted share were $1 79.

In the fourth quarter EBITDA was $72 1 million.

Or eight 6% of total revenue.

Now turning to capital allocation <unk> balance sheet.

We remain committed to a balanced approach to capital allocation.

Our first priority remains investing in the growth of cracker barrel under Maple Street beyond that we plan to return capital to our shareholders, while maintaining appropriate flexibility and a conservative balance sheet.

In the fourth quarter, we invested $36 9 million and capital expenditures, we ended the quarter with $415 million in total debt.

Sandra Cochran: We continued our successful deployment of Back of the House Technology, which will be foundational for us going forward, and despite a very challenging environment, our retail product disortment resonated with our guests and our teams managed inventory exceptionally well and delivered solid retail margins even in the face of lower traffic. We believe our loyalty program will be a key traffic driver for us over the long term and I'll speak in more detail about the program later in the call.

Sandra Cochran: From a full year perspective, we achieved our ambitious goal of growing our catering business above 100 million and we delivered 30 million in sustainable cost savings. We opened a total of 12 new maple streets and two new Cracker Barrel locations and we returned more than 133 million to our shareholders in the form of dividends and share repurchases. Although we believe that the traffic pressures that we're experiencing reflect a challenged consumer environment, we also believe they were exacerbated by our marketing and media strategy.

Our leverage ratio was one five times, which is within our target range of one three times to one seven times.

Sandra Cochran: The volume and substance of our marketing messages in the fourth quarter were not as effective as we'd wanted, particularly against the backdrop of a highly competitive and promotional marketplace. We lowered our advertising spend because we traditionally found advertising to be less impactful in the fourth quarter and instead invested funds in store staffing and labor which we think are longer term imperatives. And although we focused our messaging on value, our message did not break through against the highly promotional advertising we saw from our competitors.

Lastly, as we announced in our press release, the board declared a quarterly dividend of $1 30.

Sandra Cochran: Finally, we think we still have opportunities with regard to the guest experience. I'd like to turn it over to Craig now for a more detailed look at the quarter from a financial perspective and to discuss our outlook. Craig is not all come back and comment on the actions we're taking to address our traffic situation and position us to change our trajectory in 2024, correct?

I would now like to speak to our outlook and provide some additional color on the guidance in this morning's release.

Historically, we have typically provided full year guidance. However, we have decided to only provide Q1 guidance at this time, given the uncertainty in the environment and our CEO transition.

Craig Pommells: Thank you Sandy and good morning everyone. As Sandy noted, for the fourth quarter, we reported total revenue of $836.7 million and increased of 0.8% over the prior year quarter. Restaurant revenue increased 2.6%, the $679.3 million and retail revenue decreased 6.6%, the $157.4 million versus the prior quarter. Comparable store total sales, including both restaurant and retail, grew by 0.5%. Comparable store sales grew by 2.4% over the prior year, driven primarily by approximately 8.7% price in.

Turning to our guidance as.

As we've mentioned traffic.

Traffic has remained pressured during Q1 and for Q1, we currently anticipate total revenue of 800 million to $850 million.

Craig Pommells: Our average check results included a favorable menu mix of approximately 1%, which continues to be driven by our culinary strategy of providing guests with upgrade and add-on options such as our Sheryl Barrow bites, premium sides, beverage program, or take home offering. Anticipating a question you might have, we do not believe our price and strategy negatively impacted our fourth quarter or our current traffic in any meaningful way As we've commented before, we have consistently taken and continue to take a very thoughtful and deliberate approach to pricing.

We anticipate opening one to two new cracker barrel stores and four to five new Maple Street during the quarter.

We expect Q1 commodity deflation of approximately 1% to 2%.

And wage inflation on a constant mix basis of 4% to 5%.

We anticipate a Q1 adjusted operating income margin of between $2, 25% and three 5%.

And capital expenditures of $27 million to $32 million.

Our adjustments to operating income include expenses related to our sale leaseback transaction.

Our corporate restructuring charge and.

And certain expenses related to our CEO transition.

All of which are detailed in the footnotes to our reconciliation table at the end of our earnings release.

Randy will describe our plans to improve our profit performance momentarily, while delivering an improved topline performance is our top priority. It is also imperative that we continue to shore up our business model and improve profitability.

We were pleased that we delivered $30 million of sustainable cost savings in fiscal 'twenty, three and we anticipate we will deliver approximately $13 million in additional savings again in fiscal 'twenty four although I do want to note that we expect these savings to be partially offset.

By investments in labor and loyalty.

I'll now turn the call back over to Sandy So she may share additional details around our business plans.

Thank you Craig.

We are aggressively taking steps to recover traffic above industry levels and to adjust our business model to ensure our financial strength while doing so.

We are and we'll be doing this on a number of fronts, both shorter and longer term.

In the shorter term, we are focused on marketing the guest experience retail sales.

Pairing for the important holiday season, which occurs during our second quarter and the launch of our loyalty program. So I'm going to go through each of these with you.

With regard to marketing we've increased our media spend and are focusing our marketing on our core guests of all ages and more pointed value messaging, particularly around lunch and dinner <unk>.

For example, we've added media presence and avenues like college football NASCAR to drive top of mind awareness.

Yeah.

Our advertising around the breakfast day part has been effective at improving traffic and we will now increase our emphasis on lunch and dinner, where we've underperformed.

By focusing on craveable favorites that appeal to all rguest segments like southern fried chicken.

We'll also be advertising sharper price points, such as branch all day, starting at 899.

And continuing to showcase our variety with our over 20 under 12 campaign.

Finally, we're introducing a new physical menu format that tested well and includes imagery that we believe will appeal to our guests and drive check.

With regard to the guest experience, we will continue to focus on staffing retention in hospitality.

All of which are linchpins for sustainable traffic.

We're encouraged by the improvements that we've seen in these areas and our guest experience metrics, which fell below our historically strong levels as we re staffed and retrained coming out of the pandemic.

And we will continue to invest in more front of the house hours to deliver the hospitality for which we're known.

We will also continue our investments in training and development.

Refining operations and improving our manager experience by streamlining our eliminating work that draws them away from the dining rooms, and our employees and their guests.

As for retail our retail teams will continue to manage inventories and emphasize sales behaviors that drive conversion.

We're also reworking some of our merchandising displays to be even more effective and impactful than they already are.

With respect to our important second quarter. We believe we are well positioned to have a strong holiday season, and deliver continued growth in our already robust catering and occasion channels.

From a culinary perspective, we will lean into our core holiday offerings, such as country fried, Turkey, and cinnamon roll pie that we know are strong traffic drivers and that along with our retail offerings underpinned our holiday season.

Finally, we are launching our cracker barrel rewards loyalty program that we believe will be a meaningful traffic driver as well as a key source of guest insight and data, although it will take time to build awareness and participation.

As I said earlier the program will be going live by the end of the month and we believe it has the potential to be the best most engaging loyalty program in the full service dining industry.

And we will help us further extend our hospitality into the digital realm.

Based off our iconic peg game participants will earn pegs for each dollar they spend with us both restaurant and retail.

Craig Pommells: While our recent price increases have been higher than historical levels, we track guest value perceptions through ever variety of means. We closely monitor competitive price points and we measure the impact of our price and actions against the control group to ensure we have not triggered adverse guest behaviors. We have not seen a negative impact to traffic from our price and actions, even in the currently sensitive environment.

And we will be able to use those pigs for rewards at various levels.

Craig Pommells: That said, we believe price increases taken by the entire restaurant industry may be having a cumulative effect on dining behaviors, and we will continue to be mindful of the consumer and competitive environment in the markets we serve as we make price and decisions going forward. Off-premise sales were approximately 17.2% of restaurant sales. As Sandy noted, we were especially pleased with the performance of our catering business, which grew over 35% in the quarter, and we achieved our goal of growing it to a $100 million dollar channel this fiscal year.

The program this game aside, allowing guests to earn additional pegs through fund challenges as well as surprise and delight events.

Craig Pommells: Comparable store retail sales decreased 6.8% compared to the fourth quarter of the prior year. Although retail sales remained soft, we have been pleased with how our team has effectively managed our markdowns and inventory levels. Moving on to our fourth quarter expenses, total cost of goods sold in the quarter was 30.8% of total revenue versus 32.9% in the prior quarter. Restaurant cost of goods sold in the fourth quarter was 26.6% of restaurant sales versus 28.7% in the prior year of quarter.

We've been testing it with positive results among our own employees, who we know will be the best ambassadors for the program and key to its rollout.

To further drive awareness that enrollment will be launching a multichannel media campaign and I'm delighted to announce that we'll be partnering with Dolly Parton in late October to highlight the program and to promote dollars highly anticipated collaborative album, Rockstar, which will be.

Craig Pommells: This 210 basis point decrease was primarily driven by total menu pricing of 8.7%, which is inclusive off, carried forward price in from fiscal 2022, and new price in from fiscal 2023. The modesty deflation was approximately 0.8% driven principally by lower pork and poultry prices. Fourth quarter retail cost of goods sold was 48.8% of retail sales versus 49.4% in the prior quarter. This 60 basis point decrease was primarily driven by lower freight and lower markdowns.

Available in our stores.

Longer term initiatives, we are undertaking extensive research with both current and lapsed guests in partnership with outside firms to further understand the current competitive environment and our place in it including our strengths opportunities brand positioning.

And to identify actionable strategies to capitalize on our learnings.

We're also conducting a deeper dive review of our store base to better leverage our presence in certain trade areas and we will be considering physical design and refreshment opportunities, which will be informed by the research we're undertaking.

From a culinary perspective will remain focused on menu innovation driven by the needs of our most loyal guests and our desired affinity groups. While at the same time pursuing menu simplification to help our operators and improve efficiency.

Craig Pommells: Our inventory at quarter end were $189 million compared to $213 million in the prior year. With regard to labor costs, our fourth quarter labor and related expenses worth 36.5% of revenue versus 35.5% in the prior quarter. This 100 basis point increase was primarily driven by our investments in additional labor hours to support the guest experience. Our only restaurant wage inflation on a constant mixed basis was 4.5%. I just did other operating expenses were 23.0% of revenue versus 23.3% in the prior year quarter.

Finally, as Craig noted, we'll continue to identify sustainable cost savings and expect an additional $30 million in FY 'twenty for effectively matching the savings that we delivered in FY2023.

All of the initiatives I just reviewed will be led by my successor, Julie Self Masino, who our board appointed after a multiyear succession planning process.

Julie had the chance to spend several days with our entire field leadership at our biannual managers conference in Orlando, a month ago and she has been warmly embraced by the entire cracker barrel family.

We look forward to Julie's leadership as we tackle the challenges before us.

Before we open things up for your questions I want to offer Julia chance to say a few words Julie.

Hello, everyone. It's a pleasure to be with you all as you would expect over the last few weeks I've been busy onboarding visiting stores and getting to know the brand and our team.

Even after the short time it is clear to me that the things that drew me to this opportunity and iconic brand with passionate and loyal guests, who love Us Greg.

Scratch made food and retail products are profound mission, a pleasing people and talented and passionate people who are deeply committed to delivering on this mission are all right there.

So traffic is challenged the fact is our absolute traffic numbers would be the envy of many brands.

All that to say I am confident that we have the core elements to address our current challenges and regain lost ground.

I'll be digging in with Sandy and our teams on both the shorter and longer term initiatives that she mentioned and will be solidifying my own views after doing some more of listening and observing.

I look forward to speaking with you further in November and of course in subsequent calls when I'll have more to share with you.

On a personal note I am grateful not only for the opportunity to lead this great brand, but for both Sandys leadership over the last 12 years and our ongoing partnership as I settle into the role I've been around restaurant and retail my whole life and the chance to be able to leverage my experience for our company with its rich history and bright in the future as cracker barrel is truly <unk>.

Sighting.

I'm looking forward to getting to work and interacting with you more over the coming months and I appreciate the chance to say Hello Sandy.

Thanks, Julie as you all know Julie has a long track record of driving growth and innovation and I have no doubt that she will bring that experience to bear as we tackle our challenges and position the brand for the future.

Now, let's take your questions.

Thank you.

We will now begin the question and answer session.

Ask a 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 our roster.

Our first question comes from Jeff Farmer with Gordon Haskett. Please go ahead.

Great. Thank you best of luck Sandy and welcome to Julie.

With that.

A few questions. So can you help me understand the same store sales expectations that are captured in Q1 revenue guidance of I believe it was $800 million to $850 million.

Hi.

You said a few questions.

<unk>.

Well, so Jeff what I would say there is it's a fairly it's a fairly wide wide range and we don't really have a lot of new units in the plan. So that's the way we're thinking about this as Craig by the way and good morning, the way, we're thinking about the first quarter as well.

Thinking is approximately in the middle of the range.

Craig Pommells: This 30 basis point decrease was primarily driven by lower utilities and maintenance expenses. Our general and administrative expenses in the fourth quarter were 4.5% of revenue versus 3.9% in the prior year quarter. This increased primarily resulted from more normalized incentive compensation.

But if the environment were to get tougher we would probably be at the lower end of the range at the same time, we've taken a number of actions to shore up traffic in particular.

<unk> to our advertising and messaging and so on to the degree that those things are highly effective that would move us to the high end of the range.

Craig Pommells: All of this culminated in gap operated income of $41.2 million, adjusted for the non-cash amortization of the asset recognized from the gains on the sale and lease back transactions, operated income for the quarter was $44.4 million or 5.3% of revenue. Net interest expense for the quarter was $4.5 million compared to net interest expense of $2.6 million in the prior year quarter. This increase was a result of higher interest rates. Our gap effective tax rate for the fourth quarter was negative 2.1%, the negative tax rate was driven by increased credits on lower than expected earnings. On an adjusted basis, our effective tax rate for the quarter was 0%. Fourth quarter gap earnings per deluded share were $1.68 and adjusted earnings per deluded share were $1.79.

Okay.

Just following up on that so second question, so expected menu pricing in Q1 and Q2 for you guys.

Craig Pommells: In the fourth quarter, EBITDA was $72.1 million or 8.6% of total revenue. Now, turning to capital allocation and or balance sheet, we remain committed to a balanced approach to capital allocation. Our first priority remains investing in the growth of crack of viral animal street. Beyond that, we plan to return capital to our shareholders while maintaining appropriate flexibility and a conservative balance sheet. In the fourth quarter, we invested $36.9 million in capital expenditures. We ended the quarter with $4.15 million in total debt. Our leverage ratio was 1.5 times, which is within our target range of 1.3 times to 1.7 times.

So for overall for <unk>.

<unk> for Q1, the way that we think about.

Craig Pommells: Lastly, as we announced in our press release, the board declared a quarterly dividend of $1.30.

Pricing there are a couple a couple of elements. One is the price that we're wrapping on and then we also have the new price. So for our actual net new price that were added in for Q1 is relatively low but the price.

Craig Pommells: I would now like to speak to our outlook and provide some additional color on the guidance in this morning's release. Historically, we have typically provided full year guidance.

Craig Pommells: However, we have decided to only provide Q1 guidance at this time given the uncertainty in the environment and our CEO transition. Turning to our guidance, as we've mentioned, traffic has remained pressured during Q1, and for Q1, we currently anticipate total revenue of $800 million to $850 million. We anticipate opening 1-2 new crack of viral stores and 4-5 new maple streets during the quarter. We expect Q1 commodity deflation of approximately 1-2%, and Wage Inflation on a constant mix basis of 4% to 5%.

Craig Pommells: We anticipate if you want adjusted operating income margin between 2.25% and 3.25%. And capital expenditures of $27 million to $32 million. Our adjustments to operating income include expenses related to our sale of lease back transaction, a corporate restructuring charge, and certain expenses related to our CEO transition, all of which are detailed in the book notes to our reconciliation table at the end of our earnings release.

Craig Pommells: Sandy will describe our plans to improve our traffic performance momentarily. While delivery and improved top-line performance is our top priority, it is also imperative that we continue to sure of our business model and improve profitability. We were pleased that we delivered $30 million of sustainable cost savings in fiscal 23, and we anticipate we will deliver approximately $30 million in additional savings again in fiscal 24, although I do want to note that we expected these savings to be partially offset by investments in labor and loyalty.

Sandra Cochran: I'll now turn the call back over to Sandy, so she may share additional details around our business plans. Thank you, Craig. We are aggressively taking steps to recover traffic above industry levels, and to adjust our business model to ensure a financial strength while doing so. We are and will be doing this on a number of fronts, both shorter and longer term.

Cumulatively bit over a year over year would be somewhere in the six two.

6% to 7% range for Q1 total pricing in <unk>.

The additional pricing from Q1 enterprise year round.

67% in Q1 and cumulative if I got that and then do you have.

Sandra Cochran: In the shorter term, we are focused on marketing, the guest experience, retail sales, preparing for the important holiday season which occurs during our second quarter, and the launch of our loyalty program, so I'm going to go through each of these with you. With regard to marketing, we've increased our media spend and are focusing on marketing on our acquainted value messaging, particularly around lunch and dinner. For example, we've added media presents and avenues like college football and NASCAR to drive top of mind awareness.

Cumulative.

Number for Q2 as well can we expect that six to seven sort of hold into Q2.

Sandra Cochran: Our advertising around the Brexit State Park has been effective at improving traffic, and we'll now increase our emphasis on lunch and dinner where we've underperformed by focusing on craveable favorites that appeal to all our guest segments like southern fried chickens. We'll also be advertising sharper price points, such as brunch all days starting at 899, and continuing to showcase our variety with our over 20 under 12 campaign. Finally, we're introducing a new physical menu format that tested well and includes imagery that we believe will appeal to our guest and drive chat.

Well, we're not sure and much beyond Q1 at this time I'll build a little bit more just to help with that question because we are moderating our pricing our incremental pricing as we go through the fiscal year and we're comping at a higher price.

Natural expectation there would be over a combined year over year price would come down meaningfully over the course of the year and you would expect it to be at its peak at approximately.

Sandra Cochran: With regard to the guest experience, we will continue to focus on staffing, retention and hospitality, all of which are linchpins for sustainable trust. We're encouraged by the improvements that we've seen in these areas and in our guest experience metrics, which fell below our historically strong levels as we re-stacked and retrained coming out of the pandemic. And we will continue to invest in more front of the house hours to deliver the hospitality for which we're known.

Approximately Q1.

Okay. That's helpful. And then final question for me it looks like the adjusted operating income margin guidance for the Q1 is at about 225 to $3 two 5% range, that's quite a bit below where you were.

Sandra Cochran: And improving our manager experience by streamlining or eliminating work that draws them away from the dining rooms, their employees and their guests. As for retail, our retail teams will continue to manage inventories and emphasize sales behaviors that drive conversion. We're also reworking some of our merchandising displays to be even more effective and impactful than they already are.

Sandra Cochran: With respect to our important second quarter, we believe we are well positioned to have a strong holiday season and deliver continued growth in our already robust catering and occasion channels. From a culinary perspective, we will lean into our core holiday offerings, such as Country Fight Turkey and Cinnamon Roll Pie, that we know are strong traffic drivers and that along with our retail offerings underpan our holiday season.

A year ago I believe its 3.6% so I'm just trying to understand there.

Sandra Cochran: Finally, we're launching our Cracker Bear Awards loyalty program that we believe will be a meaningful traffic driver, as well as a key source of guest insight and data, although it'll take time to build awareness and participation. As I said earlier, the program will be going live by the end of the month and we believe it has potential to be the best, most engaging loyalty program in the full service dining industry. And we'll help us further extend our hospitality into the digital realm.

Sandra Cochran: Based off our iconic peg game, participants will earn pegs for each dollar they spend with us, both restaurant and retail, and will be able to use those pegs for rewards at various levels. The program is gamified, allowing guests to earn additional pegs through fun challenges, as well as surprise and delight events. We've been testing it with positive results among our own employees, who we know will be the best ambassadors for the program and key to its rollout.

In terms of thinking about the restaurant level margin versus G&A.

What is what is basically representing about 100, plus plus basis point margin headwind for the F. <unk> operating margin relative to a year ago. So just key drivers there sort of across the restaurant level margin is that much lower G&A higher how should we be thinking about your bits and pieces of the moving pieces to get into that lower <unk>.

Sandra Cochran: The further driver awareness and enrollment will be launching a multi-channel media campaign and I'm delighted to announce that we'll be partnering with Dolly Parton in late October to highlight the program and to promote Dolly's highly anticipated collaborative album, Rockstar, which will be available in our stores.

Sandra Cochran: Regarding longer term initiatives, we are undertaking expensive research with both current and lapsed guests in partnership with outside firms to further understand the current competitive environment and our play Senate, including our strengths, opportunities, brand positioning, and to identify actionable strategies to capitalize on our learnings. We're also conducting a deeper dive review of our store base to better leverage our presence in certain trade areas and we'll be considering physical design and refreshment opportunities which will be informed by the research we're undertaking.

Operating income guidance income margin guidance.

The big levers are going to be we see improvements in cost of goods sold so that will be favorable, but that's being offset by to some degree the leverage to some effect, but also the investments that we're making in labor no cracker barrel of our business model is so high.

Traffic and really good value great hospitality.

And we are while we've made a lot of progress on kind of regaining our historical leadership role in hospitality, we're not back to peak levels. So we're investing in labor in order to deliver that and we think over time that will be a big tailwind for us. So we have higher labor lower.

Sandra Cochran: From a culinary perspective, we'll remain focused on menu innovation driven by the needs of our most loyal guests and our desired affinity groups while at the same time pursuing menu simplification to help our operators and improve efficiency. Finally, as Craig noted, we'll continue to identify sustainable cost savings and expect an additional 30 million in FY24, effectively matching the savings that we delivered in FY23.

Sandra Cochran: All of the initiatives I just reviewed will be led by my successor, Julie Self-Masino, who are board appointed after a multi-year succession planning process. Julie had the chance to spend several days with our entire field leadership that are by annual manager's conference in Orlando a month ago and she has been warmly embraced by the entire Cracker Girls family. We look forward to Julie's leadership as we tackle the challenges before us.

Julie Masino: Before we open things up for your questions, I want to offer Julie a chance to say a few words. Julie? Hello, everyone.

Julie Masino: It's a pleasure to be with you all. As you would expect over the last few weeks, I've been busy onboarding, visiting stores and getting to know the brand and our teams. Even after this short time, it's clear to me that the things that drew me to this opportunity, an iconic brand with passionate and loyal guests who love us, great scratch-made food and retail products, profound mission of pleasing people, and talented and passionate people who are deeply committed to delivering on this mission are all right there.

We are a bit higher advertising as well because with traffic being softer we have deployed more advertising.

On a national basis, but we're also doing test and test and learn.

Julie Masino: Although traffic is challenged, the fact is our absolute traffic numbers will be the envy of many brands. All that to say, I'm confident that we have the core elements to address our current challenges and regain lost ground. I'll be digging in with Sandy and our teams on both the shorter and longer-term initiatives that she mentioned and will be solidifying my own views after doing some more listening and observing. I look forward to speaking with you further in November and of course in subsequent calls when I'll have more to share with you.

In different parts of the country and lastly, as a sub components of G&A in Q1, we have higher.

<unk> expense manager and training expense and that is in preparation for a reporter to sandy shared we're really proud of the work that we've done and the team has delivered with the catering business that kids, where an opportunity is greater or even more so in Q2, and we want to ensure we're fully prepared for that.

Sandra Cochran: On a personal note, I am grateful not only for the opportunity to lead this great brand, but for both Sandy's leadership over the last 12 years and her ongoing partnership as I settle into the role. I've been around restaurant and retail my whole life and the chance to be able to leverage my experience for a company with as rich of a history and bright of a future as Cracker Barrel is truly exciting.

So we have invested in additional an additional managers to ensure that we are delivering that at 100%.

Okay. Thank you very much.

Our next question comes from Todd Brooks with the Benchmark Company. Please go ahead.

Hey, good morning, and congrats Andy and welcome Julie as well.

Couple of questions for you one following on kind of Jeff's pricing question, but from a more.

Theoretical standpoint, Craig I know you talked about the guest value perceptions.

We have.

Been unchanged, even though I think since.

2021 menu pricing, probably between 15 and 17%.

How do you how do you measure that value.

Value perceptions arent changing as their situation changes.

As things are getting tougher or savings rates are down energy costs, Rob student loan payments restarting again.

Are there value perception static or how are you monitoring.

Those perceptions as you continue to take incremental price with it seems like each.

Each menu opportunities.

Good morning, Todd It's a good question.

The way that we evaluate that is one is the absolute value that we're delivering measured against ourselves, but we also measure our value scores primarily against the marketplace. Because the market has been very dynamic it has been a very high inflation period over.

Number of years, so in terms of value, we measure ourselves against a resultant measure ourselves against.

Our competition. We did also know within their prepared remarks that we do believe there is a reaction from consumers to just general generally higher prices.

In casual dining and full service dining more broadly we think we're well positioned with within that and we think our pricing is good. We think we're very competitive. We think we are a great value, but I do think there is a factor to prices as a whole in the macro economic <unk>.

Environment and the amount of full service visits that are available as a result of that.

And I'll add a little bit to that too Todd I think.

And as Chris pointed to we use the quantitative.

Control group to see what kind of impact on our pricing decisions. We made we continue to look at.

Ourselves versus competitors. We also are spending a lot of time listening to guests' reactions either through.

Conversations with our operators or.

Just the feedback that we get and we manage our we're monitoring check management tactics. So we're looking very closely at things like beverage attachment.

Sure Besides premium sides and all of the things that would indicate to us that the consumer situation has changed meaningfully and most importantly that we need to change our strategy to address it.

Okay very helpful. Thanks to you both just a follow up on that.

You talked about your value relative to competitors in the <unk>.

Current environment.

We're seeing more kind of price promotion activity.

From some of the full service operator universe out there cracker barrels, obviously, obviously been a brand where values inherent in lateral length itself to kind of an everyday value approach to the.

The brand and how you communicate that.

<unk> are getting.

More overtly competitive with price points and special offers what arrows are kind of in cracker barrels quiver.

So Paul if you do you feel like you need to compete a little bit more around the value of the experience.

Okay.

Well we.

We did see the competitors doing just that we think the quarter got significantly more promotional than we were anticipating and.

Sandra Cochran: I'm looking forward to getting to work and interacting with you more over the coming months and I appreciate the chances they have left. Sandy, thanks Julie. As you all know, Julie has a long track record of driving growth and innovation and I've no doubt that she will bring that experience to bear as we tackle our challenges and position the brand for the future.

Many of the competitors are not only getting sharpen the price point, but they also increased their level of advertising sort of with that news.

Unknown Executive: Now let's take your question. Thank you.

Unknown Executive: We will now begin the question and answer session. To ask a question you may press star then one on your touchtone home. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.

I think what we're what we're doing now.

Your point everyday value has always been a hallmark of the brand and we have worked hard to invest in value. Despite.

Unknown Executive: At this time we will pause momentarily to assemble our roster.

Despite the price increases that we've been taking over the last few years. We still think we have ensured that there is everyday value at every day part on the menu. So that the guests can come in and whether they are looking for a low price point or it's more of a celebratory indulgent occasion, so that they can find that.

Jeffrey Farmer: The first question comes from Jeff Farmer with Gordon Haskett. Please go ahead. Great. Thank you.

Jeffrey Farmer: Best of Lux Andy and welcome to Julie. With that a few questions. So can you help me understand the same source sales expectations that are captured in that Q1 revenue guidance? I believe it was 800 to 850 million. You said a few questions. Well, Jeff, what I would say there is it's a fairly wide range and we don't really have a lot of new units in the plan. So the way we're thinking about, this is Craig, by the way, good morning, the way we're thinking about the first quarter is, you know, our best thinking is in the approximately in the middle of the range.

On the menu.

So we're continuing to ensure we have that optionality on the menu we're not taking.

Jeffrey Farmer: But if the, you know, environment were to get tougher, we would probably be at the lower end of the range. At the same time, we've taken a number of actions to shore a traffic in particular updates to our advertising and messaging and so on to agree that those things are highly effective. That would move us to the high end of the range. Okay. Just following up on that. So second question. So expected menu pricing in Q1 and Q2 for you guys?

We're protecting for example, a momma's pancake breakfast, which is a phenomenal value at 899 pancakes.

<unk> eggs and all of that we didn't raise the price.

Jeffrey Farmer: So for overall for, you know, for Q1, the way that we think about pricing, there are a couple, you know, couple elements. One is the price that we're wrapping on and then we also have the new price. So for our actual net new price that we're adding for Q1 is relatively low. But the price cumulatively, which over year over year would be somewhere in the, you know, six to, you know, six to seven percent range for Q1 total price in it.

To ensure that we were able to deliver high value.

Jeffrey Farmer: In deep blue in it, the additional price in the from Q1 and the prior year wrap. So six to seven percent Q1 cumulatively got that and then do you have a cumulatively or a number for Q2 as well? Can we expect that six to seven to sort of hold into Q2? Well, you know, we're not sharing much beyond Q1 at this time. You know, I've built a little bit more just to help with that question because we are moderating our pricing, our incremental price and as we go through the fiscal year and we're coming on higher price, you know, the natural expectation there would be a combined year over year price would come down meaningfully over the course of the year and you'd expect it to be at its peak at approximately, in approximately Q1.

The breakfast point of course breakfast is available all day, but also we're trying to do a better job of telling that story in our own media and marketing messaging. So what youll see as we went through the quarter and now is more of our television advertising for example, highlighting both are strong.

Price point like 899 breakfast all day as well as.

Great price points and variety at lunch and dinner, so whether it's chicken and dumplings or country fried steak or some of these other really great items.

But it's a backdrop as competitors have gotten more promotional.

And more aggressive in their advertising, we are working hard to do an even better job of ensuring.

We remind our guests of the value that we have every day and I'm sure. They don't forget about that.

Great and one more.

More follow up and I'll jump back in queue. So just when you talk about.

The elements on the menu that you look at there is everyday value Ellen.

Elements, if you look at.

This quarter versus the prior quarter, how is the sales mix.

Everyday value type of an.

Items changed.

Order over quarters, the consumer has gotten a little bit more challenged.

Tom This is Craig what we what we've seen over the quarter is our breakfast business has done better than our lunch and dinner business. So overall, we're seeing a higher mix of our breakfast items or the items that Sandy mentioned in particular, so that's <unk>.

Primarily where we're seeing the shift.

Okay.

Okay, great. Thanks.

Our next question comes from Katherine Griffin.

Jeffrey Farmer: One. Okay, that's helpful. And then final question for me, it looks like the adjusted operating income margin guidance for the Q1 is in that 2.25 to 3.25% range. That's quite a bit below where you were a year ago. I believe it's 3.6%. So I'm just trying to understand there in terms of thinking about the restaurant level margin versus GNA. What is basically representing that 100 plus basis point margin headwind for the F1 Q operating margin relative to a year ago.

Each of America. Please go ahead.

Hi, Thanks for taking my question.

Wanted to ask sort of a follow up to an earlier question just on decomposing the traffic trends I'm curious.

How much of the traffic in for Q, you think was loss to promotional intensity by competitors.

Jeffrey Farmer: So just key drivers there for the cross the restaurant level margin is that much lower GNA higher. How should we be thinking about your bits and pieces or the moving pieces to get into that lower operating income margin guidance. I think the big levers are going to be we see improvements in cost of goods sold. So that will be favorable, but that's being offset by to some degree, the leverage to some effect, but also the investments that we're making in labor.

And then how much of it do you think could have been recaptured by taking a different marketing tactic and then sort of how should we think about that in the context of your <unk>.

<unk>.

Expectations.

Hi, Catharine its Greg so.

No.

We think a meaningful part of our.

Traffic for four months in the fourth quarter was really comprised of two things one.

As we were really ramping down or a message and a repeat messaging in Q4, while competitors, we're ramping up and as we know that the environment was a bit more promotional so relative to our total traffic. We think it's a significant part of that I don't know that we're prepared.

Jeffrey Farmer: Cracker Barrel, our business model is high traffic, a really good value, great hospitality. And we have, while we've made a lot of progress on kind of regain in our historical leadership role in hospitality, we're not back to peak level. So we're investing in labor in order to deliver that. And we think over time that will be a big tailwind for us. So we have higher labor lower cost. We have a bit higher advertising as well, because with traffic being softer, we have deployed more advertising on a national basis, but we're also doing testing, testing, learn in different parts of the country.

Jeffrey Farmer: And lastly, as a sub components of GNA in Q1, we have higher, you know, MIT expense manager and training expense. And that is in preparation for a record or two. Sandy Sheard, we're really proud of the work that we've done in the team of delivered with the catering business. That catering opportunity is greater, even more so in Q2. And we want to ensure we're fully prepared for that. So we have invested in additional, additional managers to ensure that we are delivering that at 100%.

To call out a specific a specific number but that is a shift that we saw in the environment.

<unk> co.

Coincide with our shift in performance. So we think there's a bit of a macro components. We think there is a competitive intensity component.

And we think we also were spending less at a time when others were spending more but.

But we also believe we've got some ground to recover with our historical leadership role in hospitality. So we think those are some of the biggest drivers that impacted our Q4. Some of that is some of that short term and some of that longer term.

Todd Brooks: Okay, thank you very much.

Okay. Thank you and then maybe actually just following up on that in terms of where you're seeing promotional intensity.

Sort of where where where is that is it mostly and maybe your breakfast competitors or in varied menu I guess I'm trying to understand.

Todd Brooks: Next question comes from Todd Brooks, where's the benchmark company? Please go ahead.

Yeah, where the promotional intensity is just because there've been other casual dining concepts that have taken.

<unk> taken actually a different tact, where theyre not discounting as much though.

I'm curious kind of what youre seeing specifically in terms of which of your peers, maybe which day parts, you're seeing more pressure on promotions.

Todd Brooks: Hey, good morning and grad Sandy and welcome Julie as well. A couple questions for you. One, falling on kind of Jeff's pricing question, but from a more theoretical standpoint. Craig, I know you talked about that the guest value perceptions have been unchanged, even though I think since 2021, many pricings up probably between 15 and 17%. How do you measure that their value perceptions aren't changing as their situation changes? So as things are getting tougher, savings rates are down, energy costs are up, student loan payments restarting again.

We see an attack. After this is Craig again, we've seen that intensity across the really.

Really across a number of different segments, we've seen as an family.

At breakfast in particular, we've also seen it especially in the bar and grill.

Todd Brooks: Are there value perception static or are how you monitoring those perceptions as you continue to take incremental price with it seems like each, each menu opportunity. Good one and Todd, it's a good question. The way that we evaluate that is one is the absolute value that we're delivering measured against ourselves, but we also measure our value scores primarily. Generally against the marketplace because the market's been very dynamic, it has been a very high inflation period over a number of years.

Segment.

Also.

It is relatively broad based certainly not with every competitor, but if you just look back at the last few months on advertised price points there've been a lot of advertised price points. They have also been a lot of you know all you can eat type.

<unk> of offers in the marketplace and not only in family or in one particular segment, we've seen it really across.

Todd Brooks: So in terms of value, we measure yourself against our competition, we did also know within the prepared remarks that we do believe there is a reaction from consumers to just generally, generally higher prices in in casual dining and full service dining. More broadly, we think we're well positioned with you know within that that we think our pricing is is good, we think we're very competitive, we think we're a great value, but I do think there is a factor to price it as a whole in the macro economic environment and the amount of full service visits that are available as a result of that.

Across the board at family for Breakfasts, we've seen at the bar and Grill, we've seen it and we've seen it in other areas also.

Todd Brooks: I'll add a little bit to that to Todd, I think, you know, it's point into we use the quantitative control group to see what kind of impact our pricing decisions we make, we continue to look at ourselves versus competitors what we also are sending a lot of time listening to guest reactions, either through conversations with our operators or just the feedback that we get. And we manage our monitoring check management tactics so we are looking very closely at things like beverage attachment, shareable sides, premium sides and all of the things that would indicate to us that the consumer situation has changed meaningfully and most importantly that we need to change our strategy to address it.

Great. Thank you so much I'll get back in the queue.

Yes.

Our next question comes from Jake Bartlett with Securities. Please go ahead.

Great. Thanks for taking the questions. My first is on the margin guidance in the first quarter and I just wanted to make sure I understood what.

Might be kind of more of a temporary headwind versus ongoing.

Maybe if you can kind of quantify how much higher marketing costs in.

In the quarter will be pressuring margins.

Todd Brooks: Okay, very helpful things to both just a follow up on that you talked about your value relative to competitors and in the current environment, we're seeing more kind of price promotion activity from some of the full service operator universe out there. Cracker Bells obviously obviously been a brand where values inherent and it's a lent itself to kind of an everyday value approach to the brand and how you communicate that if competitors are getting more overtly competitive with price points and special offers what arrows are kind of in Cracker Bell's quiver to pull if you do feel like you need to compete a little bit more around the value of the experience.

And a little more detail about how G&A is going to play and I look at G&A on an absolute basis.

Todd Brooks: Well, we did see the competitors doing just that we think the quarter got significantly more promotional than we were anticipating and many of the competitors are not only getting sharp in the price point but they also increase their level of advertising sort of with that news. I think what we're doing now to your point every day value has always been a hallmark of the brand and we have worked hard to invest in value by despite the price increases that we've been taking over the last few years we still think we've ensured that there's every day value at every day part on the menu so that a guest can come in and whether they're looking for a low price point or it's more of a celebration.

We've done about 15% versus the third quarter. So if you can help us understand what the right run rate on a quarterly basis just in the first quarter is just those moving pieces in the first quarter margin guidance. Thank you.

Todd Brooks: So we're continuing to ensure we have that optionality on the menu we're not taking we're protecting, for example, Mama's pancake breakfast which is a phenomenal value at 899 pancakes, it meets eggs and all that we didn't raise the price to ensure that we were able to deliver high value both at the breakfast point of course breakfast is available. But also we're trying to do a better job of telling that story in our own media and marketing messaging so what you'll see is we went through the quarter and now is more of our TV advertising for example highlighting both a strong price point like 899 breakfast all day as well as great price points and variety at lunch and dinner.

Hi, Jay its Greg again.

Yes, as it relates to the first quarter there I guess a couple of data points to think about there. If you go back and look at over a Y performance in the prior year.

Todd Brooks: So whether it's chicken and dumplings or country fried steak or some of these other really great items. But it's a backdrop as competitors have gotten more promotional and more aggressive than they're advertising. We are working hard to do an even better job of ensuring that we remind our guests of the value that we have every day and sure they don't forget about that.

We have the lowest oi in Q in Q1.

And then it.

Moved around a bit from their improved significantly in Q2 and so on.

I don't anticipate that.

That will have a significantly different pattern of Hawaii in in fiscal 'twenty four so that's one data point the <unk>.

Other data point is in Q1 and G&A in particular, we will have a higher level a meaningfully higher level of spending for managers in training than we did in in Q4.

And we also have additional investments in other areas to support loyalty and so on.

So quite a few moving pieces there, but we are investing more in Q1 in the prior year Oi was the lowest it has been for the year in Q1 as well so as we look back to Q4 and why it was so low you know a part of that incentive comp and that's effectively one.

But a part of that was also we were managing the spending so to some degree we're managing our spending based on how the how the company is performing but we do expect a higher level of G&A in Q1, especially as we ramp up for Q2 and get the loyalty program rollout.

Craig Pommells: Great. And one more follow up and they'll jump back into you. So just when you talk about the elements on the menu that you look at as every day. They value elements. If you look at this quarter versus the prior quarter, how is the sales mix of everyday value type of on of items changed quarter over quarters. The consumers gotten a little bit more challenged. Thanks. This is Craig. What we'll, what we've seen over the quarter is our breakfast business has done better than our lunch and dinner business. So overall, we're seeing a higher mix off our breakfast items, the items that Sandy mentioned in particular. So that's primarily where we're seeing the shift.

Great and then my next question was about the balance sheet and about about the dividend.

Craig Pommells: Okay, great. Thanks.

Katherine Griffin: Hi, thanks for taking my question. I wanted to ask sort of a follow-up to an earlier question just on decomposing the traffic trends. I'm curious how much of the traffic in 4Q you think was lost? How much do you think could have been recaptured by taking a different marketing tactic and then sort of how should we think about that in the context of your 1Q expectations? Hi, Catherine. That's Craig. So we, we think a meaningful part of our traffic performance in the 4th quarter was really comprised of two things.

Given the margin guidance in the.

First quarter, it's very clear that EPS is going to be much less than the $1. Three that you just declared for the dividends so how.

Katherine Griffin: One is we were really ramping down our messaging, our paid messaging in Q4 while competitors were ramping up and as we noted the environment was a bit more. It's more promotional. So relative to our total traffic, we think it's a significant part of that. I don't know that we're prepared to, you know, call out a specific specific number. But that is a shift that we saw in the environment that, you know, coincided with our shift in performance.

How should investors be thinking about that dividend payout.

Moves at least early year to over 100%.

Katherine Griffin: So we think there's a bit of a macro component. We think there is a competitive intensity component. And we think we also were, you know, spend it less at a time others were spending more. But we also believe we've got some ground to recover with our historical leadership role in hospitality. So we think those are some of the biggest drivers that impacted our Q4.

Are you comfortable.

Increasing the leverage.

I know you've talked about the target of one three to $1 seven.

Are you comfortable having that go above that range to sustain the dividend other questions Im getting is about your.

Craig Pommells: Some of that's pretty, some of that's short term and some of that's longer term. Okay. Thank you. And then maybe actually just following up on that in terms of where you're seeing promotional intensity. So where is that? Is it mostly in, you know, maybe your breakfast competitors or in varied menu? I guess I'm trying to understand, you know, where the promotional intensity is just because there have been other, you know, casual dining concepts that have taken actually a different tact where they're not, you know, discounting as much.

Craig Pommells: So, you know, I'm curious kind of what you're seeing specifically in terms of, you know, which of your peers maybe which day parts you're seeing, you know, more pressure on promotion. We've seen a tack after this crack again. We've seen that intensity across the, really across a number of different segments. You know, we've seen it in family at breakfast in particular. We've also seen it, especially in the bar and grill segment also.

The balance sheet and kind of your ability to do more sale leasebacks.

And if that is appropriate.

How many stores are unencumbered for instance.

Craig Pommells: So it is, you know, it's relatively broad based, certainly not with every competitor. But if you just look back at the last few months on advertised price points, there have been a lot of advertised price points. There've also been a lot of, you know, all you can eat type of offers in the marketplace. And not only in family or in one particular segment, we've seen it really across, you know, across the board at family for breakfast. We've seen it at bar and grill. We've seen it, you know, we've seen it in other areas also. Great. Thank you so much. I'll get back in the queue.

Just as.

As you look at the balance sheet.

How comfortable are you focusing on that maintaining that dividend.

Even as EPS is somewhat challenged near term.

The capital allocation topic, which I think is broadly.

Quest is a very big one for the board and <unk>.

They've continued to take a consistent approach there which is the primary.

Purpose primary objective is to grow cracker barrel and Maple Street, and then beyond that we will return capital to shareholders in the form of a dividend or share repurchase for the last year or so that dividend has been really compelling and you combine that with our kind of stated desire to maintain a.

Jake Bartlett: Our next question comes from Jake Bartlett with pure security. Let's go ahead. Great. Thanks for taking the questions. You know, my first is on the margin guidance in the first quarter. And I just want to make sure I understood, you know, what might be kind of more of a temporary headwind versus ongoing. Maybe if you can kind of quantify how much, you know, higher marketing costs in the quarter will be pressuring margins.

Some flexibility on the balance sheet, maintaining a reasonable leverage ratio and so on so I think it's a part of a broader dividend as a part of our broader capital allocation decision is a very big topic. It's one that's off the top of the list.

For the board and there'll continue to be incredibly thoughtful about it but I think the takeaway. There is there has not been a shift that's probably the most important thing there has not been a shift.

Jake Bartlett: You know, and a little more detail about how GNA is going to play in. I look at GNA on an absolute basis in down about 15% versus the third quarter. So if you can help us understand what the right run rate on a quarterly basis, you know, just in the first quarter is just those moving pieces in the first quarter of margin guidance. Thank you.

Capital allocation framework.

Okay. Okay.

I know youre not giving.

Annual guidance here, but hopefully I'm wondering if there is some pieces that you can that you might have some visibility before <unk> takes the reigns things like like Capex.

Craig Pommells: Hi, Jake. It's Greg again. Yes, as it relates to the first quarter, there, I guess a couple of data points to think about there. If you, and go back and look at our OI performance in the prior year, you know, we had the lowest OI in queue one. And then it, you know, moved it on a bit from there and proved significantly in queue two and so on. I don't anticipate that we'll have a significantly different pattern of OI in fiscal 24.

Craig Pommells: So that's one data point. The other data point is in in queue one in GNA in particular, we will have a higher level, a meaningfully higher level of spending for managers in training that we did in in queue four. And we also have additional investments in other areas to support loyalty and so on. So quite a few moving pieces there, but we are invested more in queue one in the prior year or OI once the lowest it had been for the year in in queue one as well.

Youll rough idea of what we should expect for Capex or new units at Maple Street Greg.

Maybe some of the kind of the bigger picture.

Items in 2004 guidance hopefully you can provide even if it's not specifically on margins and such.

We can stop Directionally about a couple of the big levers without getting too specific. So for example in I would say commodity inflation, we expect commodity inflation to be much more modest than it has been.

Historically.

Wage inflation, we expect to moderate a bit from fiscal 'twenty three levels, but we do think wages wages will likely remain higher than the long term run rates, but more moderate than.

<unk>.

What we saw pre Covid for example in terms of new units now given the environment. We are moderates in new unit growth to some degree Q1, we still have a little bit more in there, but we are moderating that we're still growing new units.

Craig Pommells: So as we look back to queue four and why it was so low, you know, a part of that incentive comp and that's effectively one time. But a part of that was also we were managing the spending. So to some degree, you know, we're managing the spending based on how the, you know, how the company is performing, but we do expect the higher level of GNA in queue one especially as we ramp up for queue two and get the loyalty program. Well, great.

But we are moderating the level and the amount of spend that we're putting against that for for the time being.

Terms of Capex. There are there are other areas that we have.

We're constantly evaluating what we're thinking about all of that is a part of their broader capital allocation conversation.

Jake Bartlett: And then my next question is about the balance sheet and about the dividends. Given the margin guidance in the first quarter, it's very clear that EPS is going to be much less than the dollar three that you just declared for the dividend. So, how should investors be thinking about that dividend as your payout kind of lose at least a little earlier to over a hundred percent?

Okay. Thank you so much.

Okay.

Our next question comes from Dennis Geiger with UBS. Please go ahead.

Thank you and congratulations to Sandy and Julie I have another one as it relates to 24 at a high level I think he gave Craig which is really helpful. Some kind of key points to be thinking about in 'twenty, four which is helpful.

Craig Pommells: Are you accountable? Increasing the leverage? I know you've talked about the target of 1.3 to 1.7. You know, are you comfortable having that go above that range to sustain the dividends? Other questions I'm getting is about, you know, your, you know, the balance sheet and kind of your ability to do more sales specs if that's, if that is appropriate. You know, what, you know, how many stores are unencumbered, for instance, just what, you know, as you look at the balance sheet, you know, how comfortable are you, you know, focusing on that, you know, maintaining that dividend, you know, even as, as EPS is somewhat challenge near term.

How about on the CEO transition side of things and maybe.

Keeping some of that flexibility and guidance depending on what plans look like for the year is there anything that at a very high level.

To share on sort of what could move the outlook or numbers for 'twenty, four but might it be maybe remodels that you referenced.

Other areas of reinvestment, whether it's technology or otherwise.

Recognizing there's a reason you're not speaking to today, but anything high level to share on some things that lease buckets et cetera that might move the needle as we think about some strategic opportunities this year or two to help us think through 'twenty four.

Craig Pommells: The capital allocation topic, which I think is broadly, you know, the your question is a very big one for the board. And, you know, they've continued to take a consistent approach there, which is the primary purpose primary objective is to grow Cracker Barrel. And Maple Street, and then beyond that, will return, you know, capital shareholders in the form of a dividend or share repurchase for the last, you know, year or so that dividend has been really compelling.

Hi, Dan its Greg again.

For now we would say it's still early days in that regard.

The macro environment is particularly challenging in a bit more uncertain and.

Julie is often a standard start with really only been here for a month. So I think it's still early days and really too early for us to make any comments about that.

Craig Pommells: And you combine that with, you know, we're going to state your desire to maintain a some flexibility in the balance sheet, maintain a reasonable leverage ratio, and so on. So I think it's a part of a broader dividend is a part of a broader capital allocation decision. It's a very big topic. It's one that's at the top of the list for the board. And there will continue to be incredibly thoughtful about it. But I think the takeaway there is there has not been a shift. That's probably the most important thing. There has not been a shift in a capital allocation framework. Okay, okay.

It makes sense, one more sort of related to some of that Craig and team if I could.

Sandy has as you and the board did the surge in.

You saw the opportunity with Julien based on some of her strengths thinking about store development.

Innovation across technology menu et cetera and in her.

Prior opportunity.

Anything you can speak to and I know you're doing some work with some consultants it sounds like but kind of on the on what you think some of the longer term opportunities that you've been working on and maybe remain longer term opportunities for the brand again, whether it's on the tech side innovation.

Craig Pommells: And, you know, I know you're not giving you annual guidance here, but hopefully, I mean, I'm wondering if there's some pieces that you can that you might have some visibility and before, you know, we pick the reins. Things like like catbacks, you know, rough idea of what we should expect for catbacks or new units at Maple Street and Cracker Barrel. Maybe some of the kind of the bigger picture, you know, items in 24 games that hopefully you can provide even if it's not specifically on margins and such.

Growth, which encompasses a lot of things any very high level comments could speak too as we as we kind of look out longer term.

Well I think you've kind of summer there's a lot of the reasons why we thought Julie or the board thought Julie would be the than a great leader for this sort of next the next 50 years here at Cracker barrel.

Her experience with brands, who has very successfully both evolved.

Craig Pommells: We can start directly about a couple of the big levers without getting to specific, you know, so for example, you know, I would say commodity inflation, we expect commodity inflation to be much more modest than it's been historically. Wage inflation, we expect to moderate a bit from fiscal 23 levels, but we do think wages, you know, wages will likely remain higher than the long term run rate. But more moderate than, oh.

I mean look at Taco Bell and the kind of thing they've done and how successful they've been I think in remaining.

Relevant despite being around a long time and then the technology I think Starbucks has been an amazing example of a brand that is sort of in my opinion has got you know amazing guest facing technology to make the experience just so simple you kind of can't help yourself.

They'll go more frequently she.

She's also got retail experience, which is for our brand really important.

Craig Pommells: What we saw, pre-COVID, for example. In terms of new units, given the environment, we are moderating new unit growth to some degree, Q1, we still have a little bit more in there, but we are moderating that, we're still growing new units, but we are moderating the level and the amount of spend that we're putting against that for the time being. In terms of CAPEX, there are other areas that, you know, we are constantly evaluated, but we're thinking about all of that as a part of the broader capital allocation conversation.

Our retail segment is strong it's profitable and it is a very key component of the cracker barrel experience. It's also surprisingly for a lot of people complex and I think julie's background on both sides of this really positioned her to be able to think about.

How to bring in technology to a brand that's 54 years old too.

Evolve the brand in a way that will both be familiar and comfortable to our loyal long term gas, but make it interesting and relevant to our newer guests and maybe people who don't know us at all.

Jake Bartlett: Okay, thank you so much.

And to introduce things like technology things like our loyalty program.

Dennis Geiger: My next question comes from Dennis Geiger with UBS, please go ahead.

Craig Pommells: Thank you and congratulations to Sandy and Julie. I have another one as a relate to 24 at a high level. I think you gave Craig, which is really helpful, some, you know, kind of key points to be thinking about in 24, which is helpful. How about on the CEO transition side of things, and maybe, you know, keeping some of that flexibility in guidance, depending on what plans look like for the year, is there anything at a very high level, you know, to share on, you know, sort of what could move the outlook or numbers for 24, what might it be, maybe remodels that you referenced, other areas of reinvestment, whether it's technology or otherwise, recognizing there's a reason you're not speaking to it today, but anything high level to share on some things, at least buckets, etc, that might move the needle as we think about, you know, some strategic opportunities this year to help us think through 24.

Really brand appropriate way, which is not easy to do.

Lastly, one of the questions sort of spoke to the idea that you might need to do refresh I think thats been certainly on our list. The thought about how do you know whether you and how do you think about the interiors of our stores and ensuring that those interior.

We're sort of a rough.

Reflect the same level of freshness and modernization to be both appealing, but comforting if you've been coming for years. So I.

I think julie's an innovative flexible later she loves the brand jumped in with both feet is that demand for both legs all in deep.

And I think we're just really excited to have her here.

That's helpful and then one more quick one and apologies if I'm.

Craig Pommells: Hi Dennis, this is Craig again. I think for now, we would say still early days in that regard, the macro environment is particularly challenging a bit more uncertain, and, you know, Julie is often a standard start, but she's a really only been here for a month, so I think it's still early days and really too early for us to make any comments about that.

If I missed just by cohort.

The traffic softness.

Can you speak at all to whether it's age demographic income et cetera, just.

What you saw in the quarter from from that perspective, if you're providing there.

Yeah.

I'll kind of tell you broadly what we saw our traffic declines were broad based they were.

Craig Pommells: Makes sense. Well, one more sort of related to some of that Craig and team if I could. You know, Sandy, as you and the board did the search and saw the opportunity with Julie based on some of her strengths, thinking about store development, innovation across, you know, technology menu, etc, and her prior opportunity. Anything you can speak to, and I know you're doing some work with some consultants that sounds like, but kind of on what you think some of the longer term opportunities that you've been working on and maybe remain longer term opportunities for the brand again, whether it's on the tech side, innovation, you know, growth which encompasses a lot of things, any very high level comments to speak to as we kind of look out longer term.

They were against all of the age cohort switch.

Which was a bit of a shift the younger cohort held up better than the over 65.

But but it had been doing even better in the quarters prior on the over 65.

We just have not yet recovered the visits with that group to the extent, we thought we would really since the pandemic whether it was in the beginning.

<unk> concerns and then the pivot from health to value concerns as we've kind of talked about here we've got consumers.

It's a mixed picture right. We've got consumers that we think are very value conscious and we think that group is.

Craig Pommells: Well, I think you kind of saw us a lot of the reasons why we thought Julie are the board, thought Julie would be the great leader for this sort of next, the next 50 years here at Cracker Barrel. You know, her experience with brands who have very successfully both evolved. I mean, look at Taco Bell and the kind of thing they've done and how successful they've been, I think in remaining relevant despite being around a long time.

Over 65 group is particularly value conscious.

And so we just haven't seen the recovery of that group and the way we would.

The income level or traffic declines were actually larger in the 60 to 80000.

And plus cohorts the lower income cohorts held up better maybe that's not surprising due to the strong value proposition that we have in the.

Craig Pommells: And then the technology, I think Starbucks has been an amazing example of a brand that has sort of, in my opinion, has got, you know, amazing guest-facing technology to make the experience just so simple, you kind of can't help yourself, but go more frequently. She's also got retail experience, which is for our brand really important, you know, our retail segment is strong, it's profitable, and it is a very key component of the Cracker Barrel experience.

You know when you are managing your visits I believe you'll go to brands you Trust, where you know you're going to get value and you're going to get an experience that kind of makes it worth you youre going out that's why are.

The brand positioning.

A warm us fatality plentiful portions fair price.

Just good food I think will work.

Craig Pommells: It's also surprisingly for a lot of people complex. And I think Julie's background on both sides of this really position her to be able to think about how to bring in technology to a brand that's 54 years old, to Evolved the brand in a way that will both be familiar and comfortable to our loyal long-term guests but make it interesting and relevant to our newer guests and maybe people who don't know us at all and to introduce things like technology, things like our loyalty program in a really brand-appropriate way, which is not easy to do.

Even if what we're moving into is a more competitive value conscious consumer.

Thank you very much sandy.

Our next question comes from Allison Stokke with loop capital. Please go ahead.

Great. Thank you good morning, and I, just want to say congrats sandy under 12 years.

We Miss you, but.

Look forward, obviously, it's working well.

With the new team.

I just wanted to quickly I know what the.

Of course, the top of the hour here, but just.

Wanted to ask about your loyalty rollout how much of an opportunity that is kind of going back to your comments about younger consumers. That's always been a group that you guys have tried to expand with maybe I'm a little older.

On average versus some of your peers and so how much of an opportunity you think royalty could be to capture more of those younger consumers to come to your brand.

Craig Pommells: Lastly, one of the questions sort of spoke to the idea that you might need to do refresh. I think that's been certainly on our list the thought about how do you weather you and how do you think about the interiors of our stores and ensuring that those interiors sort of reflect the same level of freshness and modernization. It's a great question to be both appealing but comforting if you've been coming for years. I think Julie is an innovative, flexible leader. She loves the brand. Jumped in with both feet, is that the men for both legs?

I don't think we're ready to quantify them looking at Craig I doubt he's going to give any numbers. We certainly done a lot of modeling about it. It takes time, so that'll get everybody signed up they have to visit frequently enough to earn.

But what I will say is that a year or at least to go. So after we did a recent segmentation study we looked at the segments and one of the interesting findings was really across age cohorts more than I was expecting to see.

So the existence of a loyalty program was important both to our loyal guests.

Sandra Cochran: I'll end deep. I think we're just really excited to have her here. It's helpful for any.

Sandra Cochran: One more quick on an apologies if I missed. Just by cohort, some of the traffic softness. Can you speak at all to whether it's age, demographic income, et cetera, just what you saw in the quarter from that perspective if you're providing that? Yeah, we'll kind of tell you broadly what we saw. Our traffic declines were brought based. They were they were against all of the age cohorts, which which was a bit of a shift.

<unk> and our younger are younger technology in general is more important to a younger guest but the loyalty program came up surprisingly high on the list. So we are.

Optimistic that this will be something that they've hoped we would do and will.

We'll get.

Great sign ups, a lot of learnings and so on this is actually an area that Julie has quite a bit of experience and she spent.

A bit of time since she's been here just in understanding what the program is in and our rollout plan I'm. Julie do you have anything you'd like to maybe add to it sure. Thanks, Sandy Hi, Alton.

Sandra Cochran: The younger cohort held up better than the over 65. But but he had been doing even better in the quarters prior on the over 65. We just have not yet recovered the visits with that group to the extent we thought we would really since the pandemic, whether it was in the beginning health concerns and them the pivot from health to value concerns as we've kind of talked about here. We've got consumers.

Yeah right.

I'm excited about with the loyalty program and I think what our guests will enjoy most is that one they can earn across restaurant and retail, which if you think about it that's pretty distinctive and a key differentiator for us as a brand.

We have both of those.

Experiences available to our guests, we're allowing them to earn across so that's number one and secondly every item, whether it's restaurant or retail on our menu is eligible.

Sandra Cochran: It's a mixed picture, right? We've got consumers that we think are very value conscious and we think that group is, you know, the over 65 group is particularly value conjured. And so we just haven't seen the recovery of that group in the way we would. The income level, our traffic declines were actually larger in the 60 to 80,000 and plus cohorts, the lower income cohorts held up better. Maybe that's not surprising due to the strong value proposition that we have and the, you know, when you are managing your visits, I believe you'll go to brand you trust where you know you're going to get value.

To earn them to earn points and our in our pegs and our highly differentiated scheme here and you can actually redeem across everything except for alcohol. So that is really another key point and then finally.

Just to Andy's point, we know technology is important to a lot of our consumers, but even if like youre not super into technology, we're allowing you to earn points outside of the App, which is really distinctive in the industry and will allow everybody to participate and let everybody know that we value them and that we value their visits with us and.

They can participate in what we believe will be a really exciting program. So it seems excited it's rolling out in the next couple of weeks and we're optimistic about what it will do for the brand.

Got it great. Thank you so much Julien if I color. That's all I have I'll hop back in the queue.

Sandra Cochran: And you're going to get an experience that kind of makes it worth you you going out. That's why our, you know, the brand positioning. Warm hospitality, plentiful portions, fair price of just good food, I think will work. Even if what we're moving into is a more competitive value conscious.

Thanks.

Okay.

Our next question comes from Andrew Wolf with <unk>.

C L. King. Please go ahead.

Thank you I wanted to follow up on the loyalty program question.

You sort of it's the best in class or.

Is that something you worked with consultants and got a third party or is that just your sense of youre doing your own.

Sandra Cochran: Thank you very much, Sandy.

Benchmarking and looking at your competitors.

And beyond that could you kind of give us kind of give us a sense of.

Alton Stump: Our next question comes from Alton Stump with Loop Capital. Please go ahead. Great. Thank you. Good morning.

Especially if it's a benchmark number or a third party what youre hearing.

Alton Stump: I just want to say congrats, Sandy, on your 12 years. We'll sort of miss you, but look forward, obviously, to working with the new team soon. I just want to ask quickly, I know what to put, you know, close the top of the hour here, but just, you know, want to ask about your little two roll out, how much an opportunity that is, you know, kind of going back to comments about, you know, younger consumers.

Best in class loyalty program, what you believe.

Kind of means for the business in terms of.

Eventually.

Boosting the traffic.

Hi, Andrew it's Craig.

Potentially best in class I think as Julie talked about we believe the loyalty program is it has more or more options is really well branded you can earn we earn pegs are what we call our points.

Alton Stump: That's always been a group that you guys have, you know, tried to expand with, you know, maybe a little older set on average versus some of your peers. And so how much of an opportunity think loyalty could be to capture more of those younger consumers to come to your brand? I don't think we're ready to quantify. I'm looking at Craig. I doubt he's going to give you any numbers. We've certainly done a lot of modeling about it.

Both for Diamond for in.

In restaurant as well as retail you can accrue the points through an app you can accrue them.

At the at the register as well you earn.

Alton Stump: It takes time so that I get everybody signed up. They have to visit frequently enough to earn. But what I will say is that a year at least ago, so after we did a recent segmentation study, we looked at the segments. And one of the interesting findings was really across age cohorts, more than I was expecting to see. The existence of a loyalty program was important. And both to our loyal guests, older and our younger, our younger technology in general is more important to a younger guest, but the loyalty program came up surprisingly high on the list.

Meals at different levels. So we have different status levels. So as we went through and we did a lot of this internally, but we also have a loyalty export with a lot of experience who has done this in retail Amit compared elements of different loyalty programs certainly across the restaurant industry.

We really check in all of the boxes I believe in the restaurant industry and many of the boxes and broader and broader retail.

While we believe is best in class is.

Is what we're seeing when we compare two family dining and casual dining.

Yeah.

But would you be willing to give us maybe a range of what expectation for what it should do for the business ultimately.

Alton Stump: So we are optimistic that this will be something that they've hoped we would do and we will get, you know, great signups, a lot of learnings and so on. This is actually an area that Julie has quite a bit of experience. And she's spent quite a bit of time since she's been here just in understanding what the program is and our rollout plan.

We're still in early days on that one I think it's going to be a big driver for us not only in terms of the appeal.

And it's kind of short term ability to drive.

Repeat visits.

Our ability to market the company more broadly using the data that we will get from that program. We think that will have a longer term benefit in better equipping us with our broader marketing communications to make that more targeted and more effective and more efficient.

Julie Masino: And Julie, do you have anything you'd like to maybe add to it? Sure. Thanks, Sandy. Hi, Alton. Yeah, but I'm excited about what the loyalty program and I think what our guests will enjoy most is that one, they can earn across restaurant and retail, which if you think about it, that's pretty distinctive and a key differentiator for us as a brand, because we have both of those experiences available to our guests who are allowing them to earn across both.

Okay.

Got it I appreciate that.

I wanted to ask you about the traffic.

To hear about the different segments, and so on and cohorts.

But can you give us a sense of how the cadence by months and specifically did it did it slowdown get worse or did you just not improve as expected.

Julie Masino: That's number one. Secondly, every item, whether it's restaurant or retail, our menu is eligible to earn points in our pegs in our highly differentiated scheme here. And you can actually redeem across everything except for alcohol. So that is a really another key point. And then finally, to Sandy's point, we know technology is important to a lot of our consumers. But even if like you're not super into technology, we're allowing you to earn points outside of the app, which is really distinctive in the industry and will allow everybody to participate and let everybody know that we value them and that we value their visits with us and that they can participate in what we believe will be a really exciting program.

Throughout the quarter and obviously into the current quarter.

Broadly speaking in that one on our prior earnings call. We shared that while we have done relatively well in Q3, we were ahead of the industry.

Sure that we saw a deceleration in traffic as we move into the fourth quarter and so far we've said that our first quarter remains remains pressured so without getting too prescriptive around as we would say.

Both at the beginning of that and where we are today remains fairly fairly soft without a big French.

Julie Masino: So, team's excited. It's rolling out the next couple of weeks and we're optimistic about what it'll do for the brand. God, great, thank you so much Julie. I said if I color, that's all I have. I will hop back in the queue. Thanks both.

<unk> changed one way or another we are pleased with some of the progress that we've made at breakfast with the advertising that we've put forward.

To be pleased with our catering business, which is growing even in spite of.

Andrew Wolf: My next question comes from Andrew Wolf, with CLK. Please go ahead. Thank you. I wanted to follow up on the loyalty program question. You know, you asserted it's the best in class or is that something, you know, you work with consultants and got a third party or is that just, you know, your sense of it doing your own benchmarking and looking at your competitors. And beyond that, could you kind of give us kind of give us a sense of, you know, especially if it's a benchmark number or a third party, you know, what you're hearing, you know, a best in class loyalty program or what you believe kind of means for the business in terms of, you know, eventually boosting the traffic.

Challenge in a challenging environment and I think in addition to being placed with a breakfast as opposed to the dinner day part weekends have been strong which have been it's important for this brand.

So that that's been a trend that we've been encouraged by.

Yeah.

Got it thank you very much.

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

Hey.

Well before we sign off first I want to thank everyone on this call and for all of your well wishes and I want to say, thank you to our employees.

Andrew Wolf: Hi, Andrew, it's Craig. I think you know, potentially best in class. I think as Julie talked about, we believe the loyalty program is, it has more or more options. It's really well branded. You can earn, we earn pegs or what we call our points both for dining at book for in restaurant as well as retail, you can accrue the points through an app, you can accrue them at the register as well, you earn meals at different levels.

And to our shareholders, it's been a privilege to lead this brand for 12 years, we've navigated some challenges, especially in the recent years and we are clearly facing some challenges today.

But cracker barrel is one of the most differentiated brands in the industry and I have complete confidence that under Julies leadership, our teams and our company will continue to thrive.

<unk>.

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

Andrew Wolf: So we have different status levels says we went through and we did a lot of this internally, but we also have a loyalty expert with a lot of experience was done this in retail and we compared, you know, elements of different world programs. And certainly across the restaurant industry, we really check in all of the boxes, I believe in the restaurant industry and many of the boxes in broader, in broader retail.

Andrew Wolf: Yeah, well, we believe it's best in class is is what we're seeing when we compare to family that in the casual time. But would you be willing to give a maybe a range of expectation for what it should do for the business ultimately? We're still in early days on on that one, I think it's going to be a big driver for us, not only in terms of the appeal and it's kind of short term ability to drive, you know, repeat visits, but in our ability to market the company more broadly using the data that we'll get from that program. We think that will have a longer term benefit in better equipping us with our broader marketing communication to make that more targeted and more effective and more efficient.

Craig Pommells: Got it, appreciate that. And just I wanted to ask about the traffic was helpful to hear about the different segments and so on and cohorts. But can you give us a sense of how it the cadence by month and specifically did it, you know, did it slow down and get worse or did you just not improve as expected? We did, you know, throughout the quarter and obviously into the current. Corner. I was probably speaking on that one on our prior earnings call.

Craig Pommells: We shared that while we had done relatively well in Q3, we were ahead of the industry. We shared that we saw a deceleration in traffic as we moved into the fourth quarter and so far we've said that our first quarter remains pressure. So without getting too prescriptive around it, we would say, you know, both at the beginning and where we are today remains, you know, fairly, you know, fairly soft without a big trend, you know, trend changed.

Craig Pommells: One, we are another. We are pleased with some of the progress that we've made at breakfast with the advertising that we've put forward. We're continue to be pleased with our catering business, which is growing even in spite of a challenging, challenging environment. And I think in addition to being pleased with breakfast, as opposed to dinner day part, weekends have been strong, which have been, it's important for this brand and that's a trend that we've been encouraged by.

Craig Pommells: Got it.

Unknown Executive: Thank you very much.

Unknown Executive: This concludes our question and answer session.

Sandra Cochran: I would like to turn the conference back over to Cindy Cochlan for any closing remarks. Okay. Well, before we sign off, first I want to thank everyone on this call and for all of your well wishes. And I want to say thank you to our employees and to our shareholders.

Sandra Cochran: It's been a privilege to lead this brand for 12 years. We've navigated some challenges, especially in the recent years, and we're clearly facing some challenges today. But Cracker Bell is one of the most differentiated brands in the industry. And I have complete confidence that under Julie's leadership, our teams and our company will continue to the five.

Unknown Executive: Thank you. The conference was now concluded. Thank you for attending today's presentation.

Unknown Executive: You may now