Q3 2025 Cracker Barrel Old Country Store Inc Earnings Call

One on your Touchtone telephone.

So withdraw your questions you May press star two.

Please also note today's event is being recorded.

Speaker Change: At this time I would like to turn the floor over to Adam Hannon director of Investor Relations.

Sir Please go ahead.

Speaker Change: Thank you good morning, and welcome to Cracker barrels third quarter fiscal 2025 conference call and webcast. This morning, we issued a press release announcing our third quarter results in this press release and on this call. We will refer to non-GAAP financial measures such as adjusted EBITDA for the third quarter ended May <unk> 2002.

25.

Please refer to footnote in our press release for further details about these metrics.

Speaker Change: And he believes these measures provide investors with an enhanced understanding of the company's financial performance.

Speaker Change: This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials.

Speaker Change: On the call with me. This morning are cracker barrels president and CEO, Julian Massena, and senior Vice President and CFO, Greg Mills.

Speaker Change: Julian Craig will provide a review of the business financials and outlook.

Speaker Change: And then open up the call for questions.

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

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

Speaker Change: Caution our listeners and readers in considering forward looking statements and information.

Speaker Change: Any of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we filed with or furnished to the SEC.

Speaker Change: Finally, the information shared on this call is valid as of today's date and the company undertakes no obligation to update it except as may be required under applicable law I will now turn the call over to cracker barrels President and CEO, Julie Masino Julien.

Julie Masino: Good morning, and thank you for joining US we were pleased with our third quarter performance, which included positive comparable store restaurant sales for the fourth consecutive quarter and adjusted EBITDA that exceeded our expectations.

Speaker Change: These results further underscore that our transformation plan is working.

Speaker Change: I'll do a quick recap of some Q3 highlights and then speak to the exciting ways. Our plan is coming together in Q4 as these initiatives exemplify how we're evolving the brand by leaning into what makes cracker barrel, great and doing so in a refined way that appeals to both existing and new guests alike. We're excited about.

Speaker Change: Our progress and our teams are energized.

Speaker Change: Looking back at Q3, the quarter started soft so we took actions to support the top line and tightly manage our expenses without limiting our ability to deliver our important fourth quarter initiative.

Speaker Change: I am proud of how the team responded to these challenges their agility discipline and strong ability to manage the business helped deliver a solid quarter.

Speaker Change: From a culinary perspective, our spring promotion featured two shrimp dishes, a bold, Louisiana style shrimp skillet, and a comforting shrimp and grits skillet.

Speaker Change: We also expanded our pancake platform by introducing innovative new flavors and options across various price points as part of our broader barbell strategy.

Speaker Change: From an operational perspective, we remain focused on strong execution and the metrics that matter.

Speaker Change: For example, compared to the prior year quarter hourly turnover improved by approximately 14 percentage points and our internal net sentiment scores increased two 3%.

Speaker Change: During the quarter, we implemented phase one of our back of house optimization initiative to the full system. As a reminder, this phase is focused on process simplification to improve quality and profitability, while also making jobs easier and more enjoyable. We've been pleased with the results and employee feedback.

Speaker Change: <unk> has also been very positive as team members find the new processes easier to execute.

Speaker Change: Let's talk about Q4.

Speaker Change: There's a lot going on that we are excited about our Q4 work demonstrates the complementary nature of our strategic pillars and provides compelling examples of how we're bringing our strategy to life.

Speaker Change: A big focus in recent months has been our brand refinement work, which will continue to gather steam in Q4 before officially launching in August.

Speaker Change: Brand refinement means evolving our brand across all touch points and creating deeper more meaningful engagement with our guests and.

Speaker Change: In addition to the updated look and feel that we've been incorporating into our advertising we are showing up authentically in places, where our existing and new guests are.

Speaker Change: An example of this is our partnership with Speedway Motorsports and the success of the Cracker barrel 400, the NASCAR race, we sponsored this past Sunday just down the road from our home office.

Speaker Change: There is strong overlap with cracker barrel guests and NASCAR fans and our brands have much in common.

Speaker Change: Both are highly experiential input country hospitality and people at the heart of everything we do that.

Speaker Change: The cracker barrel 400 is more than a race. It marks the launch of a key partnership and throughout the summer NASCAR fans can expect Activations at Speedway motorsports destinations across the country.

Speaker Change: The cracker barrel 400 was a big moment in and of itself, but it is also a piece of our overall strategy and integrated marketing campaign to promote the much anticipated return of campfire meals.

Speaker Change: We heard loud and clear for both guests and employees that they deeply missed these unique and delicious foil wrapped meals that are packed with hardie protein season vegetables in a rich Roth.

Speaker Change: We brought them back for the first time since 2018 and made them even better we've elevated the flavors improved the quality and made them easier for the kitchen to execute and.

Speaker Change: In addition to the returning favorites of beef and chicken, we've added a new shrimp and andouille sausage offerings, starting at the great value price point of $10 99.

Speaker Change: To support Campfire, we've invested in advertising and our integrated marketing campaign also reflects our ongoing brand refinements, including a refreshed look and feel that showcases our quality and appeal of our delicious food.

Speaker Change: We're also evolving how we show up in social media and are working with creators to tap into conversations as part of our efforts to connect authentically with our guests.

Speaker Change: Cracker barrel rewards is another way, we are deepening our engagement with guests and driving frequency to jumpstart the campfire menu promotion and reward our loyalty members. We gave them early access to our new decadence Moore's brownies skillet, and we will continue to give early access to provide value to our members.

Speaker Change: We recently achieved our fiscal 'twenty five year target of acquiring 8 million members and over one third of tract sales are now associated with loyalty members.

Speaker Change: Cracker barrel rewards continues to deliver incremental sales and traffic and looking ahead, we're focused on enhancing our personalization capabilities to further drive incrementally.

Speaker Change: As a part of this we've been testing advanced personalization for cracker barrel rewards using an AI driven learning model. We are encouraged by the results as its driven a mid single digit lift in average revenue per member compared to control.

Speaker Change: We're also using AI in other ways as part of our broader efforts to improve efficiency and effectiveness by leveraging technology.

Speaker Change: Our traffic forecasting utilizes machine learning, which is improved accuracy at the store level and enhanced our ability to manage labor our entry filter for guest relations or kind of how we triage inbounds is powered by AI, which speeds up time to resolution and we're quickly puts guest in touch with a live representative.

Speaker Change: And finally, we're using machine learning to bolster our cyber security. These are just a few examples and we continue to evaluate opportunities to incorporate AI based technology into our toolkit to positively impact the business.

Speaker Change: Before turning it over to Craig I'd like to comment on the tariff situation.

Craig: For context, approximately one third of our retail products are sourced directly from vendors in China and.

Craig: In addition to this direct exposure. We also have indirect exposure related to product that we purchased through domestic vendors that is also sourced from China.

Craig: Our approach to mitigate the tariff impacts includes first aggressively negotiating with vendors second alternate sourcing and third pricing.

Craig: As we have mentioned we have been in the process of updating our retail strategy and we are also accelerating initiatives from this such as rationalizing skus, reducing the number of seasonal themes adjusting our seasonal promotional strategy. All of these will also help mitigate the impact of tariffs.

Craig: The situation remains dynamic and we intend to provide more specifics in September when we report Q4 earnings and share our fiscal year 'twenty six guidance at which time, we expect to have a higher degree of certainty on the net impacts related to tariffs and the timing of our mitigation efforts.

Craig: Want to wrap up my prepared remarks with a few key points first we acknowledge that there's a lot going on in the macroeconomic environment, but our teams are keenly focused on executing the business today, while transforming for the future.

Craig: Second we're leaning into what guests love about cracker barrel and we're evolving to drive our business forward. Our Q4 initiatives are a great example of this and there's much more to come.

Craig: Third guests are choosing us and we've delivered four consecutive quarters of positive comparable store restaurant sales growth.

Craig: Because of this momentum we were able again to raise our guidance and Q4 is off to a strong start.

Craig: Finally, as a reminder, all of this work is anchored on our three business imperatives of driving relevancy, which is market share delivering food and experiences guests love and growing profitability. We remain confident in our plan and our ability to execute and achieving these imperatives will drive significant long term value.

Craig: Asian, I'll now turn it over to Craig to review, our financials and provide our outlook.

Craig: Thank you Julie and good morning, everyone. We're now three quarters into fiscal year, and we continue to make progress against our transformation plan.

Craig: Although traffic started soft in February.

Craig: We saw improving trends in March and into April, which also benefited from a strong Easter.

Craig: Overall, our third quarter performance exceeded our expectations and allowed us to raise our annual guidance.

Craig: For Q3, we reported total revenue of eight.

Craig: $21 $1 million, which was up 0.5% from the prior year quarter.

Craig: Restaurant revenue increased one 2% to 679 3 million Boes and retail revenue decreased two 7% to $141 $8 million.

Craig: Comparable store restaurant sales grew by 1%, while comparable store retail sales decreased by three 8%.

Craig: Pricing for the quarter was approximately four 9%.

Craig: Our quarterly pricing consisted of one 5% current board pricing from fiscal 'twenty to 'twenty, four and three 4% new pricing for fiscal 2025.

Craig: Off premise sales were 19, 1% of restaurant sales compared to 18, 9% in the prior year.

Craig: Moving on to our third quarter expenses.

Craig: Total cost of goods sold in the quarter was 13, 1% of total revenue versus 30% in the prior year.

Craig: Restaurant cost of goods sold was 26, 2% of restaurant sales.

Craig: This is 25, 9% in the prior year.

Craig: This 30 basis point increase was primarily driven by menu mix and commodity inflation.

Craig: Partially offset by menu pricing.

Craig: Commodity inflation was approximately two 9% driven.

Craig: Driven principally by higher beef egg.

Craig: And oil prices parks.

Craig: Partially offset by lower produce and poultry prices.

Craig: As we discussed on the last earnings call.

Craig: Although we are fully contracted on egg prices.

Craig: One of all vendors lost capacity due to an avian influenza outbreak.

Craig: And as a result, we had to purchase some eggs on the spot market during the quarter.

Craig: However, egg prices have moderated which reduced the overall cost impact.

Craig: Retail cost of goods sold was 48, 9% of retail sales versus 49% in the prior year. This 10 basis point decrease was primarily driven by higher vendor allowances, partially offset by higher markdowns.

Craig: Our inventories at quarter end were $168 $7 million.

Craig: <unk> to $175 $3 million in the prior year.

Craig: Labor and related expenses were 37, 1% of revenue compared to 37, 8% in the prior year.

Craig: This 70 basis points, a decrease was primarily driven by menu pricing and improved productivity, partially offset by wage inflation of approximately one 9%.

Craig: One of the drivers of our improved productivity was our backup house optimization initiative.

Craig: We rolled this out early in the quarter and we were pleased that we are achieving our savings targets.

Craig: Other operating expenses were 25, 3% of revenue compared to 24, 5% in the prior year.

Craig: This 80 basis points increase was primarily driven by higher advertising expense and higher depreciation.

Craig: General and administrative expenses were five 6% of revenue compared to adjusted general and administrative expenses of five 4% in the prior year.

Craig: This 20 basis point increase was primarily driven by investments to support our strategic transformation initiative.

Craig: Yes.

Craig: Net interest expense was $5 million compared to net interest expense of $5 $2 million in the prior year.

Craig: This decrease was primarily the result of lower average interest rates, partially offset by higher debt levels.

Craig: Our GAAP income taxes were a $2 7 million dollar credits flow.

Craig: Hello, and from GAAP earnings before taxes.

Craig: Adjusted income taxes were a $2 5 million dollar credits.

Craig: GAAP earnings per diluted share were 56, and adjusted earnings per diluted share were 58 cents.

Craig: Adjusted EBITDA was $48 1 million or five 9% of total revenue.

Craig: Appeared to $47 9 million or five 9% of total revenue in the prior year.

Craig: Now turning to capital allocation and our balance sheet.

Craig: In the third quarter, we invested $36 6 million in capital expenditures.

Craig: We ended the quarter with $489 $4 million in total debt.

Craig: As we disclosed in me.

Craig: We updated our revolver and added additional debt capacity through a delayed draw term loan or <unk>. The combination of the new revolver and the DVT L increases our debt capacity to $800 million compared to $700 million under the previous revolver.

Craig: And provides flexibility to execute our plans, including the refinancing of our $300 million convertible loan that matures in June of 2026.

Craig: Lastly, as announced in today's press release, the board declared a quarterly dividend of <unk> 25 per share.

Craig: <unk> on August 13th when it's 25 to shareholders of record on July 18 2025.

Craig: Now moving to our outlook.

Craig: As we move into the final quarter of the first year of our transformation plan. We are pleased with the progress that we're making.

Craig: Evidenced by our results and we're encouraged by the strong start to Q4, driven by our campfire promotion.

Craig: Additionally, our teams have done an excellent job working to mitigate the impact of tariffs.

Craig: We anticipate the net tariff impact to Q4, EBITDA will be approximately $5 million.

Craig: And as Judy stated, we would have more to share in September on the impact for fiscal 2026.

Craig: Turning to our guidance for fiscal 2025.

Craig: We expect the following.

Craig: Total revenue of 345 billion to $3 $5 billion.

Craig: Pricing of approximately 5%.

Craig: Commodity inflation in the mid 2% range and hourly wage inflation in the mid 2% range.

Craig: We increased our EBITDA outlook and now anticipate full year adjusted EBITDA of approximately $215 million to $225 million, which includes the previously mentioned $5 million tariff impact.

Craig: We expect a full year GAAP effective tax rate of negative 17% to negative 11%.

Craig: On an adjusted effective tax rate of negative 6% to zero percent.

Craig: Lastly, we anticipate capital expenditures of approximately $160 million.

Craig: $170 million.

Craig: In closing we continue to make great progress, we remain confident in our plans and our focus on delivering a strong finish to fiscal 2025 to set us up for an important fiscal 2026 with that I'll now turn the call over to the operator for questions.

Craig: Ladies and gentlemen at this time, we'll begin the question and answer session.

Craig: Ask a question you May press Star and then one using a touchtone telephone.

Craig: So all your questions you May press star two.

Craig: If you are using a speakerphone please pick up the handset prior to pressing the keys to ensure the best sound quality.

Craig: Once again that is star and then one to join the question. Please.

Speaker Change: Our first question today comes from.

Speaker Change: Barbara Gordon Haskett. Please go ahead with your question.

Speaker Change: Thanks, and good morning, you guys noted that Q4 is off to a strong start, but but what does that mean in the context of the plus 1%.

Craig: Restaurants same store sales number that you reported in Q3.

Craig: Hi, Jeff I can I can start on that one and yeah, we've definitely seen a.

Craig: Improving trends as we kind of went through Q3 and into Q4.

Craig: Third quarter as we noted on the last call February started out.

Craig: A bit challenged as a result of both weather and some consumer uncertainty then we saw improvements into March and into April and we're particularly pleased that that improvement continued further into into Q4. So we're not giving an exact number other than to say that we're pleased with that.

Craig: The campfire promotion that is resonating with guests.

Craig: Okay, and then just a quick follow up again.

Craig: Again, I think you mentioned tightly managing expenses in Q3.

Craig: Can you just provide a little bit more detail on what youre doing there on the expense line.

Speaker Change: Absolutely I'll take that one as well yeah. So given that Q3 has started out China mist and February in particular.

Speaker Change: The timing of expenses and a number of areas, particularly around G&A. There were some discretionary items in terms of projects that we were able to adjust and just generally.

Speaker Change: In discretionary areas reduced our expense so as we think about G&A, we would expect that our G&A leveling Q4 will more closely resemble the G&A level that we had in Q1 and Q2, but that also includes the Q4 number will also.

Speaker Change: It includes some of the shifting that we viewed it with projects.

Speaker Change: <unk> out of Q3, so some G&A tightening in in Q3, and Q4 inclusive of all of that will be more in line with Q1 and Q2 okay.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Speaker Change: Our next question comes from Todd Brooks from the Benchmark Company. Please go ahead with your question.

Todd Brooks: Hey, Thanks for taking my questions.

Speaker Change: Following up on Jeff's last question, Craig as you start to think about.

Speaker Change: You gave us a framework for Q4, G&A, but theres also some catch up in there. So how do we think about as we're looking to the out year G&A as a percent of sales relative to the levels that you will see in Q4 that you saw in the first half of this year.

Speaker Change: Hi, Todd I think we all need to give some more color on that into September.

Speaker Change: The September call I mean keep in mind, we've shared before that fiscal 'twenty five as an investment year and our intention is as we work through the transformation plan that G&A will return as a percent of sales will return to closer towards.

Speaker Change: Historical levels, and we will give some more color on that in September.

Speaker Change: Okay, Great and then two questions on pricing can you Sheryl you gave us what the pricing was.

Speaker Change: Fiscal Q3, but can you tell us what average check was or maybe size what.

Speaker Change: Mixed benefit or drag may have been in the quarter and then the second question on pricing.

Speaker Change: I think you talked about using 5% now in the fiscal fourth quarter. I think prior you were talking about 4% is that reflective of an element of pricing that needed to be taken to help offset $5 million in tariff pressure.

Speaker Change: Todd I'll start with the second part first really our pricing guidance on as will provide an annual guidance in that regard and it's essentially unchanged from what we said before which is the approximately 5% and then in terms of the overall check dynamic.

Speaker Change: <unk> was up six 6% for six months, 6% for the quarter that includes four 9% of price and one 7% of mix. So a couple of encouraging things there on past calls we've talked a lot about the barbell pricing strategy and just kind of a data driven approach to <unk>.

Speaker Change: And so we're really pleased that we're able to continue to see ore prices flow through and also continue to deliver that positive mix, which really benefits from.

Speaker Change: A lot of the items that were added to the top of the barbell. You know we have this big and shrimp entre under part rules in the Ashburn Casserole Shepherd's pie. So those items have really worked really work hard for us in.

Speaker Change: The flow through of the price also continues to demonstrate that the pricing strategy continues to work well for us.

Speaker Change: And one follow up and then I'll jump back in queue, you talked about the success of the campfire.

Speaker Change: Across quarter to date, if we're thinking about the mix impact of campfire performing very strongly would you are you anticipating a stronger with mixed results in the fourth quarter, how should we be thinking about mix.

Speaker Change: I think as we move into Q4, we're going to start to comp on a more favorable mix from from the prior year. So we would expect that our room mix contribution will will moderate some as we move into Q4.

Speaker Change: And partners a function of what we're comping on.

Speaker Change: Okay, great. Thanks.

Speaker Change: Our next question comes from Jake Bartlett from <unk> Securities. Please go ahead with your question.

Jake Bartlett: Great. Thanks for taking my questions. My first was on guidance and Craig and I Am wondering you raised.

Speaker Change: EBITDA guidance, but kept your sales guidance.

Speaker Change: As you mentioned, an incremental $5 million headwind from tariffs. So what are the what is changed or what are the drivers of the improved outlook for margins.

Speaker Change: The sustained outlook for per sales.

Speaker Change: We continue to be we're pleased that a number of fronts, we talked a little bit about the the menu mix and the benefits of that we continue to be pleased with the gains that we're seeing on on labor as.

Speaker Change: An example, we have you know the labor wage inflation is benefiting from some of the improvements that we've made across the business things like turnover the backup house initiative rolled out and in the third quarter.

Speaker Change: But embedded in that where we had some training costs and so once as we move into Q4, we'll get a more of a full benefit from that in into Q4. So a number of the really a lot of the initiatives that we've been working on over the year are kind of starting to come to life in Q.

Speaker Change: And so we're excited about the progress there in spite of.

Speaker Change: Kind of a bit of a challenge in.

Speaker Change: Backdrop, we think we're making good progress.

Speaker Change: Okay. So it sounds like Youre getting.

Speaker Change: More labor leverage or some of those initiatives is offsetting the pressure you're expecting from the tariffs.

Speaker Change: Yeah, there are a lot of moving pieces there to tariffs is a $5 million.

Speaker Change: Headwind for for sure, but again the tariffs we didnt planned for at the beginning of the year. It's relatively we've been working on it here for quite a few months and the team has done has done a great job with that.

Speaker Change: But we also have a little bit of favorability in Q4 versus our prior thinking related to eggs. So thats a little bit of a partial offset to some of the headwinds from.

Speaker Change: From tariffs, but I think the underlying kind of structural improvements kind of goes along with what Julia has been talking about here is a part of the transformation plan, which is your one is test and learn investment year, and we are bringing to life now a lot of the things that we've been testing and learning and in.

Speaker Change: Invest in them and so you're starting to see the benefit of the broader strategic work come to life in.

Speaker Change: In particular as it relates to labor in this case.

Speaker Change: Okay and then.

Speaker Change: Another question on the tariffs that the $5 million impact that youre seeing.

Speaker Change: Given your turnover of inventory I guess I would've expected the real impact to start a little bit later, and so not actually to hit much of the fourth quarter. So how do we think of that $5 million impact is that.

Speaker Change: Correct.

Speaker Change: Or is are your costs fully impacted by tariffs at this point in the fourth quarter. What are the mitigating talked about mitigating efforts. What are they are there any in place in the fourth quarter. For instance are you increasing retail prices to help offset the tariffs are you shifting away from from the China.

Speaker Change: Supply what are you doing in the fourth quarter and should we think of is it fair to think of that $5 million is a good run rate as we think about <unk>.

Speaker Change: 26 of $20 million for the year or is it just way too early to tell at this point.

unknown: Hey, Jake I'll I'll start and then I'll, let Craig jump in because Im sure I wont get all of that it's an excellent question. So let me, let me back up a little bit right. The teams have been thinking about tariffs for months right. This was a topic on the campaign trail in and frankly, we have been working on a similar transformation for the retail business.

unknown: Been doing on the restaurant side, so really really looking at the strategy there what are the pieces.

unknown: Of the business that require a little bit of reinvention and what will that look like and so.

unknown: Thinking about that strategy and where we're going there have been a couple of key things that the tariff situation has actually enabled us to accelerate what are the key tenants of what we're looking at from a retail strategy is the number of Skus that we have the number of themes that we have and the timing of when they hit the floor and.

unknown: We've been known to put Christmas and Halloween out quite early and so we're readjusting some of that timing to really be more in time with where consumer need state and demand is and so we've got a lot of moving pieces. While this tariff thing is coming in so the teams have been really working for a while now on rationalizing skus thinking about those themes thinking.

unknown: [noise] about the timing.

unknown: And moving all of those pieces now specifically against the way tariffs are at the moment and remember 90 days ago. When we were sitting here it looks really different than where we're sitting today in time continues to be a very big factor in all of this but we actually have to keep going because we have a business to run. So the teams are really working with vendors our vendor partners have been tremendous.

unknown: Through this exercise we have been able to negotiate with them, they're negotiating with their factories, we've been alternate sourcing for awhile.

unknown: Are there different parts of the world, where some of these goods can come from and then as a last lever and look you know pricing is an option, but we're being very thoughtful about pricing because this business is so discretionary and we know from work that we've done around the transformation that value is important in this business just like it is in our restaurant business. So we'll have more to share about.

unknown: How to think about 'twenty six and tariffs in September.

Speaker Change: Because we will present, our annual guidance and Jason will go like a couple of quick steeper on it at that point in time, but know that the teams are really working as we push our strategy for absorb this tariff situation and continue to just check and adjust again I'm actually very pleased about how we've been able to absorb the impacts so far here in fiscal 'twenty five.

Speaker Change: And what that looks like as we move forward I don't know Craig if there's anything.

Speaker Change: And I think Thats right. It seems doing a good job and it's it's dynamic and they continue to adjust and maybe one thing to just come sooner is there is an average inventory return in there, but there are some things that are turning faster and some things are a little bit longer and then there are decisions that were we're making now that.

Speaker Change: Kind of in anticipation of the tariff impact in the future. So.

Speaker Change: Big takeaway for US is while that's out there. The team has been working on this for months they've made great progress and we anticipate even more progress.

Speaker Change: Great I appreciate it.

Speaker Change: Our next question comes from Brian Mulan from Piper Sandler. Please go ahead with your question.

Brian Mulan: Thank you a question back to phase one of the back of the house automation initiatives just understanding the benefits are probably only just starting.

Speaker Change: Now in fiscal Q4 can you just talk about or help us understand do you anticipate.

Speaker Change: <unk> reduction in labor hours in the back of the house as a result of the seas and do those fall to the bottom line or do those get maybe reinvested into another area of the business and then related to that I think there's a phase two and then a phase three that we will see over the next couple of years can you remind us what those phases are related to and when you transition.

Speaker Change: <unk> into the second phase. Thank you sure Bryan I'll start and then I'll, let Craig handle a couple of the specifics there on the movement of the savings. The goal remember of this entire work stream is to improve the quality of our food because we're mainly a restaurant visits and make sure that we're always serving our delicious scratch made food, but making it easier.

Speaker Change: For the teams to do that consistently and making the jobs more enjoyable. We got a lot of processes in the back of house that hasn't changed a lot in a long time and so that's really the Genesis of this work as we got into it as part of the transformation agenda. We've broken this work into three phases. So this first phase that we launched in.

Speaker Change: Q3 and.

Speaker Change: So you're right to think that not all of the benefit is there and I'll, let Craig talk about that in a moment. The first phase is really focused on some of those processes and changing the way that we actually make the do to improve the quality and make the job easier. So that's kind of phase one phase two is about how do we take that even further by bringing in some ingredients that are already like pre chopped and pre <unk>.

Speaker Change: <unk> and things like that because today, we do all of that by hand or most of it by hand, and then phase three is gosh equipment has changed so much in the last few decades are their equipment solutions that would also make it easier for our cooks.

Speaker Change: In our prep clubs to do their work easier. So those three phases will phase out over the remaining years of the transformation.

Speaker Change: This phase one I'll, let Craig talk about how it's flowing through but we're real pleased so far with the early days of this year.

Speaker Change: Yeah I'll take the second part of that we do expect the back of the house initiative to to flow through again, we didn't get the full benefit of that in Q3, because there were some learning curve training and so on and we do expect more of a benefit in Q4 and into into 'twenty six.

Speaker Change: And if you can just talk a lot about 25 being an investment year and test and learn year. So we do expect to get the benefit of this initiative on a more of a run rate basis, as we finish up Q4 and into fiscal 'twenty six and it's really a part of that broader $50 million to $60 million cost saves that we've talked about.

Speaker Change: Now as we go into back of House.

Speaker Change: Two we will see we expect to see some.

Speaker Change: Overall benefit to total prime cost.

Speaker Change: But you might end up with a little bit of shift in between.

Speaker Change: Between buckets there but.

Speaker Change: Part of the plan here is to in a more permanent way.

Speaker Change: Prove the ease of operate in the back of house, and the consistency and the quality as well as the costs at a permanent structural way.

Speaker Change: Thank you that's great color and then just wanted to ask about remodeling initiative that you've called fiscal 'twenty five a test and learn year. So can you just talk about what you've learned thus far this year in terms of the different approaches you've taken with some of the projects and if you'd be willing to talk about.

Speaker Change: Your plans for fiscal 'twenty six or so.

Speaker Change: How youre thinking about number of stores or maybe capex.

Speaker Change: It's never a call until somebody asked this about Remodels I.

Brian Mulan: So thanks for the question Brian.

Brian Mulan: We've discussed this has really been a year of testing and learning and so we are saving it kind of this topic for September. So we will talk a lot about it in September really what we've learned in this year and while we continue to learn because honestly, we're not done learning.

Brian Mulan: We're really continuing to transform the organization to be one that's more agile and really to just continuously learn and improve as we go forward. We launched a new version of our remodel remember we've got 20 remodels in 'twenty reflect refreshes that as of right now our complete in our system and we continue to be really pleased with what we're learning there the <unk>.

Brian Mulan: Pact that it's having on the system employees and giving US great feedback about working in those in those newly remodeled and refreshed stores and guests continue to tell us that they are lighter brighter more welcoming them and they are enjoying them as well so but at the end of April we launched a new version of our remodel as well and so it's early early days of that.

Brian Mulan: We're very pleased with the early results of that we've taken retail into a different way in this remodel as well. So theres just a lot to learn and as you can imagine it's only been 30 days of that that's really why we want to wait and have the conversation in September we will talk about how it's informing our 26 and beyond plan and really what we've learned to date as we continue to learn on this topic.

Brian Mulan: Nick.

Nick: Okay. Thank you.

Speaker Change: And our next question comes from Sara Senatore from Bank of America. Please go ahead with your question.

Sara Senatore: Thank you I wanted to go back to the sort of traffic trends I know that you had said that you know they started off soft in February and then improved but I guess as you think about all these initiatives you said consumers or customers are choosing cracker barrel, but the traffic is still pretty negative. So you know I guess maybe.

Sara Senatore: We you could help me understand is this kind of a process, where there are certain kinds of transactions that you're intentionally perhaps losing and then in lieu of that you're getting perhaps some more profitable transactions at the higher end of the barbell and then with respect to the any kind of color on the trends.

Speaker Change: Across demographic groups I know last quarter, you had said you're actually seeing some better performance among our 55% of consumer so does that continue and what.

Speaker Change: Does that say anything about kind of the efficacy of some of the traffic driving initiatives. Thanks.

Speaker Change: Okay.

Speaker Change: Hi, Sarah it's Craig I'll start with I think Julien I will kind of share of this one.

Speaker Change: I didn't think I would keep in mind on the traffic for the quarter is there are pretty sizable differences in terms of you know, let's say February versus versus April.

Speaker Change: And so I would just keep that keep that in mind February was particularly challenged whether it was staff. The macro uncertainty there was a lot of news was elevated but we've been pleased with the progress throughout the quarter and we've been pleased with the way that the fourth quarter has has started so we.

Speaker Change: But what were the work that we're doing here is really about bringing cracker barrel back too.

Speaker Change: Profit double growth and that includes.

Speaker Change: That includes traffic and we think even though the overall quarter was challenged from a profit perspective, we think the underlying trend is something that we're happy with.

Speaker Change: In terms of the demographic.

Speaker Change: Trends I would say it was pretty steady there wasn't a big standout across the entire quarter.

Speaker Change: Over 55 cohorts performed similarly to our under 55 cohorts or over 60000, okay.

Speaker Change: Over 60, K income cohort perform similarly, or under 60, I think the takeaway for us on the quarter is more about how the quarter developed and on how the fourth quarter has started.

Speaker Change: No I think that's right I think remember we said this is an investment year and this is a three year plan and it's not going to be a straight line. There is going to be some bumps along the way some of which you can anticipate some of which you can't I don't think anybody thought the macros would do what they did in February I don't think anybody thought the weather would be as bad as it was on top of that so I'm real pleased.

Speaker Change: He is with how we have actually manage through this quarter given some of those real.

Speaker Change: In the quarter.

Speaker Change: Then to Craig's point, I think Sara we continue to be very optimistic and confident in the long term trends that we're seeing underneath the business. So I.

Speaker Change: I think Q3 is a little bit of a speed bump and kind of whats been a good year for us so far in terms of changing those those trends and then in the curves that we need to spend to keep this transformation on track to take the brand where it needs to go long term.

Speaker Change: You.

Speaker Change: And ladies and gentlemen, with that we'll be concluding today's question and answer session I would like to turn the floor back over to Julie Masino for closing remarks.

Speaker Change: Thank you I wanted to start with a huge thank you to the teams in our 658 stores to bring the cracker barrel country hospitality to life every day for our guests.

Speaker Change: The executive team the board and I really appreciate your smiles and hard work in what was I know, it's a difficult quarter.

Speaker Change: Everyone else on the call today. Thank you for joining US today. Our plan is working and we are excited about what's ahead. We appreciate your interest in the brand and we look forward to giving you our next update in September.

Speaker Change: Yeah.

Speaker Change: Ladies and gentlemen that does conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.

Speaker Change: [music].

Speaker Change: Yeah.

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Speaker Change: Yes.

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Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

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Speaker Change: Sure.

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Speaker Change: Yes.

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Speaker Change: Good morning, everyone and welcome to the Cracker barrel fiscal 2025 third quarter conference call.

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

Speaker Change: After todays presentation, there will be an opportunity to ask questions.

Speaker Change: I'll ask a question you May press Star and then one on your Touchtone telephone.

Speaker Change: Draw your questions you May press star two.

Speaker Change: Please also note today's event is being recorded.

Adam Hannon: At this time I would like to turn the floor over to Adam Hannon director of Investor Relations.

Speaker Change: Sir Please go ahead.

Speaker Change: Thank you good morning, and welcome to Cracker barrels third quarter fiscal 2025 conference call and webcast. This morning, we issued a press release announcing our third quarter results in this press release and on this call. We will refer to non-GAAP financial measures such as adjusted EBITDA for the third quarter ended May 2025.

Speaker Change: <unk>.

Speaker Change: Please refer to the footnote in our press release for further details about these metrics.

Speaker Change: Sony believes these measures provide investors with an enhanced understanding of the company's financial performance.

Speaker Change: This information is not intended to be considered in isolation or as a substitute for net income 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.

Speaker Change: On the call with me. This morning are cracker barrels president and CEO, Julian Massena, and senior Vice President and CFO, Greg <unk>.

Speaker Change: Julian Craig will provide a review of the business financials and outlook.

Speaker Change: And then open up the call for questions.

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

Speaker Change: 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.

Speaker Change: Caution our listeners and readers in considering forward looking statements and information.

Speaker Change: Any of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we filed with or furnished to the SEC.

Speaker Change: Finally, the information shared on this call is valid as of today's date and the company undertakes no obligation to update it except as may be required under applicable law I will now turn the call over to cracker barrels President and CEO Julian Massena Julien.

Julian Massena: Good morning, and thank you for joining US we were pleased with our third quarter performance, which included positive comparable store restaurant sales for the fourth consecutive quarter and adjusted EBITDA that exceeded our expectations.

Julian Massena: These results further underscore that our transformation plan is working.

Julian Massena: I'll do a quick recap of some Q3 highlights and then speak to the exciting ways. Our plan is coming together in Q4 as these initiatives exemplify how we're evolving the brand by leaning into what makes cracker barrel, great and doing so in a refined way that appeals to both existing and new guests alike. We're excited about.

Julian Massena: Our progress and our teams are energized.

Julian Massena: Looking back at Q3, the quarter started soft so we took actions to support the top line and tightly manage our expenses without limiting our ability to deliver our important fourth quarter initiative I am proud of how the team responded to these challenges their agility discipline and strong ability to manage the business.

Julian Massena: Deliver a solid quarter.

Julian Massena: From a culinary perspective, our spring promotion featured two shrimp dishes.

Julian Massena: Louisiana style shrimp, skillet, and a comforting shrimp and grits skillet, we also expanded our pancake platform by introducing innovative new flavors and options across various price points as part of our broader barbell strategy.

Julian Massena: From an operational perspective, we remain focused on strong execution and the metrics that matter.

Julian Massena: For example, compared to the prior year quarter hourly turnover improved by approximately 14 percentage points and our internal net sentiment scores increased two 3%.

Julian Massena: During the quarter, we implemented phase one of our back of house optimization initiative to the full system. As a reminder, this phase is focused on process simplification to improve quality and profitability, while also making jobs easier and more enjoyable. We've been pleased with the results and employee feedback has.

Julian Massena: <unk> been very positive as team members find the new processes easier to execute.

Julian Massena: Let's talk about Q4.

Julian Massena: There's a lot going on that we are excited about our Q4 work demonstrates the complementary nature of our strategic pillars and provides compelling examples of how we're bringing our strategy to life.

Julian Massena: A big focus in recent months has been our brand refinement work, which will continue to gather steam in Q4 before officially launching in August.

Julian Massena: Brand refinement means evolving our brand across all touch points and creating deeper more meaningful engagement with our guests and.

Julian Massena: In addition to the updated look and feel that we've been incorporating into our advertising, we're showing up authentically in places where our existing and new guests are.

Julian Massena: An example of this is our partnership with Speedway Motorsports and the success of the Cracker barrel 400, the NASCAR race, we sponsored this past Sunday just down the road from our home office.

Julian Massena: Strong overlap with cracker barrel guests and NASCAR fans and our brand have much in common both are highly experiential input country hospitality and people at the heart of everything we do.

Julian Massena: The cracker barrel 400 is more than a race. It marks the launch of a key partnership and throughout the summer NASCAR fans can expect Activations at Speedway motorsports destinations across the country.

Julian Massena: The cracker barrel 400 was a big moment in and of itself, but it is also a piece of our overall strategy and integrated marketing campaign to promote the much anticipated return of campfire meals.

Julian Massena: We heard loud and clear for both guests and employees that they deeply missed these unique and delicious foil wrapped meals that are packed with hardie protein season, vegetables, and a rich Roth.

Julian Massena: We brought them back for the first time since 2018 and made them even better.

Julian Massena: We've elevated the flavors improves the quality and made them easier for the kitchen to execute and.

Julian Massena: In addition to the returning favorites of beef and chicken, we've added a new shrimp and andouille sausage offerings, starting at the great value price point of $10 99.

Julian Massena: To support Campfire, we've invested in advertising and our integrated marketing campaign also reflects our ongoing brand refinements, including a refreshed look and feel that showcases the quality and appeal of our delicious food.

Julian Massena: We're also evolving how we show up in social media and are working with creators to tap into conversations as part of our efforts to connect authentically with our guests.

Julian Massena: Cracker barrel rewards is another way, we are deepening our engagement with guests and driving frequency to jumpstart the campfire menu promotion and reward our loyalty members. We gave them early access to our new decadence Morris Brownies Skillet, and we will continue to give early access to provide value to our members.

Julian Massena: We recently achieved our fiscal 'twenty five year target of acquiring 8 million members and over one third of tract sales are now associated with loyalty members.

Julian Massena: Rocker barrel rewards continues to deliver incremental sales and traffic and looking ahead, we're focused on enhancing our personalization capabilities to further drive incrementally.

Julian Massena: As a part of this we've been testing advanced personalization for cracker barrel rewards using an AI driven learning model. We are encouraged by the results as its driven a mid single digit lift in average revenue per member compared to control.

Julian Massena: We're also using AI in other ways as part of our broader efforts to improve efficiency and effectiveness by leveraging technology, our traffic forecasting utilizes machine learning, which is improved accuracy at the store level and enhanced our ability to manage labor our entry filter for guest relations or kind of how we triage inbounds.

Julian Massena: <unk> is powered by AI, which speeds up time to resolution and we're quickly puts guests in touch with our live representative and.

Julian Massena: And finally, we're using machine learning to bolster our cyber security. These are just a few examples and we continue to evaluate opportunities to incorporate AI based technology into our toolkit to positively impact the business.

Julian Massena: Before turning it over to Craig I'd like to comment on the tariff situation <unk>.

Julian Massena: For context, approximately one third of our retail products are sourced directly from vendors in China and.

Julian Massena: In addition to this direct exposure. We also have indirect exposure related to product that we purchased through domestic vendors that is also source from China.

Julian Massena: Our approach to mitigate the tariff impacts includes first aggressively negotiating with vendors second alternate sourcing and third pricing as.

Julian Massena: As we have mentioned we have been in the process of updating our retail strategy and we are also accelerating initiatives from this such as rationalizing skus, reducing the number of seasonal themes adjusting our seasonal promotional strategy. All of these will also help mitigate the impact of tariffs.

Julian Massena: The situation remains dynamic and we intend to provide more specifics in September when we report Q4 earnings and share our fiscal year 2006 guidance at which time, we expect to have a higher degree of certainty on the net impacts related to tariffs and the timing of our mitigation efforts.

Julian Massena: I want to wrap up my prepared remarks with a few key points first we acknowledge that there is a lot going on in the macroeconomic environment, but our teams are keenly focused on executing the business today, while transforming for the future.

Julian Massena: Second we're leaning into what guests love about cracker barrel and we're evolving to drive our business forward. Our Q4 initiatives are a great example of this and there's much more to come third guests are choosing us and we have delivered four consecutive quarters of positive comparable store restaurant sales growth.

Julian Massena: Because of this momentum we were able again to raise our guidance and Q4 is off to a strong start.

Julian Massena: Finally, as a reminder, all of this work is anchored on our three business imperatives of driving relevancy, which is market share delivering food and experiences guests love and growing profitability. We remain confident in our plan and our ability to execute and achieving these imperatives will drive significant long term value.

Julian Massena: <unk> I will now turn it over to Craig to review, our financials and provide our outlook.

Craig: Thank you Julie and good morning, everyone.

Craig: We're now three quarters into our fiscal year, and we continue to make progress against our transformation plan.

Craig: Door traffic started soft in February.

Craig: We saw improving trends in March and into April, which also benefited from a strong Easter.

Craig: Overall, our third quarter performance exceeded our expectations and allowed us to raise our annual guidance.

Craig: For Q3, we reported total revenue of $821 1 million, which was up 0.5% from the prior year quarter.

Craig: Our restaurant revenue increased one 2% to $679 3 million and retail revenue decreased two 7% to $141 $8 million.

Craig: Comparable store restaurant sales grew by 1%, while comparable store retail sales decreased by three 8%.

Craig: Pricing for the quarter was approximately four 9%.

Craig: Our quarterly pricing consisted of one 5% carryforward pricing from fiscal 2024, and three 4% new pricing from fiscal 2025.

Craig: Off premise sales were 19, 1% of restaurant sales compared to 18, 9% in the prior year.

Craig: Moving onto our third quarter expenses.

Craig: Total cost of goods sold in the quarter was 31% of total revenue versus 30% in the prior year.

Craig: Restaurant cost of goods sold was 26, 2% of restaurant sales versus 25, 9% in the prior year.

Craig: This 30 basis point increase was primarily driven by menu mix and commodity inflation.

Craig: Partially offset by menu pricing.

Craig: Commodity inflation was approximately two 9%.

Craig: Driven principally by higher beef.

Craig: And oil prices, partially offset by lower produce and poultry prices.

Craig: As we discussed on the last earnings call.

Craig: Although we are fully contracted on egg prices one of all vendors lost capacity due to an avian influenza outbreak and as a result, we had to purchase some eggs on the spot market during the quarter. However.

Craig: However, egg prices have moderated which reduce the overall cost impact.

Craig: Retail cost of goods sold was 48, 9% of retail sales versus 49% in the prior year. This 10 basis point decrease was primarily driven by higher vendor allowances, partially offset by higher markdowns.

Craig: Our inventories at quarter end were $168 7 million compared.

Craig: Compared to $175 $3 million in the prior year.

Craig: Labor and related expenses were 37, 1% of revenue compared to 37, 8% in the prior year.

Craig: This 70 basis points of the decrease was primarily driven by menu pricing and improved productivity.

Craig: Really offset by wage inflation of approximately one 9%.

Craig: One of the drivers of our improved productivity was our back of house optimization initiative.

Craig: We rolled this out early in the quarter and we are pleased that we are achieving our savings targets.

Craig: Other operating expenses were 25, 3% of revenue compared to 24, 5% in the prior year.

Craig: This 80 basis point increase was primarily driven by higher advertising expense and higher depreciation.

Craig: General and administrative expenses were five 6% of revenue compared to adjusted general and administrative expenses of five 4% in the prior year.

Craig: This 20 basis point increase was primarily driven by investments to support our strategic transformation initiatives.

Craig: Yes.

Craig: Net interest expense was $5 million.

Craig: Compared to net interest expense of $5 2 million in the prior year.

Craig: This decrease was primarily the result of lower average interest rates, partially offset by higher debt levels.

Craig: Our GAAP income taxes were a $2 $7 million credit flowing from GAAP earnings before taxes.

Craig: Adjusted income taxes were a $2 $5 million of credits.

Craig: GAAP earnings per diluted share were 56.

Craig: And adjusted earnings per diluted share were 58.

Craig: Adjusted EBITDA was $48 1 million or five 9% of total revenue compared to $47 9 million or five 9% of total revenue in the prior year.

Craig: Now turning to capital allocation and our balance sheet.

Craig: In the third quarter, we invested $36 6 million in capital expenditures.

Craig: We ended the quarter with $489 4 million and total debt.

Craig: As we disclosed in May we updated our revolver and added additional debt capacity through a delayed draw term loan or <unk>.

Craig: The combination of the new revolver, and a DVT L increases our debt capacity to $800 million.

Craig: <unk> to $700 million under the previous revolver and provides flexibility to execute our plans, including the refinancing of our $300 million convertible loan that matures in June of 2026.

Craig: Lastly, as announced in today's press release, the board declared a quarterly dividend of <unk> 25 per share.

Craig: Payable on August 13, 2025 to shareholders of record on July 18, 2025.

Craig: Now moving to our outlook.

Craig: As we move into the final quarter of the first year of our transformation plan. We are pleased with the progress that we're making as evidenced by our results and we are encouraged by the strong start to Q4, driven by our campfire promotion.

Craig: Additionally, our teams have done an excellent job working to mitigate the impact of tariffs.

Craig: We anticipate the net tariff impact to Q4, EBITDA will be approximately $5 million.

Craig: And as Judy stated, we will have more to share in September on the impact for fiscal 2026.

Craig: Turning to our guidance for fiscal 2025.

Craig: We expect the following.

Craig: Total revenue of 345 billion to $3 5 billion.

Craig: Pricing of approximately 5%.

Craig: Commodity inflation in the mid 2% range and hourly wage inflation in the mid 2% range.

Craig: We increased our EBITDA outlook.

Craig: And now anticipate full year adjusted EBITDA of approximately $215 million to $225 million, which includes the previously mentioned $5 million tariff impact.

Craig: We expect a full year GAAP effective tax rate of negative 17% to negative, 11% and an adjusted effective tax rate of negative 6% to zero percent.

Craig: Lastly, we anticipate capital expenditures of approximately 160 million to $170 million.

Craig: In closing we continue to make great progress, we remain confident in our plans and our focus on delivering a strong finish to fiscal 2025 to set us up for an important fiscal 2026 with that I'll now turn the call over to the operator for questions.

Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session.

Speaker Change: To ask a question you May press Star and then one using a touchtone telephone withdraw.

Speaker Change: Thank you all your questions you May press star two.

Speaker Change: If you are using a speakerphone please pick up the handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Im not a star and then one to join the question. Please.

Speaker Change: Our first question today comes from Jeff Farmer from Gordon Haskett. Please go ahead with your question.

Speaker Change: Thanks.

Jeff Farmer: You guys noted that Q4 is off to a strong start but what does that mean in the context of the plus 1% restaurants same store sales number that you reported in Q3.

Speaker Change: Hi, Jeff I can I can start on that one and yes, we're definitely seeing improving.

Speaker Change: Improving trends as we kind of went through Q3 and into Q4, our third quarter as we noted on the last call February started out.

Speaker Change: A bit challenged as a result of both weather and some consumer uncertainty then we saw improvements into March and into April and we're particularly pleased that improvement continue further into into Q4. So we're not giving an exact number other than to say that we're pleased with the.

Speaker Change: The campfire promotion that is resonating with guests.

Speaker Change: Okay, and then just a quick follow up.

Speaker Change: Again, I think you mentioned tightly managing expenses in Q3.

Speaker Change: Can you just provide a little bit more detail on what youre doing there on the expense line.

Speaker Change: Absolutely I'll take that one as well so given that Q3 has started out Shannon I missed in February in particular.

Speaker Change: We tightened expenses in a number of areas, particularly around G&A. There were some discretionary items in terms of projects that we were able to adjust and just generally.

Speaker Change: And discretionary areas reduced our expense so as we think about G&A, we would expect that our G&A leveling Q4 will more closely resemble the G&A level that we had in Q1 and Q2, but that also includes the Q4 number will also.

Speaker Change: Includes some of the shifting that we did it with projects.

Speaker Change: Out of Q3 sell some G&A tightening in Q3 and Q4 inclusive of all of that will be more in line with Q1 and Q2.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Speaker Change: Our next question comes from Todd Brooks from the Benchmark Company. Please go ahead with your question.

Todd Brooks: Hey, Thanks for taking my questions.

Speaker Change: Just following up on Jeff's last question, Craig as you start to think about.

Speaker Change: You gave us a framework for Q4, G&A, but theres also some catch up in there. So how do we think about as we're looking to the out year G&A as a percent of sales relative to the levels that you will see in Q4 that you saw in the first half of this year.

Speaker Change: Hi, Todd I think we all need to who will give some more color on that into September.

Speaker Change: September recall I mean keep in mind, we've shared before that fiscal 'twenty five as an investment year and our intention is as we.

Speaker Change: <unk> worked through the transformation plan that G&A will return as a percent of sales will return to closer to its.

Speaker Change: Historical levels I will give some more color on that in September.

Speaker Change: Okay, Great and then two questions on pricing can you Sheryl you gave us what the pricing was in fiscal.

Speaker Change: Fiscal Q3, but can you tell us what average check was or maybe size what.

Speaker Change: Mixed benefit or drag may have been in the quarter and then the second question on pricing.

Speaker Change: I think you talked about using 5% now in the fiscal fourth quarter. I think prior you were talking about 4% is that reflective of an element of pricing that needed to be taken to help offset $5 million in tariff pressure.

Speaker Change: <unk>.

Adam Hannon: Todd I'll start with the second part first really our pricing guidance on as will provide an annual guidance in that regard and is essentially unchanged from what we said before which is the approximately 5% and then in terms of the overall check dynamic the check was up.

Adam Hannon: Up six 6% for six months, 6% for the quarter that includes four 9% of price then one 7% of mix. So a couple of encouraging things there on past calls we've talked a lot about the barbell pricing strategy and just kind of a data driven approach to pricing and so.

Adam Hannon: We're really pleased that we're able to continue to see your pricing flow through and also continue to deliver that positive mix, which really benefits from.

Adam Hannon: A lot of the items that were added to the top of the barbell. You know we have this big and shrimp entre and apart rolls in Asheboro casserole Shepherd's pie. So those items that really work really work hard for us in the <unk>.

Adam Hannon: So through the price also continues to demonstrate that the pricing strategy continues to work well for us.

Speaker Change: One follow up and then I'll jump back in queue, you talked about the successor campfire.

Speaker Change: Across quarter to date, if we're thinking about the mix impact of campfire performing very strongly would you are you anticipating a strong of a mix result in the fourth quarter, how should we be thinking about mix.

Speaker Change: I think as we move into Q4, we're going to start to comp on a more favorable mix from from the prior year. So we would expect that our room mix contribution will moderate some as we move into Q4 in part as a function of what we're confident on.

Speaker Change: Okay, great. Thanks.

Jake Bartlett: Our next question comes from Jake Bartlett from <unk> Securities. Please go ahead with your question.

Jake Bartlett: Great. Thanks for taking my questions. My first was on guidance and Craig and I Am wondering you raised your EBITDA guidance, but kept your sales guidance.

Jake Bartlett: As you mentioned, an incremental $5 million headwind from tariffs. So what are the what is changed or what are the drivers of the improved outlook for margins.

Jake Bartlett: Versus the sustained outlook for per sales.

Jake Bartlett: We continue to be we're pleased that a number of fronts, we talked a little bit about the.

Jake Bartlett: The menu mix and the benefits of that we continue to be pleased with the gains that we're seeing on on labor as an example, we have.

Jake Bartlett: Labor wage inflation is benefit then from some of the improvements that we've made across the business things like turnover the backup house initiative rolled out and in the third quarter.

Jake Bartlett: But embedded in that where we have some training costs and so once as we move into Q4, we'll get a more of a full benefit from that in into Q4. So a number of the really a lot of the.

Jake Bartlett: The initiative is that we have been.

Jake Bartlett: Working on over the year are kind of starting to come to life in Q4, and so we're excited about the progress there in spite of.

Jake Bartlett: Kind of a bit of a challenge in <unk>.

Jake Bartlett: Backdrop, we think we're making good progress.

Speaker Change: Okay. So it sounds like Youre getting.

Speaker Change: More labor leverage or some of those initiatives is offsetting the pressure you're expecting from the tariffs.

Speaker Change: Yes, there are a lot of moving pieces there to tariffs is a $5 million.

Speaker Change: Headwind for sure, but again tariffs, we didnt planned for at the beginning of the year. It's relatively we've been working on it here for quite a few months and the team has done has done a great job with that.

Speaker Change: But we also have a little bit of favorability in Q4 versus our prior thinking related to eggs. So thats a little bit of a partial offset to some of the headwinds from.

Speaker Change: From tariffs, but I think the underlying kind of structural improvements kind of goes along with what Julia has been talking about here is a part of the transformation plan, which is your one is test and learn investment year.

Speaker Change: And we are bringing to life now a lot of the things that we've been testing and learning and invest in them and so you're starting to see the benefit of the broader strategic work come to life.

Speaker Change: Particularly as it relates to labor in this case.

Speaker Change: Okay and then.

Speaker Change: Another question on the tariffs that the $5 million impact that youre seeing.

Speaker Change: Given your turnover of inventory I guess I would've expected the real impact to start a little bit later, and so not actually to hit much of the fourth quarter. So how do we think of that $5 million impact is that.

Speaker Change: Directly.

Speaker Change: Is are your costs fully impacted by tariffs at this point in the fourth quarter what are the mitigating you've talked about mitigating efforts. What are they are there any in place in the fourth quarter. For instance are you increasing retail prices to help offset the tariffs are you shifting away from from the China.

Speaker Change: What are you doing in the fourth quarter and should we think of is it fair to think of that $5 million is a good run rate as we think about.

Speaker Change: 26 of $20 million for the year or is it just way too early to tell at this point.

Speaker Change: Hey, Jake I'll I'll start and then I'll, let Craig jump in because Im sure I wont get all of that it's an excellent question. So let me, let me back up a little bit right. The teams have been thinking about tariffs for months right. This is a topic on the campaign trail in and frankly, we have been working on a similar transformation for the retail business that we've been doing.

Speaker Change: On the restaurant side, so really really looking at the strategy there what are the pieces.

Speaker Change: Of the business that require a little bit of reinvention and what will that look like and so.

Speaker Change: Thinking about that strategy and where we're going there have been a couple of key things that the tariff situation has actually enabled us to accelerate what are the key tenants of what we're looking at from a retail strategy is the number of Skus that we have a number of themes that we have and the timing of when they hit the floor.

Speaker Change: Been known to put Christmas and Halloween quite early and so we're readjusting some of that timing to really be more in time with where consumer need state and demand is and so we've got a lot of moving pieces. While this tariff thing is coming in so the teams have been really working for a while now on rationalizing skus thinking about those themes thinking about.

Speaker Change: The timing.

Speaker Change: And moving all of those pieces now specifically against the way tariffs are at the moment and remember 90 days ago. When we were sitting here it looks really different than where we're sitting today in time continues to be a very big factor in all of this but we actually have to keep going because we have a business to run. So the teams are really working with vendors our vendor partners have been tremendous.

Speaker Change: Through this exercise we have been able to negotiate with them, they're negotiating with their factories, we've been alternate sourcing for a while.

Speaker Change: There are different parts of the world, where some of these goods can come from and then as a last lever and look pricing is an option, but we're being very thoughtful about pricing because this business is so discretionary and we know from work that we've done around the transformation that value is important in this business just like it is in our restaurant business. So we will have more to share about how.

Speaker Change: To think about 'twenty six and tariffs in September.

Speaker Change: Because we will present, our annual guidance and Jason will go like a couple of quick steeper on it at that point in time, but know that the teams are really working as we push our strategy for absorb this tariff situation and continue to just check and adjust again I'm actually very pleased about how we've been able to absorb the impact so far here in fiscal 'twenty five.

Speaker Change: And what that looks like as we move forward I don't know Craig if there's anything you would add.

Speaker Change: And I think thats right that seems doing a good job and it's dynamic and they continue to adjust and maybe one thing to consider is there is an average inventory return in there, but there are some things that are turning faster and some things are a little bit longer and then there are decisions that were we're making now that.

Speaker Change: Or kind of in anticipation of the tariff impact in the future. So.

Speaker Change: The big takeaway for US is while Thats out there. The team has been working on this for months they've made great progress and we anticipate even more progress.

Speaker Change: Great I appreciate it.

Brian Mulan: Our next question comes from Brian Mulan from Piper Sandler. Please go ahead with your question.

Brian Mulan: Thank you a question back to phase one of the back of the house automation initiatives just understanding the benefits are probably only just starting now in fiscal Q4 can you just talk about or help us understand do you anticipate.

Brian Mulan: Permanent reduction in labor hours in the back of the house as a result of the seas and do those fall to the bottom.

Brian Mulan: Bottom line or do those get maybe reinvested into another area.

Speaker Change: Of the business and then related to that I think theres a phase two and then a phase three that we will see over the next couple of years can you remind us what those phases are related to and when you transition into the second phase. Thank you sure Bryan I'll start and then I'll, let Greg handle a couple of the specifics there on the movement of the savings the goal remember of this anti.

Brian Mulan: <unk> work stream is to improve the quality of our food because we're mainly a restaurant visits and make sure that we're always serving our delicious scratch made food, but making it easier for the teams to do that consistently and making the jobs more enjoyable. We've got a lot of processes in the back of house that haven't changed a lot in.

Brian Mulan: A long time and so that's really the Genesis of this work as we got into it as part of the transformation agenda. We've broken this work into three phases. So this first phase that we launched in Q3 and so you are right to think that not all of the benefit is there and I'll, let Craig talk about that in a moment.

Craig: The first phase is really focused on some of those processes and changing the way that we actually make the do to improve the quality and make their jobs easier. So that's kind of phase one phase two is about how do we take that even further by bringing in some ingredients that are already like pre chopped and pre sliced and things like that because today, we do all of that by hand or most of it.

Speaker Change: And then phase III is gosh equipment has changed so much in the last few decades are their equipment solutions that would also make it easier for our cooks and.

Speaker Change: In our prep clubs to do their work easier. So those three phases will phase out over the remaining years of the transformation.

Speaker Change: This phase one I'll, let Greg talk about how it's flowing through but we're real pleased so far with the early days of this.

Speaker Change: Yes, I'll take the second part of that we do expect the back of the house initiative to sort of flow through again, we didn't get the full benefit of that in Q3, because there were some learning curve training and so on we do expect more of a benefit in Q4 and into into 'twenty six.

Speaker Change: And if you can just talk a lot about 25 being an investment year and test and learn year. So we do expect to get the benefit of this initiative on a more of a run rate basis, as we finish up Q4 and into fiscal 'twenty six and it's really a part of that broader $50 million to $60 million cost saves that we've talked about.

Speaker Change: Now as we go into <unk>.

Speaker Change: Back of house.

Speaker Change: Two we will see we expect to see some.

Speaker Change: Overall benefit too of our total prime cost what.

Speaker Change: What you might end up with a little bit of shift in between.

Speaker Change: Between buckets, there, but part of the plan here is to.

Speaker Change: More permanent way improve the ease of operate in the back of house and the consistency and the quality as well as the costs that are permanent structural way.

Speaker Change: Thank you that's great color and then just wanted to ask about remodeling initiative that you've called fiscal 'twenty five a test and learn year. So can you just talk about what you've learned thus far this year in terms of the different approaches you've taken away some of the projects.

Speaker Change: And if you'd be willing to talk about.

Speaker Change: Your plans for fiscal 'twenty six.

Speaker Change: How youre thinking about number of stores or maybe capex.

Speaker Change: It's never a call until somebody asked this about remodels.

Brian Mulan: So thanks for the question Brian.

Brian Mulan: Discussed this has really been a year of testing and learning and so we are saving it kind of this topic for September. So we will talk a lot about it in September really what we've learned in this year and while we continue to learn because honestly, we're not done learning.

Brian Mulan: We're really continuing to transform the organization to be one that's more agile and really to just continuously learn and improve as we go forward.

Brian Mulan: Launched a new version of our remodel remember we've got 20 remodels in 'twenty reflect refreshes that as of right now are complete in the system and we continue to be really pleased with what we're learning there the impact that it's having on the system employees and giving US great feedback about working in those in those newly remodeled and refreshed stores and guests continue to tell us that they are lighter.

Brian Mulan: Brighter more welcoming and they are enjoying them as well so but at the end of April we launched a new version of our remodel as well and so it's early early days of that.

Brian Mulan: Very pleased with the early results of that we've taken retail into a different way in this remodel as well. So theres just a lot to learn and as you can imagine it's only been 30 days of that that's really why we want to wait and have the conversation in September we'll talk about how it's informing our 26 and beyond plan and really what we've learned to date as we continue to learn on this topic.

Speaker Change: Okay. Thank you.

Speaker Change: And our next question comes from Sara Senatore from Bank of America. Please go ahead with your question.

Sara Senatore: Thank you I wanted to go back to the sort of traffic trends I know that you had said that they started off soft in February and then improved but I guess.

Speaker Change: As you think about all these initiatives you said consumers or customers are choosing cracker barrel, but the traffic is still pretty negative so.

Speaker Change: I guess, maybe you could help me understand is this kind of a process, where there are certain kinds of transactions that you're intentionally perhaps losing and then and in lieu of that youre getting perhaps some more profitable transactions at the higher end of the barbell and then with respect to the any kind of color on the trends.

Speaker Change: Across demographic groups I know last quarter, you had said you're actually seeing some better performance among 55 million of consumer so does that continue.

Speaker Change: That say anything about kind of the efficacy of some of the traffic driving initiatives.

Speaker Change: Okay.

Julian Massena: Hi, theorized, Greg I'll start with I think Julien I will kind of share of this one.

Speaker Change: I didn't think I would keep in mind on the traffic for the quarter is there a pretty sizeable difference is in terms of let's say February versus versus April.

Sara Senatore: And so I would just keep that keep that in mind February was particularly challenged the weather was tough the macro uncertainty there was a lot of news.

Sara Senatore: Was elevated but we've been pleased with the progress throughout the quarter and we've been pleased with the way that the fourth quarter has has started so we.

Sara Senatore: But what were the work that we're doing here is really about bringing cracker barrel back too.

Sara Senatore: Double growth and that includes that.

Sara Senatore: That includes traffic and we think even though the overall quarter was challenged from a profit perspective, we think the underlying trend is something that we're happy with it.

Sara Senatore: In terms of the demographic.

Sara Senatore: Trends I would say it was pretty steady there wasn't a big standout across the entire quarter.

Sara Senatore: Our over 55 cohorts performed similarly to our under 55 cohorts are over 60000, okay.

Sara Senatore: Over 60, K income cohort performed similarly to our under 60 I think the takeaway for us on the quarter is more about how the quarter developed.

Sara Senatore: And how the fourth quarter has started.

Sara Senatore: No I think that's right I think remember we said this is an investment year and this is a three year plan and it's not going to be a straight line. There is going to be some bumps along the way some of which you can anticipate some of which you can't I don't think anybody thought the macros will do what they did in February I don't think anybody thought the weather would be that as it was on top of that so.

Sara Senatore: Real pleased with how we have actually manage through this quarter given some of those real.

Sara Senatore: Many of the quarter.

Sara Senatore: And then to Craig's point I think Sara we continue to be very optimistic and confident in the long term trends that we're seeing underneath the business. So.

Sara Senatore: Q3 is a little bit of a speed bump and kind of whats been a good year for us so far in terms of changing those trends and then in the curves that we need to spend to keep this transformation on track to take the brand where it needs to go long term.

Sara Senatore: Thank you.

Speaker Change: And ladies and gentlemen, with that we will be concluding today's question and answer session I would like to turn the floor back over to Julie Masino for closing remarks.

Julie Masino: Thank you I wanted to start with a huge thank you to the teams in our 658 stores to bring the cracker barrel country hospitality to life every day for our guests.

Speaker Change: Executive team the board and I really appreciate your smiles and hard work and what was a difficult quarter.

Sara Senatore: And to everyone else on the call today. Thank you for joining US today. Our plan is working and we are excited about what's ahead. We appreciate your interest in the brand and we look forward to giving you our next update in September.

Sara Senatore: Yeah.

Sara Senatore: Ladies and gentlemen that does conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.