Cracker Barrel Old Country Store, Inc. Stock

Good day, and welcome to the Cracker Barrel Fiscal 2026 Fourth Quarter Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead.

Thank you. Welcome to Cracker Barrel's Fourth Quarter Fiscal 2026 Conference Call and Webcast. Earlier today, we issued a press release announcing our fourth quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the fourth quarter ended July 31, 2026. Please refer to the footnotes in our press release for further details about these metrics.

The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials.

On the call with me are Cracker Barrel's President and CEO, Dave Deno; and Senior Vice President and CFO, Craig Pommells. Dave and Craig will provide a review of the business, financials and outlook. We will then open up the call for questions. On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations.

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

I'll now turn the call over to Cracker Barrel's President and CEO, Dave Deno. Dave?

Good morning, everyone, and thank you for joining us. As many of you know, I stepped into the CEO role about 6 weeks ago. Having spent several decades working in the industry, I have long admired this iconic brand and been excited about the opportunity ahead of us. Given my brief tenure at the company, today's remarks will focus on early observations and priorities. Over the past few weeks, I've spent the vast majority of my time meeting with team members, visiting stores and speaking with our guests. I've also tried to get a deeper understanding of the brand, our current strategy and recent performance.

A few things are already very clear to me. First, Cracker Barrel is on the right track. Second, we are a highly differentiated brand with tremendous potential. Third, we have a passionate guest base among the most passionate I've seen. Fourth, our people are critical to our success. They are the foundation for our hospitality and the connection that guests feel to our brand.

We have 75,000 talented and dedicated employees who are committed to delivering exceptional guest experiences. They are energized by our momentum and are invested in the long-term success of Cracker Barrel.

Next, broadly speaking, the company is already focused on the right areas and has a strong plan as demonstrated by the continued improvements in performance over the last several quarters. We are working to refine and further strengthen our plan, particularly as it relates to our focus on food and guests. Finally, this company has been through a difficult stretch and has come out stronger. The team made hard calls, listened to guests and got the business back on offense. The results of the past couple of quarters speak for themselves.

A big part of my management philosophy is doing fewer things better and concentrating on opportunities that can have the greatest impact. For restaurants, the formula is pretty straightforward. You must offer great food, provide a guest -- great guest experience and hire and retain excellent employees who deliver both. So these are the priorities that we will be focused on: food, experience and people.

I'll now speak briefly about each area. Our first priority is food, more specifically enhancing our quality while making it more craveable. We are making investments to improve food quality. Dinner is our biggest opportunity, and we plan to upgrade our chicken, hamburger and steak offerings. We also want to ensure our great food meets guest expectations for taste, temperature and quality on every visit.

These changes are all about increasing guest satisfaction and not about taking out costs and the associated investments are embedded in our guidance. Although enhancing our dinner offerings is the priority from a daypart perspective, breakfast remains our strongest area in both food scores and traffic trends. Our menu work and marketing will capitalize on this strength even as we work to improve dinner.

Guest experience is our second priority. Operationally, the company has made impressive gains across the key metrics in recent quarters. This is thanks to the dedicated efforts of our teams in the stores as well as our store support center. In Q4, our Google Star rating increased 2% year-over-year and remained near an all-time high. Food taste and service scores increased nearly 400 basis points and food temperature scores improved 500 basis points compared to Q4 last year.

These results are very encouraging, and we are confident in our ability to improve hospitality even further. The retail shop is critically important to the Cracker Barrel brand. This has been one of the biggest and most pleasant surprises for me since I joined the company. The business is a real competitive advantage because we are the only full-service restaurant brand offering guests a true retail experience alongside their meal.

We will make the retail experience even better for our guests. From a product standpoint, we'll continue to offer unique quality assortments at a strong value. From a merchandising standpoint, we're introducing targeted enhancements to improve the shopping experience. This includes simplifying our product layouts, widening aisles and improving sight lines.

Another key part of the guest experience is our loyalty program, Cracker Barrel Rewards. The strength of the program is remarkable. We have over 12.5 million members that account for over 40% of tracked sales. This is a differentiator that we will continue to leverage. The team is continuing to improve our personalization capabilities, and we recently launched a new website and app to make the experience easier and more seamless for our guests.

Turning to our final priority, our people. Cracker Barrel has a special culture, and our team members are our greatest asset. Employee engagement and retention are critical to our plan. We continue to see favorable turnover trends. In Q4, hourly turnover improved 450 basis points and manager turnover improved 85 basis points compared to the prior year.

To sustain these gains and support strong execution, we will ensure our team members are equipped with the skills and training to be successful and highly effective. Additionally, we'll be enhancing our training and development programs and tools.

In closing, we have a strong and focused plan. We will accomplish our objectives by relentlessly executing against the priorities we have identified and doing fewer things much better. Most importantly, the entire organization is aligned against our objectives, investing in and improving our food, continuing to provide outstanding service and hospitality and creating a great work experience for our people. As a result of the strong execution of these priorities, we will meaningfully improve profitability and cash flow in fiscal '27 and set the business up for long-term success.

I'll now turn it over to Craig to review Q4 financials and the fiscal '27 outlook.

Thank you, Dave, and good morning, everyone. Before reviewing our results, I want to build on Dave's remarks and thank our teams. The business continues to gain traction as reflected in the improvement in our underlying traffic trend, key guest metrics and overall financial results. I'm proud of our team's work and excited about the opportunity ahead.

Now, turning to the fourth quarter results. Total revenue was $849.3 million. Restaurant revenue was $698.5 million. Comparable store restaurant sales decreased 2.1%, which included a traffic decline of 6.1%. As a reminder, in Q4, we were lapping a stronger quarter in the prior year, and there was significant variability in the prior year comparisons for Q3 and Q4. Controlling for this variability, we were pleased with the continued gradual improvement in the traffic trend and these top line results exceeded our expectations.

The restaurant average check increased 4.2%, including pricing of 4.4%. Menu mix was slightly negative, but we continue to benefit from menu initiatives, such as the option to upgrade to 3 sides. Off-premise sales were 19% of restaurant sales, an increase of approximately 100 basis points compared to the prior year, driven by growth in third-party delivery.

Retail revenue was $150.8 million. Comparable store retail sales increased 0.7%, driven by increases in the average unit selling price and units per transaction. This was partially offset by lower traffic. We were pleased with the performance of our retail business with this quarter representing the strongest retail comp sales growth since the second quarter of fiscal '23. We saw strength in the toys and housewares categories, and we also benefited from pulling forward our Halloween assortment.

Moving to profitability. We reported adjusted EBITDA of $62.1 million, which was up 11.4% versus the prior year. The current year adjusted EBITDA results include a $15 million tariff refund benefit, $5.9 million of which was reinvested in the business for a net tariff refund benefit of $9.1 million. Additionally, the adjusted EBITDA results include 2 offsetting $10 million legal settlements, one of which favorably impacts other operating expenses and another that unfavorably impacts G&A.

As noted in the press release, our adjusted EBITDA results exclude CEO transition costs, expenses related to the Maple Street divestiture and a gain from the sale-leaseback transaction. Please review the non-GAAP reconciliation tables in the press release for additional details.

Now, moving on to our fourth quarter expenses. Total cost of goods sold was 28.8% of total revenue versus 30.5% in the prior year. Restaurant cost of goods sold was 26% of restaurant sales versus 26.3% in the prior year. This 30 basis point decrease was primarily driven by menu pricing, partially offset by commodity inflation. Commodity inflation was 3.1%, driven principally by higher beef, produce and seafood prices, partially offset by lower egg and poultry prices.

Retail cost of goods sold was 41.6% of retail sales and includes a benefit of approximately $15 million from tariff refunds. Excluding the tariff refund impact, retail COGS were 51.6% of retail sales and increased 60 basis points compared to the prior year, primarily due to higher markdowns.

Quarter-end inventories were $163.9 million compared to $180.6 million in the prior year. This decrease was primarily driven by timing and retail clearance events to reduce aged inventory. Labor and related expenses were 37.5% of revenue compared to 36.5% in the prior year. This 100 basis point increase was primarily driven by the following: first, sales deleverage; second, the reversal of the prior year's kitchen labor initiative; and third, higher store bonuses.

Wage inflation was approximately 2%. Other operating expenses were 23.7% of revenue and include a $10 million benefit from a legal settlement related to antitrust litigation. Excluding this benefit, other operating expenses were 24.9% of revenue and approximately flat to the prior year as lower advertising expenses offset higher maintenance expenses.

Adjusted general and administrative expenses were 6.9% of revenue. This excludes approximately $6.7 million in CEO transition expenses, but includes an unfavorable $10 million legal expense. Backing out the legal expense, G&A was 5.7% of revenue and approximately flat to the prior year. Additionally, our GAAP financial results include the following items, which are excluded from adjusted EBITDA.

First, a $47.4 million net gain on sale of assets related to the sale-leaseback transaction; second, a $27 million noncash loss on sale related to the Maple Street divestiture; and third, a noncash impairment charge of $8.5 million related to the Maple Street divestiture and a noncash impairment charge of $13 million related to low-performing Cracker Barrel stores, three of which closed during the quarter.

Taking all of the above into account, adjusted EBITDA was $62.1 million or 7.3% of total revenue and increased 11.4% compared to the prior year's $55.7 million. These results exceeded our expectations and demonstrate our continued momentum.

Net interest expense was $3 million compared to $4.7 million in the prior year. This decrease was primarily the result of a lower debt balance. GAAP income taxes were a $2 million credit and adjusted income taxes were $1.1 million. GAAP earnings per diluted share were $0.54 and adjusted earnings per diluted share were $0.99.

Now, turning to capital allocation and the balance sheet. We continue to diligently manage the company's capital resources and are pleased with the progress we have made to further strengthen the balance sheet. The sale-leaseback transaction generated $77 million in net proceeds, which were used to pay down debt and partially offset the $150 million debt related to the 0.625% convertible senior notes that matured and was repaid in June.

The quarter ended with total debt of $337.2 million, which was $147.4 million below the prior year. The current debt is comprised entirely of the 1.75% convertible senior notes due in 2030, with the revolver balance undrawn at quarter end. We continue to have ample access to liquidity, ending the quarter with $541.3 million in available capacity. Capital expenditures in the fourth quarter were $27.4 million.

Turning to the outlook. We expect the following for fiscal '27. Total revenue of $3.325 billion to $3.4 billion. This assumes comparable store restaurant sales growth of approximately 3% to 5% with no new stores. Total pricing of approximately 3% with pricing highest in Q1 and dropping sequentially each quarter, commodity inflation of approximately 3% and hourly wage inflation of approximately 2.5% to 3%. Taking all of the above into account, we anticipate full year adjusted EBITDA between $180 million and $200 million.

When thinking about the quarterly cadence in fiscal '27, please keep in mind that the quarterly EBITDA distribution for fiscal '26 was unusual. The first half of fiscal '26 was meaningfully below the prior year, while the second half significantly improved and was largely in line with prior year.

Regarding taxes, on an adjusted basis, we anticipate a full year tax credit of $4 million to $8 million, which reflects routine employer tax credits such as the FICA tip credit. Finally, we expect capital expenditures to be between $110 million and $125 million, comprised of approximately 65% maintenance and 35% technology and other strategic initiatives. We are not opening any new units this year.

With that, I'll now turn the call over to the operator for Q&A.

[Operator Instructions] The first question today comes from Anthony Trainor with Wells Fargo.

So my first question for you, Dave, is you spent several weeks, kind of, in the business. What still needs to be fixed today? And as you -- as investors are comparing what's -- looking at what's changing in the strategy today? What more can you, kind of, elaborate on where it's moving?

Yes. Well, as I mentioned in my remarks, I mean, this is really a well-positioned iconic brand. And I think the company is very well positioned to move forward. So let me spend a minute or 2 just talking about what we can build on and some of those things I already mentioned.

So we have great strength at breakfast, a very strong value equation, a passionate guest base and talented employees. And I think one of our biggest opportunities is food, especially at dinner. And I talked in my prepared remarks about the steps we're doing to address it. We're going to be investing in food quality, and that's embedded in our guidance for the year.

We're going to absolutely remain a relentless focus on consistent execution, and we've made progress in hospitality over the past year. We want to make even more faster. And we want to ensure that our stores and our people are trained to give the hospitality that people expect from Cracker Barrel. So that's what I've been trying to do it since I've been here for the last 6 weeks or so. And when you look at the restaurant industry overall, that's what great restaurant companies do.

And then my second question, Craig. So the FY '27 EBITDA outlook implies $30 million to $50 million step-up in EBITDA. Can you bucket us out what's actually driving the -- bridge us what's actually driving the increase? And then with the restaurant comp guide of 3% to 5%, I see that price was going to be plus 3%, maybe that's, kind of, the lower end towards the historical range that we were expecting. How should we think about the price component of the outlook over the next several years?

Absolutely. Anthony, good question. The -- it is a robust increase in EBITDA year-over-year. There are a couple of things driving that. One is the underlying improvement traffic trend. Then building on that are a number of our initiatives, our -- one of those is menu mix, and initiatives that support that, that will drive increased menu margin outside of pricing. We also have a number of cost savings and efficiency initiatives that are -- initiatives that do not -- they're not takeaways in any way, shape or form from the guest. So that menu margin work is particularly important.

As it relates to pricing, we're essentially pricing on a percent basis to offset inflation. We've done a lot of work over the last couple of years on the strategic pricing initiative. That's a pretty sophisticated data-driven approach at a store level. That initiative has worked well. It is largely successfully completed. There is always more work to do with pricing as you optimize. But the big chunk of that was done and it was well received.

So as we go forward, there's always a little bit of pluses and minuses on strategic pricing, but a big chunk of that is behind us. We do think as we look to the future and we think about dinner and so on, there's opportunity in the menu mix component of the business that is a win-win for our customers and then obviously improving our margins as well.

The next question comes from Dennis Geiger with UBS.

I wanted to ask a little bit more about the same-store sales comp -- same-store sales guide for the full year. Helpful on the pricing dynamic, Craig. Anything on cadence through the year, sort of, how you started the year and how you're thinking about cadence of same-store sales through the year? And just anything more on, sort of, some of the biggest sales drivers and traffic drivers this year?

Yes. Dennis, it's a great question. In terms of cadence, our pricing is going to be at the highest level, 3% across the full year. It's at its highest early in the year, in the first quarter, and then it will, kind of, taper down as the year goes on. So sequentially, quarter-by-quarter, that number will tick down a bit.

Then in terms of drivers, what we have found in terms of menu mix, in particular, is that the -- there are a lot of things that we've been adding, for example, in shareables or appetizers where the take rate in those is really good. So we've been pleased with the work there. We've made some changes with sides as well and the option to use 3 sides instead of 2 sides, and that's gone over very well also.

Some of those initiatives are supporting that 3% to 5%. And then obviously, there is the underlying traffic trend improvement. Now that traffic trend improvement is multifaceted. There are a lot of operational components to that, and the team has done an outstanding job when we look at our operating metrics, they keep getting better, and Dave mentioned those as well.

Now as we think about the cadence in terms of EBITDA growth year-over-year for '27 versus '26, I would just keep in mind that the first half of '26 was particularly challenged in relation to '25 and the second half of '26 was much closer to '25. So I would just take that in consideration as you do your modeling.

Yes. If I could add -- thanks, Craig. If I could add a couple of things on the traffic drivers. First of all, I've been in the restaurant business for a long time. We've got 12.5 million loyalty members. That's amazing. That allows us to speak to our guests, market them in a certain way and clearly, it's a traffic-driving opportunity. Craig talked about the attach rates. And certainly, we'll get over time with our improvements in hospitality and food, we'll see traffic from that.

Then lastly, we have a very strong -- this has probably been the biggest surprise for me, a very strong and successful retail business. And the opportunity to merchandise between retail and our restaurants is very strong. And we -- and you look at their trends in the past quarter, it's been very good. And so there's an opportunity there to also drive traffic for the whole box. So those are the 4 or 5 different levers we have to drive traffic this year.

Very helpful. And if I could ask one more. Just a question about how you think about the opportunity for margins, obviously, as we look to this year, but even longer term. And maybe, Dave, it's a little bit early, but given your track record of finding efficiencies on the margin side of things and the margin opportunity presumably that exists here to get back to levels that the business was previously had. Any commentary right now on both the, kind of, short or medium term, but also the longer term at a high level as far as margin opportunity goes?

Yes, sure. Being a former CFO and CEO in the business, what I learned over the years is you pursue margin opportunities and the stuff that guests does not see. So in other words, margin is not about taking cost of food out. It's not about taking labor out, et cetera. It's about our store support centers being stronger and stronger and stronger and investing in technology. And I have to say, I've been pleasantly surprised by the level of our technology and expertise we have here and the progress we've made in technology. That's a big help to us as we go forward.

On the overall box, it's all about traffic and improving our menu mix as we think about our menu and merchandising. So we have great food. We want to invest in it more and make it even more craveable. We want -- we've seen opportunities in mix. People are attaching sides to a greater level than we thought.

We just did a strong dessert promotion that has worked really well. That's -- it's obvious. Our customers and our guests crave our desserts. So there's attachment opportunity, there's menu mix opportunity and there's traffic opportunity. And that's how we're going to build margin in the box and then look at cost outside the restaurant for productivity.

The next question comes from Sara Senatore with Bank of America.

This is [ Aisling ] on for Sara. Congrats on the results. My question is just on free cash flow priorities. After CapEx and any remaining transition or Maple Street cash costs, how are you thinking about 2027 free cash flows, specifically shareholder returns? Is debt reduction the priority? Or has, kind of, the lower leverage position changed the relative attractiveness of buybacks?

Yes. No, I -- thank you for the compliment of our results, by the way. I appreciate it. First and foremost, the balance sheet that the company has is in great shape. And like I said, I can speak to that as a former CFO as well. And we're very fortunate to be in this position. The team has done a great job strengthening over the past year given some of the headwinds.

And for us, this puts, sort of, opportunity to allocate capital in a very broad way, and it's something we discuss regularly. We're going to pursue a balanced capital allocation strategy. We're going to continue to prioritize organic growth. So opportunities come up, if we have more of a chance to invest in some of our stores, if we have a chance to push a little harder on food, et cetera, we're going to be using some of the free cash flow for that because it's going to grow sales and grow traffic.

But past that, we're going to remain -- retain a conservative balance sheet. So we're going to look at -- as we work with our Board, we're going to discuss our dividend policy and future repurchases. This is something we talk about regularly with our Board. And as you noticed today, we announced our regular quarterly dividend. So the good news is with these results and this forecast, there's ample free cash flow to go forward with this business, and it's a very, very big step in the right direction.

Great. My other question is just on marketing in 2027. How are you thinking about marketing expense following the slight step down in the second half of this year? Does your outlook assume spending remains near the recent run rate? Or is there any kind of reinvestment around traffic?

Yes, a couple of things. And I'll turn it over to Craig in a second to talk about some of the financials. But what's really progressed in the industry is the chance to do marketing in so many different ways in so many different channels. And our team is all over that, especially through social media and through other technology opportunities and things like that. That is, for us, a mechanism that we have to really think through how we're going to spend our money. And I'm very pleased with what I've seen so far. And for the financial side of it, I'll turn it over to Craig.

Yes. Just for a little bit of context in terms of our marketing spend. Our longer-term marketing spend was in the, kind of, upper 2% range. In fiscal '25 and the first half of '26, we increased that a bit. And then in the second half of '26, we reduced our marketing spend, our advertising spend down to about 3% of sales. So that is actually closer to our long-term run rate.

As we think about '27, our initial point of view on this is we'll be in that roughly 3% range. Now keep in mind, that 3% is in addition to all of this capability that we have with our loyalty program, and that now represents over 40% of sales. But beyond all of that, we're continuing to test and learn. And if we find an approach that requires more spending and we can drive profitable guest growth with that approach, we'll happily do it. It's not a philosophical issue. In terms of our marketing spend, we're just trying to have the optimal level. We feel comfortable at 3%, where we're willing to do more, and we also have the benefit of the loyalty program as well.

The next question comes from Jeff Farmer with Gordon Haskett.

And definitely welcome back, Dave. Good to have you back in the fold. A couple of questions for you guys. So really, the high-level assumptions about the consumer backdrop that are captured in your guidance, how are you guys thinking about what's going on out there in terms of, sort of, a bigger backdrop knowing that both the lower income consumer and some of the younger age demo consumers are, sort of, not spending as much. So I'm just curious how you guys are thinking about the broader consumer backdrop in casual dining.

Jeff, first, thank you for the welcome. I really appreciate it, and I admired your work over the years. So it's good to be back. So the state of the consumer, as we all know, the macroeconomic environment remains mixed. But having said that, if you look at the industry, casual dining sales have held up pretty well. And I think there are people in this industry doing really well, and we want to be one of them. And I think our trends, as you saw, are getting stronger and stronger.

When it comes to us specifically, yes, we do see some pressure with our low-income guests. But our trends, as I said, have gotten better. And our current trends that we're seeing is embedded in Craig's guidance for the year. We don't give quarter-to-date updates and things, but I think our current trends are embedded in what Craig is talking about.

And finally, to make sure that we continue to keep our trends going and improve our trends, our priority is going to be on food, experience and people and what matter most in regardless of the backdrop. That's how restaurant companies win.

And related to your -- the second part of your question, Jeff, in terms of the cohorts of guests, we are continuing to see some softness with the lower income cohort, and we're seeing relative strength at the higher income. So I think a lot of folks have reported that and that's the relationship that we see. And then in terms of how we maneuver in that environment, I believe -- I think we believe that Cracker Barrel value equation is really outstanding. We've got a check average that's in the $16 range, and that compares to casual dining, that's $27 versus our $16 and family dine-in, that's $20 again, versus our $16. And I think even if you break that apart and you look at dinner, our dinner check average is still in the low $16. So I think that positions us well in that regard.

Then beyond that, we have a -- some special pricing constructs with really sharp starting price points. For example, we have our Sunrise Pancake Special that's every day at $7.99. It's a great deal. We have Early Dine Monday through Friday that starts at $8.99. And then we also have, again, the loyalty program, and we have lunch specials. So there are a lot of ways that if you're feeling pressured from an income perspective -- discretionary income perspective, there are a lot of ways you can still have a great experience at Cracker Barrel.

Okay. And then just as a follow-up really for both of you, a lot of moving pieces. But as, sort of, the business continues to, sort of, get set and your -- get reset, I should say, and as you move forward into '27 and '28, how are you thinking about a potential framework for, let's just call it, a longer-term algorithm? So the same-store sales unit growth, cash return to shareholders. Do you envision this, sort of, returning -- the business returning to low single-digit unit growth? Cash return to shareholders, obviously, has come down as you guys have cleaned up the balance sheet, but that could theoretically go back up with free cash flow holds on. So I'm just curious your early thoughts from both of you guys on a longer-term algorithm as you move forward.

Yes, Jeff. First of all, not to dodge the question, but I've been here 6 weeks. So maybe give me a little more time to get my arms around that. You know the business well. You know what we can do. We should be able to have strong, maintain sales growth, earnings growth, cash flow, return cash to shareholders, run a strong balance sheet. All that is certainly possible here, and we would like to return to unit growth. So -- and invest in our stores.

That's all part of the equation here, Jeff. But it's a little early for me to say this much in sales, this much in pricing, this much in margin, et cetera. But, no, top of mind for us is to improve those key metrics. Same-store sales, revenue growth, cash flow, margin, traffic, capital allocation, returning cash to shareholders, that is all certainly part of the equation. More to follow though.

[Operator Instructions] The next question comes from Jon Tower with Citi.

This is Karen Holthouse on for Jon. I wanted to ask about freight prices on the retail side of the business. And what are you starting to see or expecting to see in terms of fuel surcharges and how you're thinking about absorbing that versus passing it on?

Karen, it's Craig. Yes, we are seeing fuel surcharges and so on related to freight, both from the perspective of retail and to a lesser degree on the restaurant side. All of that's built into our projection with the best information that we have today. So it goes into the overall pricing algorithm and overall margin structure that we've got planned in.

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

Yes. Thank you, everybody, for your interest today. As I mentioned before, I'm very pleased to be part of this company and have the opportunity. We have a terrific brand, well positioned, and I think we're going to be very strong going forward. We've got -- the reason why we've got a good foundation. This is a very, very, very differentiated brand I mentioned, and it's engaged and has committed employees and passionate guests. We're working on the right areas as demonstrated by the continued improvement in our performance.

In closing, our results wouldn't be possible without the hard work of our employees. I want to thank them for their passion, dedication and commitment, which gives each of them give me high confidence -- which gives me high confidence in the path ahead and the time ahead. Going forward, our priorities will be to lean even more into food, experience and people. And we're very optimistic about the future of Cracker Barrel and look forward to talking about more in the coming months. Thank you.

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

Good day, and welcome to the Cracker Barrel Fiscal 2026 Third Quarter Conference Call. [Operator Instructions].

Please note, this event is being recorded. I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Cracker Barrel's Third Quarter Fiscal 2026 Conference Call and Webcast. This afternoon, 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 1, 2026. Please refer to the footnotes in our press release for further details about these metrics.

The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last page of the press release include reconciliations from the non-GAAP information to the GAAP financials.

On the call with me are Cracker Barrel's President and CEO, Julie Masino; and Senior Vice President and CFO, Craig Pommells. Julie and Craig will provide a review of the business, financials and outlook. We will then open up the call for questions.

On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations. 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, and the company undertakes no obligation to update it, except as may be required under applicable law.

I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino, Julie?

Good afternoon, and thank you for joining us. Q3 results exceeded our expectations. Sales were $797 million and adjusted EBITDA came in at $40 million. This performance was driven by strong cost management across the P&L as well as improved traffic and check. Our dedicated teams have positioned us for success and they continue to execute at a high level. They are key to implementing our strategic initiatives, which are grouped into 3 areas: improved operations, deeper connections with guests through our menu, marketing and value proposition and increased profitability. I'll now discuss each one.

First, operationally, we remain focused on consistent execution and delivering an exceptional guest experience. This resulted in strong improvements across important guest metrics for the third consecutive quarter. Year-over-year, our Google star rating increased 4%, reaching its highest quarterly score since 2018. While our food taste and service scores rose 5% and food temperature scores increased 7%.

Managerial turnover improved by 6%, outperforming the industry and we continue to see positive trends in hourly turnover. We are pleased with the favorable trends in these metrics, which are important leading indicators and are confident these gains will translate into improved traffic over time.

Turning to our menu. Our multipronged strategy combines bringing back guest favorites, introducing new offerings, enhancing quality and leaning into value. We are incorporating these elements into each of our seasonal menus in an effort to improve guest satisfaction and drive traffic. Our spring menu featured the return of our Sugar Cured and Country Ham dinners to the core menu and our very popular Carrot Cake as an LTO.

We also introduced our [ Garden and Farm Health Scrambles ] to address a menu gap and respond to a long-standing guest request. Additionally, our spring menu featured our new Smoky Southern Salmon, which provided a more premium, lighter fish option. Our summer menu is centered on our Campfire promotion. As a reminder, last year marked the return of the Campfire platform, one of our strongest nostalgia anchors and a clear celebration of Americana, travel and gathering. This year, we made enhancements to our Campfire chicken and beef offerings to improve flavor and consistency.

We also extended the platform into the morning daypart with a new Campfire Breakfast Skillet. This [ hearty ] meal consists of bacon, smoked sausage, roasted peppers, onions and cheese, served over 3 eggs with crispy Campfire [ season ] to potatoes.

Value is incredibly important in today's environment. For Cracker Barrel, it's not a response to the moment. It's part of who we are, delivering meaningful abundance and everyday value for our guests. Our value remains strong as evidenced by the fact that our Q3 value scores increased 5% year-over-year. There are a number of reasons we are confident that our proposition will continue to resonate.

First, our absolute check remains well below the industry. In Q3, our average check was $15.85 and compared to over $27 in casual dining and over $19 in family dining, underscoring our lower prices versus competitors. In fact, guests can order add-ons with us and their check will still be lower than an entree at many of our peers. In addition to lower relative prices, our overall value proposition is strengthened by the high-quality ingredients, delicious food and genuine hospitality we are known for.

Second, we've maintained a strong everyday foundation, further enhanced through our barbell pricing strategy that includes compelling entree price points, such as our Sunrise Pancake special for $7.99 and early dinner deals starting at $8.99.

Third, we've implemented targeted menu changes to reinforce our value proposition and expand guest choice while also building margin. This includes bundled shareable duos and trios as well as options for guests to upgrade to 3 sides or add an extra breakfast protein to select entrees for a modest surcharge.

Transitioning to loyalty. Cracker Barrel Rewards remains a meaningful traffic and value driver for the business. The program has grown to nearly 12 million members with continued strong engagement. In Q3, member tracked sales remained above 40%. We saw strong retention among our most valuable loyalty guests that was consistent with historical norms. Overall, loyalty member visits increased year-over-year, reinforcing the program's role as an important traffic tailwind.

Beyond points and rewards, we are using the loyalty platform to create more meaningful reasons for guests to engage with the brand. A good example of this is our Fuel Your Summer Road Trip sweepstakes. As part of the sweepstakes, which launched May 19 and will run through July 26, loyalty members who purchased an entree will have a chance to win Cracker Barrel and fuel gift cards. Each week, 25 winners will receive a $500 Cracker Barrel gift card and a $500 gas card with $250,000 in total prices awarded. These loyalty exclusive engagement opportunities are expected to support member acquisition and encourage repeat visits while reinforcing Cracker Barrel's role as a trusted destination for gathering, comfort and hospitality during the summer travel season.

From a marketing perspective, our guest connection strategy remains centered on food, value and Cracker Barrel's distinct heritage. We continue to leverage key partnerships and cultural moments to deepen emotional connection, expand reach and drive visitation. For example, our partnership with Speedway Motorsports continues to be an important platform and we're using it along with our broader summer marketing efforts to generate excitement around Campfire and drive traffic.

Building on last year's successful partnership, we've expanded this year's program through broader national awareness, deeper local store engagement in key race markets and enhanced on-site activations across the season. This year, Cracker Barrel Fan Zones will be present at every Speedway Motorsports race, giving us a larger physical presence with fans and extending the brand beyond the track itself. We were especially proud to have once again served as the title sponsor of the Cracker Barrel 400. This year's sold-out [ rate ] on May 31 was action taxed and included 31 [ lead ] changes among 15 different drivers with Denny Hamlin ultimately winning in an exciting finish.

Moving to retail. This business continues to gain momentum under the leadership of Heather Hager, who joined us in September 2024 and was promoted as Senior Vice President this past February. We are pleased with the improvement in our retail performance and are seeing good results from key initiatives such as SKU rationalization, optimized markdowns and improved merchandising.

In fact, retail comps outperformed restaurant comps for the first time in over 4 years. Additionally, we saw year-over-year improvements in important metrics such as units per transaction and average unit retail. Most importantly, our product is resonating with our guests. I'll provide a few examples.

First, the toys category has been a particular strength, in part, because we successfully capitalized on social media-driven trends related to sensory play and fidget toys.

Second, our salt and pepper shakers remain a hit. These unique collectibles are an incredible value as well as a great expression of the brand.

And third, our American heritage team remains a beloved summer assortment, full of merchandise proudly celebrating America and patriotism. This year, we're featuring merchandise commemorating America's 250th birthday and the guest response has been strong.

Our last strategic initiative is improving profitability. Our teams from the operators at our stores to team members at the support center, done an outstanding job of managing costs. As a reminder, we executed a corporate restructuring completed in Q2 that is expected to deliver $20 million to $25 million in annualized G&A savings. We also reduced our advertising expense in the second half of the year compared to the prior year. Collectively, these efforts and cost saving actions were a significant driver of our Q3 adjusted EBITDA results, and we will continue to diligently manage our expenses going forward.

As our team continues to execute our strategic initiatives to improve operations, make deeper connections with guests and increased profitability, we are also taking other steps to advance the business and position us for the future, particularly through the use of technology. I'll provide a couple of examples.

First, in the coming weeks, we are upgrading our website to create a more frictionless and intuitive digital journey. The new platform will better support online ordering, rewards and targeted content. Importantly, this also serves as the foundation for expanding personalization across more channels over time, allowing us to deliver more effective messaging and reasons to visit wherever guests are engaging with Cracker Barrel. We're excited about these enhancements, which will improve the guest experience while simultaneously driving our off-premise business, which, as a reminder, accounts for approximately 20% of restaurant sales.

Second, we're using AI across the company to enhance our team's capabilities and to support the guest experience. We've deployed enterprise-wide tools, built foundational data infrastructure and established governance to ensure responsible use in scaling.

In building these capabilities, we're also investing in our people, upskilling teams and ensuring leadership adoption. We are leveraging AI as a force multiplier that allows us to be more productive while making our team's jobs more efficient.

For example, our machine learning traffic forecasting model has improved our projection accuracy, which supports better labor deployment and execution. Additionally, we are using AI and guest relations to more efficiently resolve tickets and where appropriate, to more quickly connect guests with live support.

Finally, as part of our focus on the guest experience, we developed an internal agent that can quickly mine data across all guest feedback channels and provide actionable insights.

In closing, we are executing at a high level and gaining traction across the business, as evidenced by our Q3 results. We are focused on sustaining this momentum over the coming quarters.

I'll now turn it over to Craig to walk through the financials.

Thank you, Julie, and good afternoon, everyone. Before reviewing the results, I'd like to build on Julie's remarks and thank our teams. I'm proud of their work and their progress as reflected in the improvements in our key guest metrics, expense management and overall financial results.

Now turning to the third quarter's results. Total revenue was $797.4 million. Restaurant revenue was [ $668.4 million ]. Comparable store restaurant sales decreased 2.6%, which included a traffic decline of 6.7%. Although traffic remained negative, we are encouraged by the gradual improvement in the underlying traffic trend.

The restaurant average check increased 4.3% and including pricing of 4.4%. Menu mix was slightly negative but improved from the first half of the year, driven by the many changes Julie mentioned. Off-premise sales were 19.6% of restaurant sales, an increase of approximately 50 basis points compared to the prior year, driven by growth in [ catering ] and third-party delivery. Retail revenue was $139 million. Comparable store retail sales decreased [ 1.8% ], driven by lower traffic, partially offset by increases in average unit retail and units per transaction.

Turning to the quarterly expenses. Total cost of goods sold in the quarter was 30.2% of total revenue versus 30.1% in the prior year. Restaurant cost of goods sold was 26.1% of restaurant sales versus 26.2% in the prior year. This 10 basis point decrease was primarily driven by menu pricing, partially offset by commodity inflation. Commodity inflation was approximately 2.5%, driven principally by higher beef, pork, [ produce ] and seafood prices, partially offset by lower egg and dairy prices.

Retail cost of goods sold was 49.8% of retail sales versus 48.9% in the prior year. This 90 basis point increase was primarily driven by higher tariffs partially offset by pricing. Quarter-end inventories were $179.9 million compared to $168.7 million in the prior year. Although inventories are modestly higher, we are comfortable with the level and believe we are well positioned with clean inventories.

Labor and related expenses were 37.9% of revenue compared to 37.1% in the prior year. This 80 basis point increase was primarily driven by sales deleverage. Wage inflation was approximately 2%. Other operating expenses were 24.9% of revenue compared to 25.3% in the prior year. This 40 basis point decrease was primarily driven by lower advertising expense and lower supplies expense, partially offset by higher utilities expense.

General and administrative expenses were 6.2% of revenue compared to 5.6% in the prior year. This 60 basis point increase was primarily driven by the following items, which totaled approximately $6.8 million. First, $2.9 million in higher incentive compensation expense, driven by a year-to-date true-up based on higher expectations for the year. Second, $2.8 million in higher professional fees driven by [ legal ] expenses. And third, $1.1 million in employee separation costs.

During the quarter, we received $47.4 million in cash proceeds from a settlement agreement resolve an interchange fee litigation. This amount was recorded in the litigation settlement income line on the P&L. It is included in our GAAP results but excluded from the calculation of reported adjusted EBITDA to enhance comparability across periods.

Net interest expense was $3.7 million compared to $5 million in the prior year. This decrease was primarily the result of a lower revolver balance and a higher convertible debt balance. GAAP income taxes were $7.7 million, including the tax impact of the interchange fee litigation income.

Adjusted income taxes were a $3.5 million credit. GAAP earnings per diluted share were $1.90 and adjusted earnings per diluted share were $0.29. Adjusted EBITDA was $40.3 million or 5.1% of total revenue compared to $48.1 million or 5.9% of total revenue in the prior year.

In summary, Q3 results exceeded our expectations, driven by our operating and cost actions, while guest-facing metrics continue to improve, and position us for further traffic recovery.

Now turning to capital allocation and the balance sheet. We continue to diligently manage the company's capital resources. Capital expenditures are lower relative to recent years. Investments remain focused on core business operations while maintaining modest debt levels. The $47.4 million litigation settlement further bolstered the balance sheet, and we continue to have ample access to liquidity, ending the quarter with $541.3 million in available capacity.

The quarter ended with $486.6 million in debt, which was approximately $3 million below the prior year. The current debt is comprised entirely of the 2 convertible debt notes with the revolver undrawn at quarter end. As a result, the consolidated senior debt to adjusted EBITDA ratio was 0. The consolidated total debt leverage ratio was [ 2.4 ] including the $47.4 million litigation settlement. Capital expenditures in the third quarter were $27.1 million.

Turning to the fiscal '26 outlook. I want to remind everyone that in Q4, we are [ lapping ] a stronger quarter in the prior year, and this more difficult comparison impacts our year-over-year expected comp store traffic and sales results. That said, controlling for the variability between last year's third and fourth quarters and the resulting comparison in the current year, the underlying traffic trend continues to show gradual improvement.

Regarding tariff refunds, we filed a claim for approximately $17 million. To date, we have received approximately $5 million, all of which was received in Q4. We expect to reinvest nearly all of this during the quarter. I want to point out that our guidance does not contemplate any additional refunds, given the uncertainty regarding the remaining amount applied for, but not yet received.

Now moving to the guidance. As outlined in the press release, we anticipate the following for fiscal 2026. Total revenue of $3.27 billion to $3.3 billion. Pricing in the low 4% range, commodity inflation in the low 2% range. Hourly wage inflation in the low 2% range. Taking all the above into account, we are increasing our full year adjusted EBITDA guidance to between $120 million and $125 million. Finally, capital expenditures are expected to be between $105 million and $115 million, the majority of which relates to maintenance.

I'll now turn it over to the operator for Q&A.

[Operator Instructions]. The first question comes from Todd Brooks with the Benchmark Company.

Congrats on a really strong quarter, well done. I was wondering if we could talk, the full year guidance for revenue, Q3 beat by about $20 million, you're raising the ranges on revenue guidance by $30 million, which implies a guide up to expectations for Q4. Can you walk through what's giving you the confidence? You just talked about tougher comparisons year-over-year. And I didn't hear anything in the comments to date around higher prices at the pump. And reliance on summer driving season and travel by car. So if we could kind of weave all that together into a commentary about why the constructive nature to the Q4 guide?

Todd, thank you. Sure. You did cover a lot there with that question. Well, number one, we're obviously pleased with the improving trend that we saw in the third quarter, underpinning all of that is this kind of gradual improvement in the underlying traffic trend.

As you noted, Q4 does have a more challenging comparison relative to the prior year than did Q3, Q4 last year was one of the best fourth quarters we had in a while. But again, the underlying trend is improving. And at this point, we are over a month into the quarter.

In terms of gas prices, gas prices are obviously an input into discretionary income, discretionary income is important as it relates to the restaurant industry, and it does impact us as well. So that is potentially a bit of a headwind. But again, for us, we're continuing to execute really well. We're continuing to get better and better. And as a result of that, again, we're seeing that improvement in the underlying trend. So we're feeling good about that.

There's clearly -- I think implied in your question, there is a little bit of what's going on with the consumer and the pressure with the consumer. And certainly, we've all read about that. We're seeing that as well, particularly with the lower income consumer. But again, as Julie mentioned, if you think about our check average [ 15.85 ] relative to casual dining at [ 27 ], family dine-in at [ 19 ], we are a really good value. And then we also have the barbell pricing strategy as it relates to really sharp entree price points and then some more premium offerings as well. So underpinning Q4, it is a tougher comparison. But again, we do have that gradual improvement trend that's supporting it as well.

That's great. Craig. And my follow-up, you talked about pressured consumer, especially as we get down the income scale. The retail performance, though, was dynamic in this past quarter. And I guess, the thought would be that people could preserve the visit to the restaurant, but maybe you don't attach retail in the same fashion.

Julie, you highlighted a couple of categories that are working really well. But overall, are you surprised by the sturdiness that you're seeing in the retail business, given where the consumer is? And as you look forward, as we start to get holiday on the radar here. Any changes in kind of the SKU [ rat ] or anything like that, that we should be thinking about as we get to the holiday season?

Yes. Thanks, Todd. And I appreciate the question because we were really, really proud of the performance in this quarter and especially the restaurant teams are working so hard, but so are the retail teams. We have a new leader in retail. I think I've chatted with you about her before. I'm so proud of Heather Hager. She joined Cracker Barrel in 2024 and was promoted to Senior Vice President of Retail just this past February. She's got a really, really broad background across retail and hospitality and all facets of that, including retail design, brand and customer experience, strategy, finance, and I'm pleased with the way she's really leading the business and the teams and the work that they're doing there.

So as mentioned, the call, retail comps outperformed our restaurant comps for the first time in over 4 years. And the increases were in the units per transaction and the average unit retail. And to your point, I think there's a few things going on there. One, the initiatives around SKU rationalization. The optimized markdown strategy that Heather and the team have really been working hard on is really driving a lot for us as well. And the improved merchandising. They're working on bringing site lines down, widening aisles. They've been running a lot of tests all year, and a lot of those are coming together now, and you'll see some of those move into next year for us. They're gaining traction, and it's really working.

So I've talked about the updated retail strategy in the past. There's more to come there, but they're really doing a nice job around all of this. In addition to all of that, remember, they also mitigated a bunch of tariffs, right? We had [ $17 million ] worth of tariff impacts in this last year. So they did a great job around that.

And then I think finally, the most important thing, truly, right? I mean, obviously, the hard work and how you manage the business, and buy the business and merchandise it is important, [ but you got ] to have the right stuff. And the team has done a really wonderful job of making sure that we have product that resonates with guests.

I called out a few on the call as well, but in particular, toys have been a bright spot for us. Toys in general, have done well in the industry. But our team has done a really nice job focusing in on sensory play, fidget toys. I mean we've had runs on [ needle ] like it's a great category for us. They've done a wonderful job there.

And then the other thing you'll see a lot in our social media is our collectible salt and pepper shakers. They are such a hit in what a great sort of brand expression. We're able to play [ up ] on things from our legacy, things that -- stories that we want to tell, things that are uniquely Cracker Barrel. And they're just fun, and they're very affordable. So when you think about a pressured consumer and wanting to have a little retail therapy at a very affordable price [ dosed ] at the bill.

And then finally, right now, our front and center theme in stores is the American Heritage team, and this has been a beloved part of our summer assortment for years now. The team really worked to hone that assortment given it's the 250th anniversary of the signing of the Declaration of Independence this summer, this merchandise is selling out so fast for us. It's been so popular that actually we had to pull Halloween up because we've been running out of this American Heritage product. So Halloween actually hit the floor for us, [ this ] past week, and that's actually off to a great start as well.

So thanks for the question. Really proud of the team and all the hard work that they're doing there. But honestly, I'll take this opportunity to really just thank the entire Cracker Barrel because everyone has worked so hard this last quarter. Our teams in the stores, the team at the support center and everyone is working really, really hard to effectuate the change that we're seeing in the results.

The next question comes from Jeff Farmer with Gordon Haskett.

You guys did touch on it, but the middle of the EBITDA guidance range increased by more than 30%, which was a very big number. So I'm just curious if you can provide just a little bit more color on the nature of that, greater-than-expected flow-through you're seeing on the EBITDA line?

Sure. Jeff, it's Craig. Good to be talking to you again. I think that we really -- the teams did a really good job in the quarter, and that's continuing into the fourth quarter as well. We were a little bit higher on our comp store performance, again, referencing that kind of gradual improvement. So that drove the top line to be a little bit stronger. So traffic was a bit favorable.

We also did a lot of work on menu mix, in particular, with add-ons. We've made some changes to our site strategy as well as our Barrel Bites or appetizers and that paid off well. We've got -- the operations team was really humming as well during the quarter. So we had a really good performance with food [ waste ] as well.

So all of the pieces, all of the work that the team has been doing over the past few months and we've been planning for it and purposeful. That just came together really well from a cost perspective. And as importantly, if not even more importantly, it also translated into the guest experience, which also improved a lot. So it's a function of team coming together, putting together a good plan and executing the plan. And it just -- on a number of [ fronts ], the plan was a little bit on the higher end of our expectations, and that drove the improvement that we saw in the quarter relative to our expectations. And it also, we expect will continue to contribute to that gradual improvement that we have laid out for the fourth quarter.

Okay. A lot -- [ you ] saw there. I'll process that. But actually, just my follow-up on that. So as it relates to cost control relative to everything you just sort of highlighted. How big a role has cost control played in driving that EBITDA revision, the upward revision to EBITDA on the cost control front?

Yes. It was significant -- and in this case, the cost control actually starts with -- actually, I'm going to go all the way back. It's cost control but even start the sales level. So thinking about Check and thinking about add-ons, and what the marketing team has done there to really enhance our add-ons. We've also updated the way that we discounted during the quarter. So we made a lot of improvements in Q3 with our discounts in relation to where we were in Q1 and Q2, really driven by the market in Oregon and executed by the operations org.

And then as I mentioned, a number of cost benefits there in terms of in terms of waste, in terms of labor, in terms of supplies. So it's all of it, all of those pieces coming together that some of them -- a lot of cost controls, but also things that drove the top line in the form of check and improving our check performance as well during the quarter.

There's no doubt, Jeff. We are operating better in our stores, right? All the metrics that I shared, the consumer-facing metrics in terms of Google Star rating our quality scores, our value scores on food take scores, the service scores are better. The teams are just really focused. Again, I'm really proud of everybody's hard work and under Dos leadership, they're very focused on taking care of the guests but also making sure that they're doing things properly, and that's improving waste. That's improving the scheduling. All of those things are coming together, really, really nicely. So it's just some real hard work and attention to detail by the teams on all the fronts.

[Operator Instructions]. The next question comes from Jon Tower with Citi.

Appreciate it. Maybe just starting in terms of the guest complexion, obviously, it looks like you're focusing a little bit more on fan favorites of the past and bringing those back and then innovating around them. I'm just curious if you could share some color on the guess that you're drawing in during this quarter relative to past, are they older, younger, the income levels, it sounds like you're still seeing some pressure on the lower income cohort, but any color you can provide around that would be great.

Jon, it's Julie. Thanks for the question. Obviously, it's Julie. Frank hasn't done anything like me, sorry. I'll start, and then I'll have Craig jump in a little bit on some of the finer points. So let me take you back because this time last year, John, we had actually brought new guests into the business. And we were really excited about the work and proud of that work. around Campfire, around the Cracker Barrel 400 and how the marketing. The full marketing funnel really came together around that.

If you remember, Q1 and Q2, we lost a lot of those new guests. And we've turned very, very intentionally to our core guests to our loyalty members and make sure that we really retained them and brought them back as we were pulling ourselves out of the Q1 situation. So we have been very, very focused on that. The teams have done a great job in the high-value loyalty guests, making sure that they're back in, making sure that we're growing loyalty as a percent of tracked sales and making sure that our guests know that we're still the Cracker Barrel that they know and love and that we're operating even better for them. The food is even more delicious. It's made the way that they remember and the service is going to be out of this world. So that is really what the teams are doing every single day, and we're very, very focused on that.

In that, I'll let Craig give you the numbers around it. But we are -- we've been pressured, as you mentioned, on the lower income, but we're seeing some growth in the upper income guests which has been nice to see. Across the demographics, it's been pretty consistent. There hasn't been a lot of newness or people coming in differently there. But we are pleased with the progress that we've been making, most intentionally around holding on to our core guests. And we've got lots of stuff to share with you as we go into next year around how we're moving that forward.

Yes. I would just really reinforce that. From an age perspective, again, relatively consistent across the different age cohorts, not a big difference there. In terms of income, as we mentioned, better performance at the higher end of the spectrum and pretty linear performance as income goes down. And this really was the quarter of the core guests kind of bringing back our legacy guests, particular guests that are part of the loyalty program, and that really was a big driver for us this quarter.

Got it. And maybe going to the marketing side of the equation, I know that as of last call, you were talking about marketing spend in the back half of the year being down $13 million to $17 million Curious how you're thinking about that shaping up for next year. Are you contemplating kind of a reset back to previous levels? Or are you comfortable with kind of the run rate that you're at, at the moment?

Yes. We'll touch on the marketing spend on the next call. Clearly, in the second half of the year, we adjusted down -- it was -- we were down about $7 million versus prior year and Q3 will be down roughly $7 million in Q4 versus prior year. That puts us in a range that's kind of over longer-term advertising as a percent of sales, what we've done over the very long term.

Now we want to continue to test and learn and to the degree that there is a compelling business case to spend more we will do that. But for right now, given where we are and the P&L objectives that we had we were pretty effective with the level that we executed in Q3 and that we've got planned for Q4. And as we move into next year, we're going to use the data that we have, the best we're able to and combine that with some test and learn and if that data says, we should stay where we are, we'll do that. And if it says we should do more, we'll do that.

Yes. And I think what I would add to that, John, is the teams are really -- what you're seeing in the performance in Q3 is the team is really, really getting scrappy getting focused on maximizing every single penny that we have and that marketing is another place where the team has done a really nice job of that. So it's not simply about reducing dollars. It's examining that entire funnel. The team's gone back through and said, okay, we're focused on retaining our guests, where do we find them? How do we go after them? We've created look-a-like audiences for all of them last year. If you remember, I've talked about the work that there and the team did to really relook at all of the audiences, relook at all of the media.

And last Q4 was the first time that we had, had that sort of new funnel and those new audiences. And then given everything that happened in Q1 and Q2, we went back and reexamined all of that. So any -- so they went in and did that. I think the last thing I would add into that is the work that we're doing around the CB 400 has also been really exciting. We've actually doubled down there even more to show up across all of the races with Speedway Motorsports this summer and really write the value proposition to life. It gives us a chance to get outside of the stores. in real, authentic ways, connect with people, share campfire with them.

So we're looking across all pieces of the funnel, not just like your traditional media and your digital and all of the social and all those things. But the activations that we're able to pull together this summer have been really phenomenal in our partnership with them.

And maybe 1 more lever there, John, as well, is just the loyalty program. And we've got 12 million members and -- it's just a lot more efficient for us to efficient and effective for us to talk to them directly. And as that population has grown and continues to grow, it gives us another way to communicate with guests, and they get a little bit more out of that in terms of earning pegs and redeeming pegs and they'd love to do that in retail. And for us, it's more cost effective.

Yes. I think I'll just build on that 1 because that's an excellent point, Craig. I think that's what you posed to me, and I missed it. Is -- this summer, we also launched on a new promo for our loyalty members as a way to drive both activations and excitement for them. And frankly, given the macros that everybody asks us about and that we know all the consumers are experiencing out there really let our guests know that we've got them, right? So we launched food and fuel and we call it, food and fuel internally, but it's the Fuel Your Summer Road Trip sweepstakes. And this is an example of really using the loyalty program in an exciting way to bring value to guests this summer. So any time a loyalty member purchases an entree, it started the weekend before Memorial Day through the end of July, they're entered in the sweepstakes. We've got 25 people winning every week in $1,000 worth of gas cards and $500 worth of Cracker Barrel foods. So it's a great -- I'm super pumped about it. I think it's amazing because I think it really speaks to what people are feeling out there right now in terms of groceries and food are more expensive and gas is more expensive and at Cracker Barrel we want. People will still be able to enjoy their summer. And we're an affordable option for them this summer. We pointed out where our average check is versus the competition. So we think this is a great way for us to reward those loyal gas. And frankly, to get some new people into our loyalty program as well.

Maybe just one last one on me for me is CapEx spend is obviously down this year relative to where it had been or at least originally thought about over time. I'm just curious, where are you guys thinking about the remodel cycle again, because obviously, there's quite a bit that still can be done at the stores with respect to bringing it to kind of modern image. But how far out are you thinking before that kicks up the end to the system?

So we are -- there are a lot of the great things about Cracker Barrel is in a lot of ways, the look is a look that's enduring. Now what we've continued to do is really improve on areas that are -- don't really impact that. So we've done work in areas like the bathrooms as an example. We've made updates there. We're continuing to make updates to the way that we show items in the retail area. So we're spending in the store in a format that is not a traditional remodel but really makes the experience more easier for the guest a little bit more effective, but really preserves the it really preserves the brand's core.

Yes, if I may, John, we have been really clear. We put the remodel program on pause this year. given everything that happened to us in Q1, we wanted to really listen to our guests, we learned a lot from that program in fiscal '24. And in '25, there are a lot of things that Craig is alluding to that worked really well for us that we were pleased with.

But our guests did not want us to move forward with that at this point in time. So we put that on hold. And when we get to '27, we'll talk about kind of what we're thinking about going forward, but it's really more in the lines of what Craig is talking about. We're just updating paint, updating bathrooms, things like that. We don't have big plans to roll over model program.

The next question comes from Paul House with CDS.

Great. for the question and congratulations on great results. I guess my first question, I think you've mentioned pressure among lower income consumer. Just wondering if you noticed any other impacts from the elevated gas price and specifically if there's any indication from gas surcharge like gas price surcharges from vendors or suppliers that's probably going to, I don't know, potentially hitting the flow-through.

Paul, yes, in -- certainly, fuel prices are up and that will impact the business in terms of distribution on the restaurant side. It also impacts the retail side of the business. So there is some impact in the fourth quarter related to fuel, and all of that is included in the guidance.

Got you. And maybe just 1 more on maybe some bigger picture things. I'm wondering if you have seen any early signs from the usage of GLP-1, if there's any shift in guest ordering customization trends, if you have seen anything maybe on the order size. Any color you can share with us?

Yes, Paul. We have been actively monitoring GLP-1s for over a year now and really watching what's going on. We have not seen any measurable impact at Cracker Barrel to date. Our menu strategy continues to really think about our bring backs, our innovation, the categories and all of those things. And we already have a lot of protein forward categories.

We reorganized our menu about a year ago to really make it easier for people to order by the protein that they like, whether that's beef or chicken or seafood. And we've got portion flexibility for all of our guests, right? We have 2 sides or 3 sides, I'd love to say you can crack it in -- your Cracker Barrel, doesn't like it when I say that. But -- we've got lots of options for people. We've got lighter comfort options. We just did an ad -- in a salad for $5, and you can take all of this.

So what we're seeing is that people are able to customize their Cracker Barrel experience the way that they want to. They want more protein, if they want a smaller portion. We've got that early dying option for them as well, that really sharp price point Monday through Friday.

So right now, we're feeling like we're meeting people's needs and that's what we're hearing from our guests, and that's what we're seeing. And the way mix is up, and just everything seems to be working okay for us right now.

Remember, people love abundant portions at Cracker Barrel at a very fair price point. We hear that again and again from our guests as we look at our pricing and as we're constantly talking to our guests and evaluating their needs, that continues to be the resident theme, which is abundant portion at a fair price, and that's what you get here at Cracker Barrel.

This concludes our question-and-answer session. I would like to turn the conference back over to Julie Masino for any closing remarks. Please go ahead.

Thank you for joining us today. I want to again thank our 70,000-plus team members who are doing such a great job focusing on our guests and executing our plans. We are encouraged by our progress and are confident that our continued focus on serving delicious food and delivering an exceptional guest experience will sustain this momentum.

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

Good day, and welcome to the Cracker Barrel Fiscal 2026 Second Quarter Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Cracker Barrel's Second Quarter Fiscal 2026 Conference Call and Webcast. This afternoon, we issued a press release announcing our second quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the second quarter ended January 30, 2026. Please refer to the footnotes in our press release for further details about these metrics.

The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release includes reconciliations from the non-GAAP information to the GAAP financials.

On the call with me are Cracker Barrel's President and CEO, Julie Masino, and Senior Vice President and CFO, Craig Pommells. Julie and Craig will provide a review of the business, financials and outlook. We will then open up the call for questions.

On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect our 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, and the company undertakes no obligation to update it, except as may be required under applicable law.

I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino. Julie?

Good afternoon, and thank you for joining us. Q2 total sales were $874.8 million and adjusted EBITDA was $38.2 million. Our entire team is executing our plan to: one, improve our operations; two, connect with guests through our menu, marketing and value proposition; and three, deliver cost savings to improve profitability. We're gaining traction and are encouraged by some important guest metrics and green shoots around traffic, and we're energized in terms of driving improved performance.

I'd like to start by thanking our store teams for their hard work every day. Operationally, we're pleased with the improvements we are seeing following the leadership changes we made in October. Our Google star rating, which, over the long run, is strongly correlated with traffic was 4.28 in Q2. This represents the highest quarterly score since Q2 and fiscal year '20.

We've also seen gains in food taste, service and value scores, all of which increased 4% to 5% in Q2 compared to the prior year, and these positive trends have continued into Q3.

Additionally, we're making progress with turnover as we saw improvements in both our hourly and manager turnover trends, including a 10% improvement in management turnover in Q2 year-over-year. We view all of these metrics as important leading indicators and are confident that these gains will translate into improved traffic over time.

Turning to our menu. Our multipronged strategy continues to include bringing back guest favorites, introducing new offerings, enhancing quality and leaning into value. We are incorporating elements from these tactics with each of our seasonal menus and all of this is being done with the overarching goal of improving guest satisfaction and driving traffic.

We're continuing to reintroduce favorites, both to our core menu and as part of our limited time-only promotions. Our holiday menu promotion featured our Country Fried Turkey, this fan favorite continues to resonate with guests, and we again sold out a product. In January, we reintroduced Hamburger Steak and Eggs in a Basket. Then, with our spring menu that launched in mid-February, sugar-cured and country ham dinners returned to the core menu. We also brought back carrot cake as an LTO.

We continue to use Front Porch feedback, our guest feedback mechanism, and there are more returning favorites in the pipeline. And as we bring back items, we are doing so through the lens of improving taste, consistency and ease of execution.

We also continue to innovate and close menu gaps with the introduction of new items. In the fall, we added the Breakfast Burger, talked with our signature Hashbrown Casserole, this delicious burger is the ultimate combination of country cooking and a breakfast for dinner entree. Our spring menu provides additional examples. Guests have been asking for [indiscernible] and scrambles for years, and we recently debuted our new Garden and Farmhouse Scrambles. We also added Smoky Southern Salmon. And this LTO offering provides a more premium, lighter fish option.

Collectively, these items, both the new offerings and returning favorites have been well received and we've been particularly pleased with the Breakfast Burger and carrot cake, both of which have outperformed our expectations on preference. In addition to introducing items, we're also evaluating food quality improvements to existing offerings as part of our targeted efforts to drive greater satisfaction across the menu. We're testing improvements to several signature items and have additional tests planned in the coming months.

Finally, as it relates to our menu, we're also leaning into value. We already have a strong everyday value foundation, which we've strengthened with our barbell pricing strategy, and we've been layering in new constructs and targeted promotional offers. This has allowed us to evolve the way that we talk about value by amplifying our communications around compelling price points to drive traffic, while reinforcing affordability as a hallmark of the brand.

This fall, we launched Meals for Two starting at 1999. This offer available for dine-in on weekdays includes 2 full-size entrees and 1 choice of shareable or desserts. We continue to evolve the platform and we've seen a meaningful lift in guest preference since launch.

Our approach to value also includes pulsing short window offers to create urgency and trial. In the weeks leading up to Christmas, we ran a promotion for our free toy up to $5 with the purchase of a kid's meal. We were pleased with the results and impressed by the team's agility in quickly creating and implementing this offer. It delivered incremental margin dollars and contributed to outperformance of the choice category during the promo window. Our ability to connect restaurant and retail in a single experience is a real point of differentiation. We're exploring additional ways to capitalize on this advantage and believe that by lengthening the lead times for planning and execution, we can make these integrated promotions even more impactful.

In fiscal '25, we were pleased with the positive mix we delivered, and the team has been focused on developing menu enhancements to build margins while reinforcing our value proposition. We introduced several changes in January. For example, guests can now upgrade to 3 sites for a modest upcharge and add a soup and salad to their meal for just $5. They could also achieve bundled shareable Duos and Trios. Early results from these actions are encouraging as we've seen an improvement in our mix trend following these additions.

Another important way we are driving traffic and delivering value is through our loyalty program, Cracker Barrel Rewards. After a little over 2 years since the program launched, we now have over 11 million members, and they account for over 40% of tract sales. That scale gives us a meaningful way to understand guest behavior and directly engage with guests to reinforce value and drive frequency. It's a tremendous benefit for guests and an increasingly important tool in improving traffic. Engagement in the program remains strong, and traffic among loyalty members has held up better than nonmembers since August.

From a marketing perspective, our guest connection strategy remains centered on food, value and the heritage that makes Cracker Barrel distinct. And every campaign is designed with a clear objective drive traffic and strengthen brand affinity. We are seeing early signs this is working, as evidenced by our improving traffic trends and the fact that our brand sentiment scores improved to 2% over Q2 compared to Q1. As part of this, we have deepened our storytelling and leveraged key partnerships to reinforce emotional connection, expand reach and drive visitation.

We continue to highlight our scratch cooked food made with care through the our Country friends series on social media. We are emphasizing and expanding our long-standing commitment to the military community. We, again, offered a complementary Sunrise Pancake special for military members on Veterans Day. This contributed to a strong traffic comp performance for the day, and we also help support 30 worthy veterans organizations throughout November.

Most significantly, we launched an ongoing 10% military discount available all day, every day in both restaurant and retail. This discount is available through Cracker Barrel Rewards and is helping to drive continued growth in loyalty membership, while also recognizing this important group.

We are building on our efforts from the past year and continuing our successful partnership with Speedway Motorsports. We are once again sponsoring the Cracker Barrel 400 in May as well as increasing our on-site activations at races across the country, which kicked off at Daytona last month.

Last year, our partnership with Speedway Motorsports gave us cultural moments to amplify our story in ways they get loved and that supported traffic and brand trust. We are looking forward to leveraging similar opportunities this year.

We're also excited to feature our Campfire Meals platform again this summer. Campfire is one of our strongest nostalgia anchors and a clear expression of Cracker Barrel, Americana, travel and gathering.

Turning to retail. As a reminder, Q2 is our biggest quarter for retail sales due to the holidays. Overall, our retail results remain pressured due to traffic, but we were encouraged by the guest response to our seasonal holiday assortments. We were also encouraged that retail attachment was flat versus prior year given that it has generally declined in recent quarters and that our average order value increased slightly. We're excited about our upcoming assortments.

Looking ahead, the team remains focused on effectively managing inventories, mitigating tariffs and enhancing the shopping experience. Finally, in addition to our efforts to drive traffic by improving consistency of food and the guest experience, we are also focused on cost savings. In Q2, we continued the restructuring of our corporate office that began in Q1. We remain committed to returning G&A closer to historical levels as a percentage of sales and are continuing to closely manage our expense structure to protect our balance sheet.

As we look ahead to the back half of our fiscal year, we are encouraged that we continue to welcome back more guests. Our #1 focus is serving delicious food and delivering experiences guests love. We have a number of tactics to support this, and we're confident in our team's ability to execute. We're engaging our guests through our menu, messaging and continued commitment to value. We're committed to operating with excellence, and we're implementing actions to improve profitability, all to strengthen the business and to return to positive momentum.

I'll now turn it over to Craig to review our results and discuss our outlook.

Thank you, Julie, and good afternoon, everyone. For Q2, we reported total revenue of $874.8 million, which was down 7.9% from the prior year quarter. Restaurant revenue decreased 7.5% to $694.3 million. Comparable store restaurant sales decreased by 7.1%, which included a traffic decline of 10.1%.

From a monthly perspective, November and December traffic both declined between 10% and 11%. We were encouraged by the improvement in January, which declined 9%, including an approximately 50 basis points net year-over-year unfavorable impact from weather.

Restaurant average check increased 3.4% and included pricing up 4.2%. Menu mix was negative, driven primarily by higher discounts. Off-premise sales were 23.6% of restaurant sales, which increased modestly over prior year. Total retail revenue decreased 9.3% to $180.5 million and comparable store retail sales decreased by 9.2%.

Moving on to our quarterly expenses. Overall cost of goods sold in the quarter was 33.5% of total revenue versus 32.6% in the prior year. Restaurant cost of goods sold was 27.4% of restaurant sales versus 27.1% in the prior year. This 30 basis point increase was driven by higher waste, increased discounts and commodity inflation, partially offset by menu pricing.

Commodity inflation was approximately 1.3%, driven principally by higher beef, pork and coffee prices, partially offset by lower poultry and dairy prices. Retail cost of goods sold was 56.8% of retail sales versus 53.4% in the prior year. This 340 basis point increase was primarily driven by higher tariffs and increased discounts, partially offset by pricing.

Order and inventories were $180.3 million compared to $173 million in the prior year. Labor and related expenses were 36.1% of revenue compared to 34.4% in the prior year. This 170 basis point increase was primarily driven by sales deleverage and lower productivity.

Wage inflation was approximately 2%. Other operating expenses were 24.8% of revenue compared to 23.2% in the prior year. This 160 basis point increase was primarily driven by sales deleverage and higher store occupancy costs, including increased maintenance spending, which was in part due to elevated snow removal costs.

Adjusted general and administrative expenses were 4.9% of revenue, and exclude $2.6 million in expenses related to the proxy contest and a $2.6 million corporate restructuring charge related to organizational and leadership structure changes. Compared to the prior year, adjusted general and administrative expenses improved 60 basis points, primarily driven by lower incentive compensation and cost savings initiatives, including the corporate restructuring.

Our GAAP financial results include a noncash store impairment charge of $400,000 related to Maple Street stores. Net interest expense was $4 million compared to net interest expense of $5 million in the prior year. This decrease was primarily the result of a lower revolver balance and a higher convertible debt balance. Our GAAP income taxes were a $4.9 million credit and adjusted income taxes were a $3.5 million credit.

GAAP earnings per diluted share were $0.06 and adjusted earnings per diluted share were $0.25. Adjusted EBITDA was $38.2 million or 4.4% of total revenue compared to $74.6 million or 7.9% of total revenue in the prior year.

Now turning to capital allocation and the balance sheet. Our balance sheet remains strong, and we continue to have ample access to liquidity. We ended the quarter with $531.5 million in debt compared to $471.5 million in the prior year. At quarter end, our consolidated senior debt to adjusted EBITDA leverage ratio was 0.3, which is below the maximum allowed of 3.0. In the second quarter, we invested $26.6 million in capital expenditures.

I also want to note that in our third quarter, we expect to record a net cash benefit of approximately $46 million, following the settlement of certain litigation matters. This amount will be included in the calculation of EBITDA as defined by the credit agreement for purposes of calculating applicable ratios for debt compliance and borrowing capacity. However, we expect that it will be excluded from the calculation of reported adjusted EBITDA to enhance comparability to our adjusted EBITDA results across periods.

Before sharing our annual outlook, I want to provide some context on current trends and how variability between last year's third and fourth quarters are expected to affect comparisons for the remainder of fiscal 2026. If you recall, in the third quarter of fiscal '25, traffic declined at 5.6%, in large part due to weather and macroeconomic factors. That was our lowest traffic performance of the year. As a result, we have an easier comparison in this year's Q3. Having said that, we are pleased that our traffic trend in February further improved on January's results.

Regarding Q4, traffic in fiscal '25 declined 1%, a significant step up from our third quarter. As a result, we will have a more challenging map in the fourth quarter.

Turning to our fiscal '26 outlook. Our guidance reflects our best estimate as of today, the rate and level of our traffic recovery as well as the level of investment required remain key drivers of our fiscal '26 EBITDA performance. As outlined in our press release, we anticipate the following for fiscal 2026. Total revenue of $3.24 billion to $3.27 billion, pricing of approximately 4% and lower menu mix resulting from higher discounts. Commodity inflation of 2% to 2.5% and hourly inflation of 2.5% to 3%.

As discussed on the last call, we've implemented a number of cost savings measures. We executed a corporate restructuring that began in Q1 and continued in Q2, which we expect will result in annualized G&A savings of $20 million to $25 million. Additionally, we have reduced our advertising spend and anticipate that our aggregate advertising spend in the second half of the year will be $13 million to $17 million lower than the same period in the prior year, reflecting a more targeted approach to our advertising. Taking all of the above into account, we now anticipate full year adjusted EBITDA for approximately $85 million to $100 million.

Finally, we are now planning for lower capital expenditures of $105 million to $115 million, and this reduction is part of our comprehensive efforts to manage cash flow and the balance sheet.

With that, I'll now turn the call back over to Julie for a few closing remarks.

Thanks, Craig. I want to wrap up by reiterating that all of the initiatives I described across operations, menu and marketing are part of our focus on consistently delivering delicious, flawless food, improving guest satisfaction and driving traffic. We're highly encouraged by the green shoots we're seeing, particularly the strong gains in the guest experience metrics I mentioned.

Looking ahead, we know that consistently executing at a high level is imperative for our recovery, and the entire organization is aligned to support this.

Before we go to Q&A, I want to thank our team members around the country. I'm so proud of their hard work and commitment to the guest experience. I'm confident that our continued focus on food and the guest experience will enable us to return to positive momentum.

Operator, we can now hand it over for Q&A.

[Operator Instructions] The first question comes from Dennis Geiger with UBS.

I wanted to start off by asking a bit more about the quarter-to-date commentary, just given all the moving pieces and the importance of traction against the plans that you have in place. I think specifically the comment was improvement quarter-to-date. So I was curious if that was sort of, Craig, on a 1-year basis, you were referring to that. If you are seeing continued traction and an underlying trend improvement, anything else on kind of the latest and greatest as it relates to where trends -- traffic trends are and how you'd kind of size up traction against plan so far?

We do believe the underlying trend is gradually improving as we shared, January did better than November and December, and that included some weather, as you know, at the end of the month. and we're encouraged by an even better start to February. We did try to kind of balance all of that is recognized in that February in the prior year was a bit softer due to some weather as well as some macro issues. But we feel like the underlying trend of the business is gradually improving.

Great. And then as a follow-up, encouraging to hear about the improvement in the brand sentiment scores as well as the strength in that Google star rating. Perhaps, Julie, using those metrics and any others that are relevant, can you give us any better sense for how those metrics sort of help you assess where you are in the recovery process as we try and get a better sense for sort of the leading indicators sort of ahead of further traffic improvement?

Yes. Thanks, Dennis. Again, we are really encouraged by the improvement in everything you mentioned, Google star rating, the brand sentiment, our food and value scores as well as just the way the teams are really executing and being in our restaurants is just they feel so good right now. I'm in a lot in talking to guests, talking to our team members. And I feel like we are just at our best more than we have been in a while.

So that said, we're moving in the right direction. As I've said to you guys in the past, I don't have a crystal ball, and we don't have a correlation that says when scores improve by X, traffic follows by weeks or months. We don't know that, but we know these are leading indicators. We've checked all correlations. They still correlate to same-store sales growth and improvement. So we know we're headed in the right direction. Everybody is working hard to make that a reality.

The next question comes from Jon Tower with Citi.

Great. Julie, you had mentioned earlier that you're starting to do things a little bit differently. It sounds like on the marketing front. And I know, Craig, you had mentioned that in the back half of the year, you're expecting a lower spend in terms of advertising. So I'm curious what tools you're using to ensure that consumer awareness remains high as the advertising spend drops lower in the back half of the year. And can you maybe dig into the exact tactics that you're going into, particularly in social and digital to kind of draw in either new or lapsed guests back to the brand?

Sure. Jon, I'm probably not going to lay everything out the way you asked specifically. But as you know, driving traffic is about much more than just advertising. And we have really spent the last year building out audiences really going after the specific ways to reach them in the channels that are most relevant to them. And we have a holistic plan to really reach them in those channels to bring them back and build their trust. So it is targeted and it is nuanced. And then there is some broad-based media that really just gives us reach across that.

And as Craig has shared, we have been disciplined about our marketing spend given the current environment because, as you know, we spent a lot more in Q1 and Q2, and that really hasn't manifested in traffic. So we're actively testing messaging. We're testing office offers, campaign constructs, really through our loyalty member base to really make sure that they're going to work and get after the right people.

That's really the last thing I'd leave you with is loyalty is a great way for us to reach guests. And so we've been using that to really refine messaging, try out offers, test some different messaging constructs with different -- we've got different segments within our loyalty population and making sure that we're really talking to them about what they want to hear from us. Some people want to hear more about food. Some people want to hear more about retail. Some people won't hear about the holidays. So we've really tried to dial that in an effort to meet them where they are and welcome them back.

Got it. And maybe, Craig, this one on the tariff outlook. I know there's quite a bit of fluidity in terms of what's happening now. I believe in the last call, you had mentioned about fiscal '26, there was about a $24 million or so incremental impact on the business from tariffs. Has that changed?

Well, you said it right. It is dynamic and the tariff environment is changing. As you know, there's relatively new news out there. Maybe just a couple of things on the dollar impact. In part, there's a component there of traffic and retail sales that will impact the absolute dollar impact. I think the team continues to do a really good job here. But it is also kind of late breaking and evolving. We do expect it to be a smaller tariff impact, a little bit this year, but there are a couple of things.

The rate change is not actually as big as it might seem in theory, Additionally, the impact to us really needs to flow through the supply chain. So we have received the product, warehouse it, send it to our stores and ultimately sell it. So there is some -- there is a lag with all of that and the rate change is a bit more modest. So more to come in the future on that one.

The next question comes from Jake Bartlett with Truist Securities.

My first question was just to make sure I understand the guidance for traffic. Before you had talked about 8 to 10 -- negative 8 to 10 for the year. I'm wondering if that still the case. Maybe if you could be a little more specific about what you expect in the back half and what that implies. Maybe you'd share whether you expect to be in the higher low end of that range or something like that? And then I have a follow-up.

Jake, in terms of the back half, I think the key takeaway for us here is we're thinking about what we're comping on and what happened in the prior year. As we shared, Q3 was a bit of a challenge last year. We had some kind of broad-based macro issues to start out the quarter. And then Q4 picked up a lot. We had positive dinner traffic in Q4. We were very pleased with that, with the bring back of the Campfire campaign. So as we comp over an easy -- a relatively easier Q3, we expect that to be a little bit of an assist. And then as we comp over what we expect to be a bit more challenging of a Q4, we expect that to be a little bit of a headwind.

In terms of traffic, not a lot of movement there. That Q4 dynamic is still pretty unknown. I mean, we've shared what we think there. But our thinking right now is in the full year, we would expect traffic to be somewhere in the neighborhood of negative 8.5 to negative 9.5.

Got it. Great. And it was encouraging to see the brand sentiment improvement versus pre-August. I'm wondering if you can share how far you are from the from what it was pre -- maybe how much you have to go to kind of get back to normal or kind of pre-August pre-rebranding. And I'm also wondering whether you can share whether there's different sentiment from cohorts of your customers. And I'm wondering about local versus nonlocal travelers and maybe some of the implications that could have as the summer travel business becomes the larger part of your business in the fourth quarter.

Yes. Jake, I'll start with that one and then maybe Craig will have an assist. I don't know. Let's see. There's a lot in there. So let's see. The -- we have not shared where we were prior to August. So I think that is probably not a place I can go right now. We are seeing improvements there. We are a little bit below sort of the average for casual at the moment. And so really working to claw that back and improve our trends there. But again, we are pleased with the progress that we're making.

And you kind of hit the nail on the head a little bit. The way we're doing that, and it's a little bit in my answer to Jon's question as well, we're really segmenting our loyalty audiences by what we know about them, how they shop with us, what they want to hear from us. And we've done a lot of research, as you can imagine, in the last 6 months talking to them about their feelings and what they want to hear from us and what they want to see from us. And so we're really using that learning to welcome them back. And so those messages are different based on who you are in our loyalty program and what you have said matters to you and how you shop with us and whether you're a breakfast customer or whether you're a dinner customer and whether you're a retail customer, all of those things we're using again to meet you where you are and to welcome you back with open arms. So we're really pleased with the progress we're making. We've got some ways to go, but we're starting to unlock that and feel good about that.

In terms of the traffic composition, maybe the only thing I would add is that the traffic coming from our loyalty program is holding up well. So we're pleased with that, and that's encouraging because we have such a large base there, and we've been investing behind that for a long time. So we're going to continue to utilize and leverage those capabilities.

Got it. And if I can just sneak one more in. I apologize for this. But your guidance for EBITDA in the margins, you've taken down your inflation guidance for commodities and for labor. You're talking about lowering spending much less in marketing year-over-year. You beat in the second quarter. But your overall annual guidance didn't change very much. So I guess are there some offsets that some costs that you hadn't anticipated that you think you're going to incur or I guess I'm trying to kind of get at to what level -- to what degree this might be conservative?

Yes, Jake, we did move up the bottom end of the range, a fair bit, and the Q4 dynamic is a bit of an open question mark. So I think all of that factors into our thinking.

Next question comes from Sara Senatore with Bank of America.

I have a question and then maybe a couple of follow-ups or clarifications. First, on the kind of demand environment, obviously, hearing a lot about gas prices potentially speaking. I know in the past, we've talked about Cracker Barrel having some relatively high perhaps exposure to people who are traveling or coming from other ZIP codes. I was just curious if you could speak to that and perhaps any kind of historical correlation. And then, like I said, just maybe one quick clarification.

Sara. On the gas prices, in particular, we've looked at this a couple of different times. Pre-COVID gas prices did have a really strong relationship to traffic. More recently, we focused more on disposable income because that has been a little bit more impacted with all of the other moving pieces in people spending. So gas prices are obviously one input into that. So potentially if gas prices are up, that could be a negative. But as an example, going other direction is the tax refunds are expected to be higher this year than they were in the prior year. And the retirees also have a larger deduction this year. So there are multiple moving pieces that flow into the disposable income. We have a bit more exposure to travel, which exposes us to gas, but we also have more exposure to folks that are over 65 and they are likely to have a benefit as well from the tax changes.

Okay. And I'll actually ask a clarification on this and then I'll follow up later with the other questions. Just in terms of -- to your point, I guess, tax refunds also those typically benefit kind of upper or higher income consumers. I guess have you maybe talked about your income exposure? I guess there's a perception that perhaps your customer base maybe skews a little bit lower income. But I guess as we think about the puts and takes make a good point, but just from an income perspective.

It's a good question. We have -- our income exposure is pretty close to average, maybe a little bit lower than average, but not dramatic. And in this case, I do think this particular tax environment is different. And the folks that are retirees, they do get a larger benefit. So there are a lot of moving pieces as you think about disposable income this year a little bit more so than in the past.

[Operator Instructions] The next question comes from Todd Brooks with Benchmark StoneX.

Congrats on a nice quarter. It was good to see. Wanted to dig in. I mean, we all see kind of the weekly sales and traffic data. And if I look across like the last 8 to 10 weeks, you've seen a pretty material step-up in traffic. As far as the drag kind of post August was in that down 10% range, give or take. And recently, it feels like it's more in the down mid-single-digit range. I'm wondering with your data and how well you can track and measure your customers, do you sense this is the displaced customer coming back that's causing most of this lift? Or is it a function of what you're doing against loyalty and promoting to those customers that maybe you didn't really lose post August and just getting them in the restaurant more frequently? I guess what's the data telling you, Julie, for where this traffic lifts coming from?

Sure. Todd, and thank you for the congrats. We're proud of the quarter. We're working hard. We've got a ways to go, but we're getting after it. With respect to your question about the last guest, would what I think is probably the best thing to share with you is that we've really been working on those loyalty guests. And we are encouraged that a percentage of our highest value loyalty guests that the percentage of those people who visited us in Q2 was consistent with our historical levels. So we're retaining that and that's really, really important to us.

We also were able to capture a meaningful percentage of lapse tests that we hadn't seen in Q1 that came back in Q2. So that, again, sort of to Jon's question and Jake's question, how we're really targeting some of those people, we're seeing movement there, and that feels good to us because, obviously, increasing frequency with people that know us, and are already in our ecosystem is really important to us. We're using Front Porch feedback.

Again, I told you we've done some research to really reach out to them and figure out what's meaningful to them and make sure that we're delivering on that. So and again, just executing really well. You're an operator. When we're operating well and getting great experiences in delicious hot foods, like that's really the key thing there.

In terms of people that we've lost, we did see a lot of new people come into the business with Campfire last Q4. Some of those people have not returned back to us. And so we're working on casting and net to get those people back into the business.

That's great. And if I can squeeze one more in. It wouldn't be...

Of course, not. I mean everybody else did, too. You might as well. Yes.

Okay. If we can talk about holiday meal performance. I know the strategy has maybe even changed to better balance profitability versus sales. But I guess if you could review how Holiday Meal performed during the quarter, is that behind any of the improvement or maybe less bad restaurant age, maybe what some of us were expecting and just how that overall offering resonated at holiday?

We did a little bit on the last call because it was right after Thanksgiving. But look -- gosh, November feels like a long time ago. But really, we built on the learnings from last year because if you remember, Q2 of '25 was a really strong performance for us. And we had spent a lot of time really restructuring that business. especially from an operations standpoint to make sure that we were delivering great experiences for our guests as well as our team members and making sure that we weren't overspending on labor and all of those things.

So we took those learnings into this year, really simplified the operations, make sure we had great guest experience. We were proud of the metrics, and we did almost $110 million in sales on Thanksgiving week, which was a big week for us. It was in line -- Thanksgiving traffic was in line with the rest of the months. So it didn't crazily outperform or anything like that. We were pleased with the performance. We're pleased that people invited us into their homes for Thanksgiving and that they celebrated with us in the restaurants, all leading to that $110 million in that week.

This concludes the question-and-answer session. I would like to turn the call back over to Julie Masino for any closing remarks. Please go ahead.

Thank you for joining us today. We're encouraged by the improvements we've seen in key guest experience metrics and in our traffic trend, and we remain confident that the plan we are executing will drive improved performance.

Lastly, I want to again express my gratitude to our over 70,000 team members who remain focused on delivering an exceptional guest experience every shift, every day. Thank you.

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

Good day, and welcome to the Cracker Barrel Fiscal 2026 First Quarter Conference Call. [Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to Cracker Barrel's First Quarter Fiscal 2026 Conference Call and Webcast. This afternoon, we issued a press release announcing our first quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the first quarter ended October 31, 2025. Please refer to the footnotes in our press release for further details about these metrics. The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP.

The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials. On the call with me are Cracker Barrel's President and CEO, Julie Masino; and Senior Vice President and CFO, Craig Pommells. Julie and Craig will provide a review of the business financials and outlook. We will then open up the call for questions.

On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations.

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

I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino. Julie?

Good afternoon, and thank you for joining us. As you are all aware, the past few months have been difficult for Cracker Barrel and for our 70,000 team members around the country. And while many of our guests are enjoying our improved food and guest experience, we certainly have more work to do to regain the trust and confidence of others who have been slower to return. This will take time, but we are executing a plan and are confident we will get back to the trajectory we saw in fiscal '25.

Turning to our Q1 performance. Our unique circumstances during the first quarter were exacerbated by a difficult macro and industry backdrop that saw choppy traffic patterns. Sales were down 5.7% compared to the first quarter of fiscal 2025 with adjusted EBITDA of $7.2 million. Our EBITDA was clearly impacted by our topline performance. But I also want to remind everyone that it included incremental costs related to advertising, marketing and our GM conference, which totaled approximately $14 million.

Traffic was down 1% in the first half of August and was down approximately 9% for the remainder of the quarter. We are taking decisive actions to return our performance to a positive trajectory, which can be grouped into 3 areas, the first 2 areas are centered around our focus on our food and the guest experience and include evolving our operations and connecting with our guests through our menu, marketing and value proposition.

The third area is pursuing cost savings to improve profitability. Starting with operations. We have 3 main areas of focus and activity. Optimizing our back-of-house initiatives, conducting extensive training and making key leadership changes. As you may know, our back-of-house initiative is a multi-phase program aimed at improving food quality and consistency, while also simplifying operations and contributing to cost savings.

Q4 was the first full quarter in which Phase 1 had been rolled out. Although Phase 1 was delivering meaningful savings, it became clear during the quarter that the new processes at scale made consistent execution more challenging for our operators and impacted the consistency of our food.

Given the importance of food and experience as well as the heightened scrutiny around our brand, we decided to change course and reinstated our prior processes. Based on these learnings, we're evolving Phase 2 of our back-of-house initiative and our store testing methodologies to better ensure that any changes we introduced will be easily executable across the system and help our operators deliver the consistent quality our guests expect.

To the extent we have to sacrifice some planned cost savings to achieve this goal, we will do so, and we're confident we will recoup these savings elsewhere. To ensure that our back-of-house teams are best positioned to deliver consistently outstanding food and experiences, during the month of October, we successfully retrained all of our managers, kitchen production staff and grill cooks on core, classic Cracker Barrel recipes as well as our new holiday offerings.

Finally, during the quarter, we also made key operational leadership changes to remove a layer of management, get closer to our guests and drive a relentless focus on food and hospitality. Doug Hisel previously Vice President, Field Operations, was promoted to Senior Vice President, Store Operations. Doug has been with Cracker Barrel for over 18 years and has held a variety of operational roles of increasing responsibility. He has a deep understanding of Cracker Barrel's people, processes and standards.

Teams in the field at all levels are responding to his leadership. Since Doug assumed his new role, he has emphasized flawless food, operational precision and shared accountability among leaders and team members, and we've seen encouraging trends in guest metrics as a result. In recent months, our Google star rating, which is strongly correlated with traffic, has been running at its highest level since early 2020.

Additionally, we've seen improvements in food taste, service, value and experience, all of which improved between 3% and 4% in October and even more in November versus prior year. These metrics are important leading indicators, and we expect they will translate into improved traffic over time.

Turning now to our guests. We continue to work a multipronged plan to ensure we are connecting with them through our menu, our messaging and our loyalty program. This is the second area of focus I referenced earlier. With respect to our menu, we are returning dishes to the menu that our guests have told us they love and miss, like we did with Campfire Meals, Uncle Herschel's breakfast and Chicken n' Rice. We brought back 2 fan favorite dishes to our holiday menu this year, Country Fried Turkey and Cinnamon Swirl French Toast as well as the highly requested Turkey Sausage.

We also introduced a new breakfast burger. This delicious burger is topped with our signature hashbrown casserole and is the ultimate combination of country cooking and a breakfast for dinner entree. Guest feedback on these new and old favorites has been positive. Going forward, we continue to leverage guest feedback and have quality improvement tests planned for signature items in the coming months. We are working to ensure our core menu remains craveable and includes favorites that guests have missed.

I already mentioned some of the items we've brought back and next month, our guests will see even more favorites return to the menu, such as Hamburger Steak and Eggs in a Basket. To oversee this effort, I'm pleased to report that Thomas Yun has rejoined Cracker Barrel to lead our culinary teams. Thomas previously served in this role from 2022 to 2024 and was the driving force behind several of our most successful menu introductions, including Pot Roast and Hashbrown Casserole Shepherd's Pie. He also brought back the loved legacy classics like the return of Chicken n' Rice. His efforts to strengthen the heart of the menu will help us deliver the familiarity, quality and comfort our guests expect from Cracker Barrel.

With respect to our messaging, our marketing teams are following a clear framework rooted in food, value, heritage and shared values, while reinforcing traditions. We are reassuring guests that the Cracker Barrel they love hasn't gone anywhere, while also driving shorter-term traffic in a way that is true to the brand and preserves our commitment to everyday value. We are also pleased that we've improved our ability to seek and receive feedback from guests as we leverage our Cracker Barrel Rewards Loyalty Program, which continues to grow at impressive rates.

We are deepening our storytelling by showing up in the places and passions that matter most to our guests from NASCAR and College Football to Country Music, we are leaning into the cultural touch points that reflect who we are and who we serve. We are also strengthening our presence at the local level through expanded store marketing efforts designed to connect with new and existing guests directly in their neighborhoods, bringing our heritage, food, hospitality and storytelling to life where they live, gather and celebrate.

We recently introduced the Our Country Friends series on social media, showing our commitment to scratch-cooked food made with care. Cracker Barrel suppliers include many of the company has partnered with for decades and we've been so proud to highlight these American businesses and the people behind them. A few that we featured include our sourdough bread maker, Bay's bread, based right here in Lebanon, Tennessee; and our coffee and tea maker, Royal Cup, based out of Birmingham, Alabama.

Finally, we are emphasizing and expanding our long-standing commitment to the military community. Our military retail assortment has been a part of Cracker Barrel for decades, and guests have always responded to these assortments because it reflects the pride and patriotism that is core to Cracker Barrel. Our guests, many of them veterans, active service members and military families have asked us to do more and we have responded.

Building on the success of last year, on Veterans Day, we offered a complementary Sunrise Pancake Special for military members, and we helped support 30 worthy veterans organizations throughout November. Most significantly, on November 12, we launched an ongoing 10% military discount available all day, every day in both restaurant and retail to show our continued gratitude to those who serve. The new discount is available through our rewards program, ensuring that all active military and veterans can easily receive this benefit with every visit.

As you can imagine, these are long-term efforts. But we're also pursuing shorter-term initiatives that are aimed at driving traffic in a way that is authentically Cracker Barrel. We anticipate leaning into these even more heavily over the balance of the year. During Q1, we launched a series of highly promotional short-term offers such as BOGO Sunrise Pancake Special, BOGO Old Timer's Breakfast, Kids Eat Free, All-You-Can-Eat National Pancake Day and Pancake Blocktober.

These promotions drove meaningful traffic lifts during the short windows in which they ran. Continuing these efforts this week, we will be leveraging our position as a beloved holiday destination by launching a limited-time promotion of a free toy with the purchase of a kids meal. This offer, which integrates both restaurant and retail is not only a great value, kids get to choose a free toy, up to $5 or receive $5 off a higher-priced toy. And it also taps into the nostalgia and tradition that gets associated so strongly with our brand.

We are being very careful to deploy these shorter-term initiatives in a way that preserves our longer-term commitment to everyday value through abundant portions at a fair price and our strong loyalty program. We know these things remain incredibly important to our guests and are key to our business model. Recent guest research shows that our value proposition remains strong. This is particularly encouraging given the macroeconomic backdrop and heightened promotional activity in the industry.

Cracker Barrel Rewards is another key vehicle for delivering value to our guests and staying connected to them. Since the last time we spoke, we've added another 1 million members and now have over 10 million members in the program. Members now account for 40% of tracked sales. This program continues to be a powerful tool to directly communicate with guests, whether to drive traffic or receive their input.

In September, we launched front porch feedback, a program that gives loyalty members the opportunity to comment directly to our team on aspects of their visit. This feedback, in addition to extensive guest research we conducted during the quarter has been instrumental in guiding our action plan to improve food and experience and to reinforce guest perception of our strong value proposition.

Finally, we are leveraging our differentiated retail platform to deliver value to guests. We're leaning into the holidays, and we have a thoughtfully curated collection of seasonal gifts, with many items available only at Cracker Barrel at great value across price points. As we work towards reaccelerating our traffic trajectory through our focus on food and experience, it is critical that we continue to pursue cost savings and adjust our expenses.

We are doing both, but we will do so only in ways that protect food quality, the guest experience and our store-level operations. As part of our cost savings efforts, we have previously stated that our goal was to get G&A closer to historical levels as a percentage of sales. We started a corporate restructuring during Q1. We will be accelerating and expanding this initiative through a further restructuring of our corporate support center during the remainder of the second quarter.

While this will be understandably difficult for some of our corporate team members, it is necessary to successfully navigate the current headwinds, streamline the focus of our corporate functions, protect our balance sheet and ensure we can invest in the food and guest experience. In summary, we are facing a unique set of challenges, which necessitates a long-term approach to drive improved performance and recover the momentum we had earlier in calendar 2025.

Guiding all of this is the overarching priority of serving up delicious food and delivering experiences guests love. We have made key operational changes, we're connecting and reconnecting with our guests through our menu, messaging and continued commitment to value, and we're taking significant steps to improve profitability. These are the things we need to do to return the company to a position of strength and recover the momentum we had been generating.

I'll now turn it over to Craig to review our results and discuss our outlook.

Thank you, Julie, and good afternoon, everyone. For Q1, we reported total revenue of $797.2 million, which was down 5.7% from the prior year quarter. Restaurant revenue decreased 4.8% to $650.6 million. Comparable store restaurant sales decreased by 4.7%, which included a traffic decline of 7.3%. Pricing was 4.1%, and menu mix was negative 1.2%. And the negative menu mix was driven by the value promotions we paused during the quarter to support traffic as well as lower dinner traffic.

Off-premise sales were 18.1% of restaurant sales. Total retail revenue decreased 9.4% to $146.6 million and comparable store retail sales decreased by 8.5%. This decrease was primarily driven by the decline in traffic as well as lower retail attachment rates and unfavorable retail mix.

Moving on to our quarterly expenses. Total cost of goods sold in the quarter was 31.2% of total revenue versus 30.6% in the prior year. Restaurant cost of goods sold was 26.6% of restaurant sales versus 26.1% in the prior year. This 50 basis point increase was driven by higher waste related to product and process changes, increased discounts and commodity inflation, partially offset by menu pricing.

Commodity inflation was approximately 2.1%, driven principally by higher pork, beef and egg prices, partially offset by lower poultry and produce prices. Retail cost of goods sold was 51.4% of retail sales versus 49.7% in the prior year. This 170 basis point increase was primarily driven by tariffs and higher discounts, partially offset by pricing.

Quarter-end inventories were $209.1 million compared to $201.9 million in the prior year. Labor and related expenses were 37.8% of revenue compared to 36.4% in the prior year. This 140 basis point increase was primarily driven by sales deleverage and lower productivity, which was partially due to actions to support the guest experience. Wage inflation was approximately 1.5%.

Other operating expenses were 28.7% of revenue compared to 25% in the prior year. This 370 basis point increase is primarily composed of the following: first, approximately 110 basis points from higher advertising expenses due to planned increases in marketing and sales deleverage; second, approximately 80 basis points due to planned expenses related to our General Managers Conference, which typically occurs every other year; and third, approximately 200 basis points related to store occupancy costs, driven by sales deleverage and higher maintenance expenses.

The increase in maintenance is due to an updated accrual process associated with the implementation of a new tool, which is onetime in nature as well as increased spending. The increases were partially offset by higher vendor credits. Adjusted general and administrative expenses were 5.1% of revenue and exclude $1.4 million in expenses related to the proxy contest and a $6.2 million corporate restructuring charge that includes professional fees related to business model improvement work and severance related to the organizational and leadership structure changes.

Compared to the prior year, adjusted general and administrative expenses improved 120 basis points, primarily driven by lower incentive compensation. Our GAAP financial results include approximately $3.1 million in expenses related to lease terminations associated with the Maple Street units that were closed during the quarter.

Net interest expense was $3.7 million compared to net interest expense of $5.8 million in the prior year. This decrease was primarily the result of a lower revolver balance and a higher convertible debt balance. Our GAAP income taxes were an $11.9 million credit, adjusted income taxes were a $9.4 million credit. GAAP earnings per diluted share were negative $1.10 and adjusted earnings per diluted share were negative $0.74.

Adjusted EBITDA was $7.2 million or 0.9% of total revenue compared to $45.8 million or 5.4% of total revenue in the prior year. Now turning to capital allocation and our balance sheet. We continue to have a strong balance sheet and ample liquidity, which gives us confidence that we can successfully navigate through the current headwinds. We ended the quarter with $550.3 million in debt compared to $527 million in the prior year.

At quarter end, our total available liquidity was $485 million, and our consolidated total debt to adjusted EBITDA leverage ratio was 2.8x. In the first quarter, we invested $34.2 million in capital expenditures. Additionally, as announced in today's press release, the Board declared a quarterly dividend of $0.25 per share payable on February 11, 2026 to shareholders of record on January 16, 2026.

Before providing our outlook, I want to touch on our recent trends. Quarter-to-date, traffic has declined approximately 11%. The traffic appears to have stabilized as weekly traffic has been relatively consistent in Q2, including the Thanksgiving week. Although Thanksgiving weak, the traffic comps were in line with the rest of the month, we were still pleased that millions of guests chose to dine with us that week, and we delivered notable improvements in guest experience metrics, while doing nearly $110 million in sales.

Turning to our fiscal '26 outlook. Our outlook reflects our best estimate as of today. The rate and level of our traffic recovery as well as the level of investment required remain key drivers of our fiscal '26 EBITDA performance. As outlined in our press release, we anticipate the following for fiscal 2026. Total revenue of $3.2 billion to $3.3 billion. This reflects a slower recovery than we previously expected as well as a more challenged macro and industry backdrop compared to our prior outlook.

Pricing of 3.5% to 4.5% versus 4% to 5% in our prior guidance. Additionally, we expect lower menu mix resulting from higher discounts and lower dinner traffic. Commodity inflation of 2.5% to 3.5% and hourly wage inflation of 3% to 4%, both of which are consistent with our prior guidance. We are implementing a number of cost savings actions, some of which were previously planned and some of which are new. These actions will bolster our financial performance and increase our operating leverage when traffic improves and are focused on non-guest-facing areas. They include the following. First, as Julie stated, we executed a restructuring for the corporate support center in Q1 and there will be a further restructuring of the corporate support center in Q2. We expect these combined actions will result in annualized G&A savings of approximately $20 million to $25 million.

Second, we are reducing our planned advertising spend over the balance of the year and expect that our aggregate advertising expense in Q2 through Q4 will be approximately $12 million to $16 million lower compared to the same period in the prior year. Additionally, we continue to execute our ongoing cost savings program. However, we expect that the benefits from this program will be reinvested in the business, particularly in the menu as well as being offset by traffic deleverage, but we anticipate the G&A and the advertising savings I mentioned will flow through to the bottom line.

Taking all of the above into account, we now anticipate full year adjusted EBITDA of approximately $70 million to $110 million. The low end of the range reflects lower traffic that is more consistent with recent performance, elevated discounts and lower retail attachment. The higher end of the range reflects gradually improving traffic in the second half of the fiscal year as well as more moderate discount levels and retail attachments. Finally, we are now planning for lower capital expenditures of $110 million to $125 million. This reduction is part of our comprehensive efforts to manage our cash flow and is in line with our baseline capital expenditures in years prior to the transformation.

The largest category is for maintenance capital expenditures. And while we have reduced this area, we're being careful to maintain an appropriate level of spend here given our continued efforts to catch up on deferred maintenance. Additionally, this amount includes important strategic initiatives, such as replacing our point-of-sale system, which will be unsupported in approximately 1 year.

With that, I'll now turn the call back over to Julie for her closing remarks.

Thanks, Craig. Before we go to Q&A, I want to thank all of our team members around the country for their ongoing dedication as well as their efforts in making sure our guests had a wonderful Thanksgiving. I speak for all of them when I say we're energized to deliver for our guests and drive results, both now and well into the future. Guests come to us for craveable, comforting dishes and warm, genuine hospitality. And we are focusing our energy there by further elevating food quality, executing consistently and doubling down on the country hospitality and service that makes people feel cared for.

Now more than ever, Cracker Barrel remains a special and differentiated American brand, and we are focused on delivering that unique connection with our guests. Cracker Barrel is more than a restaurant or a retail store. It is the front porch of America, and the deep emotional connection guests feel is our greatest strength as we move ahead.

We are confident that we can return to growth over time and create long-term value for all stakeholders.

[Operator Instructions]

The first question will come from Todd Brooks with The Benchmark Company.

A couple of questions here. First, I wanted to ask Julie about the cut in the advertising spend for the year, that kind of pulled back in ad dollars. Is that more reflective of kind of Q2 spend during this peak holiday period and it's kind of reflective of just needing to stabilize first, before getting a little bit more aggressive with advertising dollars to draw customers back to the brand?

Todd, thanks for the question. Let me come at it a different way. Q2 marketing spend was -- sorry, Q1 marketing spend was a little bit elevated at 4.2% of sales. We had planned incremental spend in conjunction with the brand relaunch. But obviously, that didn't go as planned. But that was already committed. So there wasn't a lot that we could do there.

We've looked at the advertising spend in the back half Q2 through Q4 to get it more in line with our current traffic levels and the imperative of reducing non-guest-facing costs. So that's what you're seeing. In aggregate, the spend will be about $12 million to $16 million below prior year over Q2 to Q4.

Yes. The only thing I would add to that, Todd, this is Craig, we also have the loyalty program, and we now have over 40% of our sales running through that program. And that allows -- we're able to talk to those guests directly in a more cost-effective way. So we have that opportunity.

And as always, we're always looking at the efficacy of our spend. And if there is -- it's performing really, really well, we can do more. But given where traffic is today, we thought we would be a little bit more conservative with the support of the loyalty program.

Okay. Great. And then my second question, and I'll jump back in queue. If you look at the trends, and you talked about kind of a consistent trend traffic-wise, even through Thanksgiving week, Julie. This November, December window is obviously kind of your most important seasonal period during the year. Is there much incremental that you're trying to do? I mean you talked about the LTO with the $5 toy. Other incremental plans for that December window or kind of is the die cast for holiday and the performance will fall where it may, and then we'll see where we go going forward from that standpoint. I'm just trying to get a sense of, are we looking for any sign of inflection here kind of back half of fiscal Q2? Or is it more kind of if we see inflection, we're expecting that in the second half of the year?

Yes. Let me try to answer it again. Maybe a little bit differently, Todd. Maybe you and I are like crossing signals. I think -- look, this team is absolutely committed to getting back to a positive trajectory and regaining the traffic momentum that we had and getting back on our front foot here.

So we wake up every single day thinking about how to drive traffic. What we are really focused on is doing that one guest at a time with great experiences in store, amazing food, great hospitality, attentive service. That's really the core focus. What we're trying to do on top of that is regain trust.

Truly, we've got a little bit of a brand opportunity right now. There's some brand rebuilding and trust rebuilding that we need to do, and there's a sales opportunity. And so we are doing both of those things. When you really look at what we -- what the marketing team has been doing with the branding messaging, we're leaning into our legacy, our heritage and really messaging those emotional connections to remind people that we are the brands that they've known and loved all of these years, but that hasn't changed.

That's why our holiday messaging is around holiday and driving people in for LTOs that they know and recognize, like Country Fried Turkey and Cinnamon Swirl French Toast. But we're also really looking at how do we activate traffic so that people can come in and see that we are the brand that they know and love and that we have great value.

So the toy promotion, we're actually really pumped about that. It is uniquely Cracker Barrel. It activates both sides of our business. And unlike some LTOs that are so prescriptive, what I personally love about this is that you get to pick, go shopping. You want a toy that's under $5, great, it's free. You want to toy that's $15, we'll take $5 off of it. if you want something that's $50, we'll take $5 off of it.

So it really lets consumer be the driver in a time where value is so important to them. And again, in a way that we can really create some emotional resonance with them in our restaurant and retail store.

And maybe the only thing I would add within our guidance range as it relates to sales, they're in the upper end of that range, does assume that things get better and the lower end of the range is more consistent with where we are right now. And clearly, there are a number of actions that we have planned to change the momentum. There are the longer-term actions, which primarily relate to all of the work that we're doing around food and the guest experience, and we're pleased with the gains that we're seeing there, but those are longer term.

Then there are shorter-term things that we're executing as well. Some of those -- they're not fully proven out. In other words, we haven't done them in prior years. So we're not completely certain how they're going to play out. But there are actions that should help to support that traffic improvement, but our guidance range contemplates that. The low end of the range is more steady states and the high end of the range is those things, the effectiveness of those are...

Gaining traction.

Are gaining traction and helping us to improve.

The next question will come from Jeff Farmer with Gordon Haskett.

I'll use that last question as a bit of a segue. So I think when we last heard from you, the 2026 traffic guidance was down 7% to down 4%. So correct me if I'm wrong on that. But the question is what are you thinking about as it relates to an updated guidance range for traffic for the year?

Jeff, it's Craig. The -- yes, correct. Negative 4% to negative 7% was the guidance range we provided before, embedded in the $3.2 billion to $3.3 billion in sales that includes traffic that's about negative 8% to negative 10%. On top of that, the low end of the range includes a higher level of discounting and negative menu mix as well as a lower level of attachment with retail.

All of that goes into the lower end of that range. So traffic negative 8% to negative 10%. The higher end of the range assumes that there is some recovery in traffic in the back half of the year as well as less discounting and some moderation in the attachment rates in retail.

Okay. That's helpful. Just 2 other quick ones. You pointed to a more challenged macro and industry backdrop, obviously, so maybe your peers have called this out as well. But anything specific to say there as it relates to what you're seeing in the macro backdrop?

I think we're probably all seeing the same thing, which is relative to September, consumer sentiment has softened, the labor numbers are not as strong as they used to be. Again, nothing alarming or anything, but they are softer than they were. And we've seen the overall industry traffic ticked down a bit relative to the summer over the last couple of months.

In terms of our consumers, one thing that's encouraging, our under $60,000 group underperforming a little bit, but relatively close to the over $60,000 or over $80,000 groups. So we're not seeing dramatic differences across those income cohorts. We're also not seeing dramatic differences across the age cohorts. We're seeing a little bit better performance with the over 55 and over 65 than the under 55, but within a fairly narrow range.

Okay. That's all very helpful. And last one, and thank you for bearing with me. But you mentioned that caught me a little bit off guard that when you -- you had some challenges with rolling out Phase 1 of your operations initiative. It sounds like you've sort of pivoted from that. But the question is, did those challenges, that you faced, have a material impact on either same-store sales or traffic in the quarter that you just reported?

Yes. Thanks for the question, Jeff. It's Julie. Let me start. Q4 was really the first full quarter in which we rolled out Phase 1. We talked about it on several of the calls. We rolled it in Q3, but it wasn't fully deployed at that point in time. What we really saw was that the teams struggled with the complexity of it at scale. It just what -- everything had to be perfected is really kind of what we learned as we rolled it out.

And that's in our world just very difficult to control for. And given the scrutiny that the brand was under, given some of the feedback that we were getting on food, even though when it was executed properly, it worked really, really well, and there was low margin of error, we felt like it was the right thing to do to just pause the initiative right now. We made the decision to go back to the prior processes. We retrained the team on all of that.

What I'm most optimistic about is that we can continue to improve the business model. We continue to look for ways to find efficiencies. We've learned a lot from rolling this out. We're reevaluating Phase 2. It's still in test in a couple of districts and really continuing to work with that. We've changed our in-store methodologies of testing, taking all of the learnings from this phase because more than ever, we have to remain committed to amazing food, great hospitality and that guest experience. And so anything that starts to compromise that we just -- we can't allow it, and that's why we rolled back.

The next question will come from Jake Bartlett with Truist Securities.

Mine is a combination of some of the ones that have been asked before. But I'm wondering if you can try to disaggregate the macro pressures on sales versus the aftermath of the rebranding. And there's been a deceleration in the second quarter to date to negative 11% from negative 9%. Would you attribute that all to the macro -- incremental macro pressures? Or is it possible that maybe some of the macro pressures are even worse than that or maybe bigger headwind, but you're getting some recovery in terms of sentiment around -- post your rebranding. Trying to understand how the rebranding and trying to disaggregate the 2 forces at play, so we can understand maybe how you go forward.

Jake, it's Craig. I'll start. First, I'll take -- let's talk about the change for Cracker Barrel in Q2 versus Q1. Our traffic has been pretty consistently between a negative 10% and negative 11% over the last couple of months. In Q1, some of what we saw there are -- some of the reason the results were a little bit better, and it appears that they may have decelerated is because the drop-off in traffic wasn't instant. It happened gradually over a period of weeks that's one.

Also, some of the initiatives that we executed, for example, the Buy one, Get One and in particular, the All-You-Can-Eat Pancake, they were very, very short term in nature, but they did have a meaningful improvement for those short periods of time. They just weren't necessarily sustainable promotions. I don't know that we can necessarily break out the industry versus us, but you see all the industry results, and it's pretty clear that now relative to the summer, the industry has moved down.

Got it. Okay. And then as we think about the path forward and how to rebuild sales, you've talked about, I think, materially reducing your advertising expense that usually would be moving in the opposite direction, I think you -- there's an offset there with more local marketing, more of the loyalty program. But I just want to get a better sense as to what the positive things you're doing to change the trajectory here?

And maybe within that, what is coming on the menu. A big part of the story for the last year has been some pretty positive menu innovation and good responses there. How confident are you in the pipeline of menu innovation and what's coming down the pike in the next 6 to 9 months. Anything else that you think is kind of something that you are doing that could really change the trajectory here?

Yes. Thanks, Jake. I'll start and then Craig can jump in. Again, we are doing -- I want to leave you with the fact that the focus of this organization is on food and the guest experience. We are very much focused, making sure that every single person who comes in has a great experience, their food is made the way they remember it, the way they wanted to taste and that they have hot food served by attentive servers with great hospitality. And that is the true focus of the organization in the way that we execute.

We are absolutely also focused on getting people into the stores to experience that. So when you think about how the whole machine works together, and the marketing work is a little bit more nuanced, if you will. As I mentioned, I think it was Todd's question. We have a brand reputation issue that we are working through, and that takes rebuilding trust one guest at a time, and that's going to take some time.

And that's why we're so focused on operations so that everybody who comes in has a great experience, and that will get that momentum all rolling in that direction. The toy promotion is a great way that we are showing our value, our uniqueness and getting people in to experience the brand. We did the military -- it's probably for next call, but the Veterans Day promotion for the free Sunrise Pancake special, we did that for the first time last year. We anniversaried that this year, even bigger turnout, guests really enjoyed that promotion.

And that's really why we launched the military discount ongoing. That has been something that -- we've gotten lots of requests for over the years, and we wanted to make sure that we get executed in a way that was sustainable, measurable and that we could really market it and impact it correctly, right? So we tucked it into the loyalty program. So we know who those guests are. We know what they're buying, we know when they're coming. We know how to actually communicate with them and use that discount to our advantage to drive traffic for the future.

So that's really why those 2 promotions have been launched literally in the last month. The other thing that's out there that we are working our way through is our meals for 2 program. We're really excited about this. It's an outstanding value. It tested well in our research around value and what guests need from us and the traffic driving ability for it. So it's 2 full entrees then your choice of a starter or a dessert, all for $19.99, which is, again, a great, great value for our guests.

And you can still get in our loyalty program or your military discount and stack that on top of it. So we are really driving great value with these experiences at Cracker Barrel. Rewards continues to use the AI engine to drive traffic in so that people have those great experiences. And we, again, see those guests shopping on both sides of the business, especially during this important holiday time frame.

So we are very much working on driving people and to have those great experiences and then reinforcing our legacy messaging around where the brand that you know, that you love. We've recently launched -- I talked about it a little bit in my prepared remarks a platform called Our Country Friends, where we highlight a lot of our suppliers or people who worked for us for a while or just processes that we have, whether that's around how we design our holiday items or what we do in the Decor warehouse to our sourdough bread supplier, our pancake mix supplier, the people who make our hams that have been doing that for decades, to really, again, reinforce the great traditions that we have here at Cracker Barrel and how that ends up on your plate and in your experience with the brand.

I don't know, Craig, if there's anything you would add.

I think the only thing I would add to that I think Julie covered a lot there, there is actually quite a bit going on. We didn't talk as much about that externally in Q1. I guess given everything, but there was new news. We had the Breakfast Burger as we mentioned. There were a couple of bring-backs as well.

He did ask about the menu. Yes.

So those are all good. And we do have some promotions that we have slated for the early spring. We're not necessarily talking a lot about that now, and we have some new news as well. So there is news there. Jake, we're being -- we haven't seen some of these things in a sustainable way, really regain the momentum that we had before. So we're being careful with -- we're being careful with that, but we do have them. And underneath all of that, one of the things that we're really excited about is the gains that we're seeing in -- across a number of our service metrics, very significant gains that really accelerated through the quarter and have continued into the second quarter. So that gives us confidence in the midterm and the long term because those things do take a little bit longer.

Let me jump back in, sorry, Craig, you trigged that for me. I apologize, Jake, I didn't answer your menu question. There are quite a few things coming that we are excited about, passionate about. But specifically, there's been a lot of feedback through front porch feedback and some of our other channels on items that guests would like to see return to the menu.

I mentioned Eggs in the Basket and Hamburger Steak that will rejoin the menu in January. Uncle Herschel's joined the menu this October, which has been a great bring back. We brought back Turkey sausage, which people -- I've been hearing about this Turkey Sausage since I walked in the door. We had to find somebody to make it for us. That's why it took a bit of a minute to get it back on the menu. But we're going to continue to do what we're calling Bring Back and really highlight those for guests so that they can see some of their favorites return. And look, I think that's what we did well with Campfire. That was bring back in Q4 when we had such great traffic that quarter.

Craig mentioned, we do have innovation coming. The breakfast burger has been really well received. It's awesome. It's a burger with cheese and bacon and then our Hashbrown Casserole on top of it. And then an egg on top of it, I mean it is decadent, it's amazing. It's very Cracker Barrel though in a wonderful way. And we've got more innovation coming in the spring that feels -- I want to be really careful, innovation that feels very, very Cracker Barrel. Like what we've done with Pot Roast and Hashbrown Casserole, Shepherd's Pie, but it's newness to the menu that I know our guests will appreciate.

One of the things we're bringing back in spring is like -- is a bring back, but sort of in an innovation space. So it's something that used to be on the menu that guests have asked us to bring back, and so that's coming back as well. So again, really taking that feedback, that focus on food and continuing to bring forward a menu that we know our guests will crave.

The next question will come from Brian Mullan with Piper Sandler.

Just a question on the retail business. Just any thoughts you could offer about the upcoming holiday season? How do you feel about the assortment, the team's ability to execute. And then maybe anything you could offer in terms of what we might be able to expect to see on retail gross margins here in fiscal 2Q? Just any puts and takes. That you could call out?

Brian, it's Julie. I'll start and then I'll let Craig jump in on the margin side of things. The team continues to execute the transformation of the retail business. We're looking at the assortment. We're looking at the shopping experience, making sure that people can get through. It could be a little tight in our stores, sometimes, especially when we're busy. So they continue to work those pieces of the plan. We're pleased with our ability to execute this holiday.

If you think back, this has been a really tumultuous year for retail with the tariff stuff at the beginning of the year and then the way that, that's manifested and the back and forth as the year has come to bear. I think the team has done a really nice job of absorbing the impact of tariffs, but also using that to make the assortment stronger. We specifically held putting our Christmas on the floor until a little bit later than we did the prior year.

The impact of that is that we actually have, I think, a better assortment right now on the floor. That's not as old, that's not a shopworn. And so we actually comparatively to kind of some of our competition, we have goods on the floor, which I think is a really nice place for us to be right now. We are in business with items at a great value price point. The team continues to do a nice job of making sure that we're bringing that value forward.

And then where we need to when we're watching items, like, for example, our Ornament business right now is on markdown because we were a little heavy on that side of things and also just getting to the price point that the guests really requires on that right now. But team has done a nice job responding. I think the assortment looks really good. guests are responding to the assortment. Inventory is a little bit heavier than where we were last year, but some of that is also the way that we brought in the goods given the tariff situation earlier in the year.

Brian, on margins, margins are being impacted in large part by tariffs. Our plan for tariffs all along was in the first year to address the dollar impact of tariffs. So we always expected that our percent margins would go down, and our work really focused on mitigating the dollar impact. And I think we had a lot of success with that. What we're seeing, I think, with maybe somewhat related, someone unrelated, there's also a mix shift that's happening where guests are kind of trading down in some ways in the retail space.

And then this is a general environment for retail, we're seeing a bit of a lower attach. That will kind of naturally result in a little bit more markdowns. But our expectation, even before our recent change was that our margins would be lower this year for -- the marginal rates would be lower, even though we would expect that we would have been neutral, relatively speaking, on a margin dollar perspective.

Okay. And then just a follow-up, a clarification on G&A. Can you give a sense of what you're assuming for either adjusted G&A dollars for the full year now? Or if not that, maybe just a good quarterly run rate to think about starting in fiscal 3Q after you're fully done with the restructuring actions?

I don't want to get too prescriptive on that one. What I would say is we have a $20 million to $25 million range on an annualized basis, and we expect to have that fully -- well, almost fully executed, almost fully executed by the end of Q2. So just that by itself would convert into an impact in Q3 and Q4. We did start some of that work, and we got some of the benefit into Q1 and we have some more in Q2. But the vast majority of that will occur in -- by the end of Q2.

The next question will come from Sara Senatore with Bank of America.

Isiah Austin on for Sarah. Just after everything that's been covered. Just a quick question. You guys noted earlier that your Google star rating is correlated with your traffic. Any idea of how far ahead you guys lead that or how to think about, I guess, the spread on that?

It's Craig. I'll start. We have done a lot of work on the Google star rating, we're pleased with the improvements we're seeing there. The analysis approach that we use is a longer -- a bit of a longer tail. Just keep in mind, our typical guess comes in twice per year. So we look at this over about a year. So it's not like a light switch. It's something that happens more gradually. But bear in mind, the frequency of our guests.

Yes. When we launched the metrics that matter about 2 years ago at this point in time, we looked at the things that were most highly correlated with same-store sales growth and Google star was at the top of that. So we've recently checked that correlation, given everything that's going on, and I can tell you that it is still valid. So we haven't given sort of your question of like what's the tail there and how much time for recovery.

Know that it is still correlated and we are still looking at it and it's one reason why we're driving it so hard. I'm really pleased with the improvements that Doug has made since stepping into his role 45 days ago.

Very helpful. And then just as a follow-up question on the topic of just cutting -- like having corporate restructuring in order to address the current situation. Any idea on whether that could cause concern around long-term performance? Just kind of thinking about what specifically you guys are thinking of cutting in that restructuring?

Yes, I'll start with that one, Isiah. What we're doing here is driving incredible focus. I mean we -- given the prior -- our highest priority is [indiscernible] and guest experience. So we have -- that's always been there. We have elevated that even more. And there are some other work streams that are value creating, but over a longer period of time that we have kind of pulled back on for now.

But in terms of regaining our momentum from where we are, we think we'll have the resources to do that, and we can make other decisions as it relates to G&A in the future. But we all -- another point is we also had previously committed to getting back to our historical G&A run rate. In some ways, what we're doing here is, we're accelerating some of those decisions.

The next question will come from Jon Tower with Citi.

Just a quick one for me. Craig, I was just wondering if you could remind us what the plans are for the debt that's coming due later this year?

John, the -- our plans are -- for the convertible that matures in June of 2026, our plans would be to pay that about the time that it matures by drawing down on the revolver. We repaid about half of that when we refinanced a few months ago. So we have about half of that original convert outstanding, and then we have the capacity on the revolver to cover that.

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

Thank you so much for joining us today. Although, we are facing headwinds, we are confident that the plan we are executing will drive improved performance and that we will regain our momentum. Finally, I want to express my sincere appreciation to our team members for their hard work and dedication. Thank you, and happy holidays.

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

Good day and welcome to the Cracker Barrel Fourth Quarter Fiscal 2025 Conference Call and Webcast. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead, sir.

Thank you. Good afternoon, and welcome to Cracker Barrel's Fourth Quarter Fiscal 2025 Conference Call and Webcast. This afternoon, we issued a press release announcing our fourth quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the fourth quarter ended August 1, 2025. Please refer to the note in our press release for further details about these metrics. .

The company believes these measures provide investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last page of the press release include reconciliations from the non-GAAP information to the GAAP financials.

On the call with me are Cracker Barrel's President and CEO, Julie Masino; and Senior Vice President and CFO, Craig Pommells. Julie and Craig will provide a review of the business, financials and outlook. We will then open up the call for questions. On this call, statements may be made by management of their beliefs and expectations regarding the company's future operating results or expected future events. These are not 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, and the company undertakes no obligation to update it, except as may be required under applicable law.

I'll now turn the call over to Cracker Barrel's President and CEO, Julie Masino. Julie?

Thank you, everyone, for joining. I'd like to start by saying what an honor it is to be trusted with the responsibility of stewarding the Cracker Barrel brand. Ever since the company's founding in 1969, Cracker Barrel has been a home away from home for America, with our restaurants, people and food offering a reminder of some of the country's greatest attributes, family, hard work, scratch-made meals and country hospitality. .

Cracker Barrel is not just an old country store or a restaurant. It's the front porch of America, and we take that very seriously. The feedback we received from our guests in recent weeks on our brand refresh and store remodels, has shown us just how deeply people care about Cracker Barrel. We thank our guests for sharing their voices and love for the brand and telling us when we've misstepped. We've listened carefully. As we've discussed on past conference calls and presentations, we've been advancing a multiyear plan to return Cracker Barrel to growth and ensure we're here to welcome families around our table for generations to come, while staying true to what is so special about the brand. We conducted extensive research to inform our strategic plan. Well what cannot be captured in data is how much our guests see themselves in their own story in the Cracker Barrel experience, which is what's led to such a strong response to these changes.

We have already taken steps to get back on track. We want longtime fans and new guests to experience the full story of the people, places and food that makes Cracker Barrel so special. That's why our team pivoted quickly to switch back to our old-timer logo and has already begun executing new marketing, advertising and social media initiatives, leaning into Uncle Herschel and the nostalgia around the brand with more to come. We also hit pause on our remodels and are reverting the 4 locations with the modern design to our old-timer signage and more traditional interiors. And we've adjusted the investment plan for our restaurants.

The brand refresh activities around our logo and our remodel tests were only one part of the work we were and are doing to make sure Cracker Barrel continues to thrive. A key imperative of our multiyear plan has been to deliver food and experience our guests love, and we are placing an even bigger emphasis in the kitchen and other areas that enhance the guest experience. In the past week, we've instituted process changes to ensure our signature biscuits are living up to our guests' memories and expectations, and there is more to come on the food front.

We look forward to continuing to invest in our loyalty program to seek even more direct feedback from our core guests. We are confident in our path ahead, leveraging the many elements of our multiyear plan that have been working along with these recent changes we have made, leaning into Cracker Barrel heritage, listening to and steepening the connection with our guests. We're moving ahead with a strong plan to regain traffic and the momentum we had a month ago. There is a lot to be optimistic about. And our teams are focused on getting back to a positive trajectory.

I'll now turn the call over to Craig for details on our results as well as our outlook and I'll return later to dive more deeply into our key focus areas going forward.

Thank you, Julie, and good afternoon, everyone. Before reviewing our fourth quarter results, I will share a brief update on the full year. Adjusting for the impact of the 53rd week in the prior year, we grew revenue by 2.2%, which included a comparable store restaurant sales growth of 3.5%. Additionally, we delivered adjusted EBITDA growth of 9%. Our teams did a great job delivering these results in fiscal '25.

Now turning to the quarterly results. For Q4, we reported total revenue of $868 million, which included restaurant revenue of $718.2 million and retail revenue of $149.8 million. Excluding the $62.8 million benefit from the 53rd week in the prior year, total revenue increased 4.4%. Comparable store restaurant sales grew by 5.4%, representing the fifth consecutive quarter of positive comparable store restaurant sales growth. Pricing for the quarter was 5.4%. We continue to be pleased with the strategic pricing initiative as flow-through results remain favorable. Additionally, menu mix was also favorable by 1%. Off-premise sales were 18.1% of restaurant sales, an increase of approximately 100 basis points versus prior year. Comparable store retail sales decreased by 0.8%.

Moving on to our fourth quarter expenses. Total cost of goods sold in the quarter was 30.5% of total revenue versus 30.4% in the prior year. Restaurant cost of goods sold was 26.3% of restaurant sales versus 26% in the prior year. This 30 basis point increase was primarily driven by menu mix commodity inflation and higher promotion-driven waste partially offset by menu pricing. Commodity inflation was approximately 2.3%, driven principally by higher beef, pork and crisis, partially offset by lower poultry and produce prices. Retail cost of goods sold was 51% of retail sales versus 50.1% in the prior year. This 90 basis point increase was primarily driven by $2.4 million in additional tariff expense. Our inventories at quarter end were $180.6 million compared to $181 million in the prior year. Labor and related expenses were 36.5% of revenue compared to 37.5% in the prior year. This 100 basis point improvement was primarily driven by menu pricing, improved productivity and improved turnover, partially offset by wage inflation of approximately 1.1%. Other operating expenses were 24.9% of revenue compared to 23.9% in the prior year. This 100 basis point increase was primarily driven by higher advertising expense and higher depreciation.

General and administrative expenses were 5.8% of revenue compared to adjusted general and administrative expenses of 5.2% in the prior year. This 60 basis point increase was primarily driven by investments to support our strategic initiatives and a more normalized incentive compensation. Our GAAP financial results include a noncash store impairment charge of $16.2 million, primarily related to low-performing Maple Street stores, many of which have already closed in the first quarter. Net interest expense was $4.7 million compared to net interest expense of $5.7 million in the prior year. This decrease was primarily the result of lower average interest rates. Our GAAP income taxes were a $4.3 million credit. Adjusted income taxes were a $1.2 million credit. GAAP earnings per diluted share were $0.30 and adjusted earnings per diluted share were $0.74. Adjusted EBITDA was $55.7 million or 6.4% of total revenue. Excluding the $5.8 million impact from the 53rd week in the prior year, adjusted EBITDA increased by 8%.

Now turning to capital allocation and/or balance sheet. In the fourth quarter, we invested $45.4 million in capital expenditures. For the full year, capital expenditures were $158.6 million, which includes approximately $105 million in store maintenance $20 million related to remodels, $19 million for technology and other strategic initiatives and $15 million for new stores. We ended the quarter with $445 million in debt net of cash, which was $19.6 million lower than the prior year. As disclosed through the quarter, we executed a new convertible debt transaction that raised approximately $345 million through the issuance and sale of 1.75% coupon convertible senior notes due in 2030. The proceeds were used to repay $150 million of the existing convertible debt. Purchased a capped call that reduces the dilution risk on the new convertible debt and pay down the revolver. We intend to repay the remaining $150 million of the existing convertible when it matures in June of 2026. We were pleased with the outcome and terms of the new convertible. This transaction, coupled with the refinancing of our credit facility in May, further fortifies our balance sheet, giving us confidence that we can successfully navigate through any short-term headwinds and also provides ample liquidity to execute our plans. Additionally, as announced in today's press release, the Board authorized a new $100 million share repurchase program and declared a quarterly dividend of $0.25 per share, payable on November 12, 2025, to shareholders of record on October 17, 2025.

Turning to our fiscal '26 outlook. I'll start with an update on traffic trends to date in the first quarter. Traffic for the first half of August was down approximately 1%. Since August 19, the date of the initial logo change, traffic has declined approximately 8%. Assuming similar trends continue for the remainder of the quarter, we anticipate a Q1 traffic decline of approximately 7% to 8%. Our outlook reflects our best estimate today. The rate and level of our traffic recovery as well as the level of investment required will be key drivers of our fiscal '26 EBITDA performance. For fiscal '26, as outlined in our press release, we anticipate the following: total revenue of $3.35 billion to $3.45 billion, which contemplates annual traffic off negative 4% to negative 7%. This assumes that our traffic trend improved sequentially each quarter with a meaningfully higher rate of improvement in the second half of the year compared to the first half. Pricing up 4% to 5%, the opening of 2 new Cracker Barrel stores and the closure of 14 Maple Street units. Commodity inflation of 2.5% to 3.5%. Our only wage inflation of 3% to 4%. Related to retail, to our remediation efforts, we were able to largely offset the incremental impact from tariffs.

Taking all of the above into account, we anticipate full year adjusted EBITDA for approximately $150 million to $190 million. For Q1, we expect adjusted EBITDA to be significantly below prior year due to lower traffic expectations and approximately $16 million in various costs related to our ongoing investments in advertising and marketing as well as our general managers conference, which typically occurs every other year and manage our training costs. We are planning for capital expenditures of approximately $135 million to $150 million, consisting of approximately 60% maintenance, 35% technology and other strategic initiatives and 5% new units with no spending on new remodels. Finally, as noted in the press release, this guidance replaces all previous guidance or projections, including with respect to fiscal '27. We look forward to updating you throughout the year as we work towards our objectives.

I will now turn the call back over to Julie.

Thanks, Craig. Cracker Barrel is an incredible brand. We are proud to welcome millions of guests a year. Our hardworking team is more than 70,000 people strong. Our value proposition is exceptional. Our breakfast offerings are standouts. Our retail assortments are enticing and our balance sheet is strong. As you know, the company for many years was not delivering the results that we know are possible for this brand.

The choices people have, their expectations around food and experience the way they travel and their technology have all changed dramatically over the last decade, and the company had not kept pace. I share this to reground us in the importance of Cracker Barrel's growth. We deeply value the strong emotional connection our guests have, not just to the old-timer logo or vintage Americana decor, but to the sense of tradition and nostalgia those represent. That connection is powerful, and we recognize there are other areas where we must continue improving, especially in our food and overall guest experience. Fortunately, these were already part of our multiyear plan, and we are moving forward with a renewed focus on both.

You've heard me say before that we have all the right pieces to return to being a leading restaurant company with meaningfully improved margins and growth potential. There are many elements of our plan that have been working well and delivering results. As you've seen from our 5 consecutive quarters of positive comp store restaurant sales and a 9% growth in adjusted EBITDA we delivered in fiscal 2025. Some of the successful elements of our plan include actions we've taken so far with our food and menu, bringing back old favorites like Uncle Herschel's breakfast and chicken and rice as well as introducing new dishes like pot roast and our improved New York strip steak, enhancing how our food is presented on our menus and evaluating and adjusting our pricing and value positioning.

We've also taken significant steps in the back of the house with the goal of improving food quality while increasing efficiencies and reducing waste. We've continued to invest in our people and training. And in the last 2 years, we've seen hourly turnover improved by 19 percentage points along with more consistent and better operational execution in our restaurants, and our initiatives continue to drive improvement in digital and off-premise. The return of Campfire Meals to our summer menu in 2025 is a perfect example. We brought back a menu item that many guests and team members asked for, while improving quality and streamlining kitchen execution.

The new offering started at a compelling price point of $10.99. The promotion was supported by an integrated advertising campaign that also highlighted our sponsorship of the Cracker Barrel 400, a NASCAR Cup Series motor rates in June and activations at key Speedway Motorsports destinations nationwide. We shared the news of the return of Campfire First with our loyalty members, and they joined us. And the results were excellent. Our dinner traffic in Q4 was positive at 1% for the first time since fiscal year '19, excluding COVID. We're continuing to lean into craveable flavors and comforting dishes, which you can see on our current fall menu with our herb roasted chicken and our sausage and egg hashbrown casserole, another innovation with our beloved hashbrown casserole.

I mentioned earlier that we've instituted process changes to ensure our signature biscuits are living up to our guests memories and expectations. And we're also making changes to our Meatloaf and green bean preparation, along with accelerating testing on other core item improvements. I've talked before about back of the house optimization as a key part of improving food quality and consistency while simplifying operations and execution. Phase 1 of our back of the house optimization was rolled out in Q3 and adjustments on our processes that I just mentioned are a direct result of learnings from that rollout. Phase 2 was piloted in 15 stores late in the fourth quarter. We're encouraged by the initial results and plan to test a region in the second half of fiscal '26.

We're also leaning even more into country hospitality and operational excellence. In early August, we implemented our new service principles, the Herschel Way. inspired by our beloved uncommercial and the warm and gracious hospitality he showed to all. The Herschel Way builds on the updated service standards we introduced in Q3 and aligns our team members to consistently deliver exceptional guest experiences. Our guest loyalty program is another element of our multiyear plan that has been performing well and delivering results. Over the past year, we continue to see strong membership growth for Cracker Barrel Rewards, with membership increasing by 3 million people. We now have over 9 million members after just 2 years of the program. And those members account for over 35% of tracked sales and an even higher percentage of retail sales.

Notably, our Cracker Barrel Rewards membership has increased in recent weeks, rising by over 400,000 members in Q1 to date, and 300,000 in the most recent 4 weeks, both of which are above plan. Looking ahead to build on all we've heard in recent weeks, tomorrow, we are launching front porch feedback which gives our reward members the opportunity after every visit to comment directly to our team on aspects of their visit. We will be listening to an actioning initiatives based on their valuable input.

Before I close the call and we turn it over for your questions, I want to spend a few minutes on our previous remodel program and our updated capital investment plan. From the time we introduced our multiyear plan, we committed to being careful stewards of capital, only making large-scale investments if we felt confident in the returns and to proceeding slowly with a test-and-learn mentality. In keeping with this philosophy, as Craig shared with you, the total invested in our remodel program during fiscal 2025 was approximately $20 million of our overall $159 million CapEx for the year. That number also includes some regular guest-facing maintenance in certain locations, such as restroom upgrades.

Since the outset, we have been clear that our stores require significant maintenance and repair and it's this defensive spending that has made up the majority of our store investments over the past 2 years. Along with those critical investments, we also saw an opportunity to provide an even more welcoming and comfortable experience with additional incremental improvements. The kind of things that would lead to loyal guests visiting us more frequently, team members staying with us and new guests joining us, all while remaining authentically Cracker Barrel. We have shared information previously on our refreshes and various levels of remodels and have discussed the changes we were making in test stores. Over the past year, we have tested various elements, paint colors, lighting, sound, seating and so on. listening closely to what our guests are telling us. We are still listening.

The modern design that has been seen online and in social media was only tested in 4 of our locations. As we recently committed and as I noted earlier, we will not proceed with these modern stores. and have also begun reverting to our old-timer signage and bringing back more traditional Cracker Barrel interiors to these locations. Some of this will take time due to permitting and other constraints, but it is happening. In addition to those 4 modern design locations, we touched another 58 stores or less than 10% of our system since starting to test remodels. We've hit pause on these as well and will not roll out any further remodels or refreshes while we continue to gather and evaluate data on the existing stores, looking at the specific elements that guests love and those they don't. Of course, in all of our locations, the core elements that people expect from Cracker Barrel are there today, and they will always be there. Rocking chairs on the front porch, Vintage Americana decor and antiques hold straight from our warehouse in Tennessee, pay games, fireplaces and our unique retail shop.

Going forward, we'll continue to maintain and repair our stores and improve them in ways that our guests and team members expect and will leverage learnings from our test locations for any future improvements in a disciplined way. This brings me to our updated capital spending plans. As Craig noted, we expect to invest approximately $135 million to $150 million in the coming fiscal year. The bulk of this will be maintenance CapEx, things like paints, parking lots, lighting, retail fixtures, flooring and restrooms as well as investments in technology to support our stores and our loyalty program. Given the adjustments we are making, it's too early to set a specific CapEx range for fiscal '27, but we will be well below the prior 3-year figure of $600 million to $700 million that we provided at the outset of our program for fiscal '25 through '27.

Our Board remains committed to a disciplined approach to capital allocation, investing in our core business, improving our quarterly dividend and authorizing a $100 million share repurchase program, all while maintaining a conservative balance sheet. This week, we will be celebrating Cracker Barrel's 56th birthday. As we cross this milestone and look ahead to America's 25th birthday, I want to say again how proud we are to serve our guests and to thank our hard-working team members. Cracker Barrel is a part of America's story. Our stores are in your communities. Our team members are your neighbors. Our suppliers are your local businesses. We are fortunate there's so much passion for the brand, our heritage and our place in people's lives. We are more focused than ever on making sure Cracker Barrel is here to serve families for generations to come. Again, there's a lot to be optimistic about.

Operator, we'll now turn the call over for questions.

[Operator Instructions] And your first question today will come from Brian Mullan with Piper Sandler.

Thank you for sharing the traffic performance this quarter. Just given what you saw following the logo change, I just had a question about the marketing plans there. Do you still spend the same amount of dollars and maybe just change the message in order to drive that sequential traffic recovery you're expecting? Or maybe do you pull back on spending regroup a bit? Just how are you thinking about that as you sit here today? And is there any way to perhaps actually take advantage of all this recent attention over time?

Brian, thanks for the question. It's Julie. We expect marketing as a percent of sales will be a little bit higher in '26 than it was in '25 with Q1, in particular, up a bit. We're continuing to invest in marketing. You saw some great performance from our investment there in Q4, but especially given the need right now to drive traffic in light of the current headwinds, we're going to continue to invest there.

Okay. And then just a follow-up on some of the back of the house issues. I think Phase 2 this year was always going to be focused on improving some of the processes. But separate from that in the prepared remarks, you've talked about improving some of the food quality of some of the items. Just trying to understand, like was this always the plan on the food quality side? Or is some of this maybe due to broader feedback you've done since the logo change, just really any color on the plans, both processes as well as food on the menu that you're working on?

Sure. It's a great question. look, food quality has always been a north star for us in the plan. We've been focused on that as well as process simplification to make jobs easier and improve productivity. Phase 1, as we talked about, rolled out in Q3, Phase 2 started testing in Q4, like I said in my prepared remarks, Kitchen initiatives like this are complex. And I think as we shared with you guys a couple of quarters ago, we said it was going to have 3 phases, multifaceted. We just continue to evaluate processes as they get out there. We're learning from scale. We continue to listen to our team members and watch food quality scores and value scores. We remain focused on all that, and we'll just keep focused on all of these things.

And your next question today will come from Dennis Geiger with UBS.

I appreciate the quarter-to-date or year-to-date color. Wondering if you could share anything more sort of on how things have trended just given the sensitivity and the magnitude of some of the pressure. Anything to share have gone by? Have you've seen any kind of improvement within that trajectory? I understand you gave the 1Q guide. But just if anything more on the cadence weekly cadence so far?

Dennis, this is Craig. I'll start on that one. I think for us, if we kind of think about where we were before all of this before 08/19, traffic was down about 1%. Q4 was also down about 1%. And obviously, we had reported the 5 consecutive quarters of same-restaurant store sales. So we're very happy with that, and we're pleased with that performance. And obviously, things have changed a bit here recently. I think the guide that we've given for the quarter is really our best thinking at this point. And as we think about the year, the -- our best thinking right now is we'll continue to get better sequentially quarter-over-quarter, and we expect even greater rate of improvement in the second half of the year. But this is a bit of an unusual situation, and we factored all that into our guidance.

The only thing I'd add, Dennis, is the teams are hard at work. We have taken the feedback from our guests, pivoted quickly. We've got a plan to drive traffic, and we're optimistic that we can get back to that prior run rate.

Very helpful, guys. And the last one, I guess sort of 2 parts. If anything additional on the weakness and the challenges, whether it's regional anything by cohort or frequency of guess if you've got anything more or maybe it's just broad-based. And the more important second part of the question is kind of Julie, what you just touched on. from here plans, in particular, to address kind of the near-term challenge, it sounds like the front porch feedback initiative is going to help to dictate some of the plans in the reaction here? Just wanted to see if I have that correct or if anything else to share on kind of near to medium-term stuff to recover that traffic?

Benny, this is Craig. I'll get started with the first part of that and then turn it over to Julie. We have seen declines that are relatively broad-based, but the declines are larger in the Southeast, excluding Florida. In terms of cohorts by income, we're not seeing any substantial differences by income. In terms of age, again, fairly broad-based. We're doing a little bit better or a little bit of less decline with the over 65 cohort. But speaking more generally, broad-based geographically, a little bit more in the Southeast, that's Florida and broad-based with income at age.

From a plan standpoint, Dennis, we had really planned to focus on a lot of new menu innovation this fall, driving our herbs roasted chicken, our sausage and egg hashbrown casserole. We also brought back 2 guests request to the menu Uncle Herschel's breakfast rejoined the menu ironically on the day of the logo change as well as country mornings breakfast. So those are 2 breakfast items that guests have been asking for for a while. We continue to listen to our guests. I think we've shown that throughout the last year with items coming back like Campfire. We're continuing to do that right now as we really pivot and double down. Marketing plans that you're going to be seeing in the next few weeks really center around college football. We've got some advertising buys there that were existing prior to this event. We've got some big news coming next that we're excited about. So just stay tuned. The teams are really actively engaged in making sure all of our guests know that we are honoring our legacy and our heritage and inviting everybody in for a great meal around our table. .

And your next question today will come from Jake Bartlett with Truist Securities.

My first was on the margin guidance. We implied margin guidance for '26. Maybe if you could kind of dig into the moving pieces before we had talked about $55 million to $60 million in cost savings from the back of the house sounds like that plan has changed a little bit, but it seems to be on track. Maybe just to describe maybe how much savings you expect there. What you're looking at from G&A.? I think obviously, 2025 is an investment year, as you described it. The situation has changed. Wondering whether G&A might -- there's opportunity to bring that down? And then lastly, within the guidance, are there any unusual items -- and then something that won't be backed out, but they just are larger than normal, specifically maybe in the first quarter, maybe there's some expenses that you've incurred as you've had to react to the near-term disruptions.

Jake, it's Craig. I'll start with Q1. I think the biggest item for Q1 is we -- obviously, we have the softer traffic and we've given the guide there in terms of our expectations. We also have that $16 million in additional costs that relates to the marketing and the advertising. Our general managers conference actually occurs every other year. So we'll incur that this year. We did not incur it last year and then we have some related training costs. So all of that together will be a meaningful impact to Q1. And as we think about the full year, the biggest driver in our EBITDA consideration at this point is really around traffic. So that negative 7% to negative 4%. That's a pretty big range, but obviously, we're still early in this. We're only about 30 days away from when all of this occurred. So that's going to be the big lever. And the marginal impact of that is also quite substantial. The way that we think about that is a flow-through rate on that traffic of somewhere between 30% and 45%. So those are going to be the biggest drivers in terms of our EBITDA guidance. We do have a fair bit of cost savings in the plan, but we also have things going in the other direction. So at this point, the best I can do is kind of point you to the full year guidance and point you to the traffic performance has been the biggest driver there.

I think the only clarifying point I would make, Jake, because I thought I heard you say $55 million to $60 million attributed to backup house. I don't think we've actually attributed $55 million to $60 million backup house. We've just said we'd have $55 million to $60 million in cost saves of which backup house is one of the key initiatives in there. So just to clarify that for you. We are moving forward with back of house. It's kind of a 3-phase program. There are savings associated with that, but that's not the only thing driving that $55 million to $60 million.

Over multiple years as well as the other key point there.

Got it. Should we think about the $55 million to $60 million, and I'd love to hear what the other big buckets there are. But as something that is still would be expected within the '26 and '27 or is it the prior plan? Or has that changed materially?

Yes. I think given all of the moving pieces here, we are not going to share any more about that at this point. I mean we think the $50 million to $60 million is still achievable. It may take the exact time frame. We'll have to update as we kind of navigate through all of that about $50 million to $60 million still achievable. We're still evaluating the exact timing of that at this point, and we've contemplated all of that in our guidance.

The only thing I'd add there, Jake, is, we are -- it's one of the things I think this company is really best at. We are really good at cost saves. And we have a history of delivering that over the last several years, even before my arrival. So the teams bubble down. They have some good plans there, and we will deliver there.

Great. And then another question was on the balance sheet and the return of cash to shareholders. You have the authorization now, the $100 million. I guess the question is what your approach is to the balance sheet. It looks like your EBITDA guidance is about your equal to your CapEx guidance. So if you look at where your EBITDA guidance is, you're going to get a little bit higher leverage there anyway from that. So is it feasible to return cash to shareholders this year given in the framework of your guidance? Or is that just kind of a tool maybe for upside? Or how do we think about your approach to the balance sheet, returning cash to shareholders in the context of your guidance?

Jake, I'll start with that one. The -- for a long time, the Cracker Barrel Board's approach to capital allocation is to use a balanced approach. The Board is always looking to optimize and they focus on investing in value-creating activities in the core business, maintaining a conservative balance sheet, in particular as it relates to our debt profile and then returning cash to shareholders. So the Board is going to continue to evaluate that and be a bit opportunistic. So I don't think any of those decisions are final. They're going to -- obviously, they have made the authorization, they've approved the dividend and they're going to continue to monitor that as things evolve. .

And your next question today will come from Jeff Farmer with Gordon Haskett.

Several of your casual dining and family dining peers have been looks like increasingly aggressive in pursuing low price point offers or just value promotions at a certain price point. So again, sort of as the logo dynamic has played out over the last 5 to 6 weeks, even in that narrow time frame, the segment has gotten increasingly competitive. So in lieu of what a lot of your peers are doing, how does that impact your own top line strategy?

Yes. Jeff, it's Julie. I'll start and then Craig can jump in. We are -- we continue, as you've noted, to see that with the competition, there's a lot of promotional activity out there and dealing going on. Now we would expect some of that consists back-to-school season, and you usually see a lot of that this time of year. I'd remind you and everyone out there, what an incredible value we deliver to our guests in so many ways. The first one that I'd love to point out is check. Our check for fiscal '25 still ended the year right around $15, while family dining was a little over $18 and casual is at $27. So eating a meal at Cracker Barrel of our abundant scratch-made food. And remember, people at Cracker Barrel have told us, our guests have told us redoundingly that they value our delicious food in abundance People leave with druggie bag, they leave with to-go containers. And so we think that we really still represent that great value. We were recently on air with our Sunrise Special, which is our $7.99 all-day offering of 2 pancakes and your choice of either eggs or breakfast protein. We've got great items out there. If you think about Campfire, one of the reasons that landed so well with our guests is we had an opening price point at $10.99 on that new sausage and shrimp skill it as part of the Campfire menu. Our barbell strategy continues to resonate with our guests, think about how we've evidenced that in the last year, what we've been able to flow through in pricing, the 1 percentage point of mix we delivered every single quarter in '25. We've got early dinner deals starting at $8.99 that continue to perform well for us. And then honestly, the chart on the top is our loyalty program, which is another way that we deliver tremendous value. When we look at the promotional activity that we've put out there in the last couple of weeks, just to reinvite guests back into our restaurants, they've resonated really well. We had the Sunrise Special BOGO. And then this last weekend, we offered the old timers' BOGO because we know how much everybody loves the old timer. What's better than 1, 2. So we brought in yet this past weekend with that. We saw that resonate not only with guests, but with our loyalty members as well. And they were able to earn pegs on all of those transactions. So it continues to be a way that we deliver great value to our guests. So we believe that we are well poised as I've said in the past, to compete in this space because we have such great value day in and day out.

Yes. And internally, we continue to see our value scores make gains on top of gains. So we're particularly pleased with that. But we have some levers here.

Okay. And then I think I heard you guys say 4% to 5% menu pricing in 2026, is that accurate?

Correct. Yes.

Okay. So the question that follows that, actually, a couple would be. So that's quite a bit of how of your commodity and wage inflation, roughly 100 to 200 basis points. And it would be one of the highest menu pricing levels in this sector. So 2 questions. So why do you guys feel the need to sort of push that pricing? Is this just, again, sort of going back to the -- or rejiggering the pricing structure? And do you expect your consumers to sort of accept this pricing without too much pushback?

Absolutely. The -- so keep in mind, as you know, Jeff, we revamped our whole pricing approach a couple of years ago, we've built up that capability and that has been working well. And we measure that on an ongoing basis. We continue to see really good flow-through. We continue to make gains with our value scores. And we've actually -- even with that, we've been generating positive mix. And I think if you think about 4% to 5% in context of $15, it is just still a smaller dollar increase, and it continues to it continues to work for us. We've also been really careful as we use the kind of the barbell pricing approach. We've been really careful in terms of maintaining those entry price points, and that's been helpful. We also have the loyalty program that continues to grow and exceed our expectations. And so guests that dine with us more frequently effectively can get an incremental discount with that program. So we're taking higher pricing, but we've been really thoughtful about how to do that and continue to flow through well from a guest perspective.

And your next question today will come from Sarah Senatore with Bank of America.

I guess one quick clarification. I think you said, Craig, that most of the age cohorts or you didn't see a lot of variation outside of the geographic kind of split, but that the older cohort was perhaps less affected than younger. So I just wanted to clarify that, and then I do have a question.

Sara, yes, that's correct. We are seeing the impacts really across all of the cohorts. However, our over 65 cohorts has held up best relative to the others.

Okay. And I guess in that context, and maybe, Julie, similar what you said was that Cracker Barrel hadn't evolved with the guests from prior to many -- for many years, which I think certainly makes sense. I guess, if remodeling and rebranding isn't the way to sort of evolve or bring the brand forward. Maybe you could talk a little bit more about what is as you think about maybe shift -- either shifting your customer base to perhaps maybe easing a little bit more useful? Or how you think about evolving the brand in the context of your comments earlier?

Yes, Sara, thanks for the question. Look, I think the way we've talked about the plan is we -- first of all, we spent a lot of time on research and really understanding where Cracker Barrel at versus our competition and what our opportunities were and also what our strengths were. And that was always about food and experiences that guests love, and we were kind of in the middle of the pack on some of those scores when we rated ourselves against the competition. So one of the key tenets for our plan has been around food and experience. And when you think about the 5 pillars that we put out there, brand and even the logo piece was just 1 small work stream of those 5 pillars and the [ 21 ] work stream that we've put out there, same with remodels, it's one small work stream. We know that we've had work to do on food experience. The loyalty progress of that pricing was a piece of that. So all of those things are coming together in the plan. As we've talked on this call and in my prepared remarks, a lot of those pieces are really working. So we feel like this is still the right plan. And our focus right now, our renewed focus is on food and experience. We're really doubling down there. taking in a lot of the feedback from the recent weeks and continuing to evaluate the menu and the work that we need to do there.

Okay. That's very helpful. And just then sorry, second quick modeling question, Craig. Can you just talk a little bit -- I'm sorry, if I missed it, G&A was a good guy again this quarter. I think last quarter, you had said that there might be some timing shifts. So could you just maybe explain maybe what happened?

Well, we've been continuing to manage our -- manage G&A as a part of the broader our broader cost savings efforts. So we're always looking at our G&A spend and whenever there is an opportunity to spend less, we're always taking that. So we've continued to manage it. The entire team is working to deploy those dollars as effectively as possible, and that paid off in the quarter.

[Operator Instructions] And your next question today will come from Jon Tower with Citi.

Jumping around on mix, if you don't mind. You had mentioned quarter-to-date, you're seeing good, not good, but you're seeing traffic declines. But at the same time you're seeing an uptick in loyalty sign-ups, I believe you talked about, I think in the recent weeks, 300,000 loyalty members sign up. So can you speak to what's happening there? Are you doing anything internally at the stores to get people to jump into the program more so than what you were doing previously?

Jon, it's Julie. Our loyalty program is not -- has not been impacted as we talked in by recent events. Your takeaways were correct. Traffic is a little bit down, not a little bit. I think you said good I don't know about that. Traffic is down since 08/19, but the loyalty program sign-ups are actually ahead of our plan. So we've signed up about 400,000 people quarter-to-date and 300,000 of those people have come in since 08/19, again, exceeding our plan exceeding our expectations. We haven't changed any activity in the stores around that to specifically answer your question. We know that it's a great program. People really love being in it. As Craig and I talked earlier, it provides great value. And we're really excited to launch this front porch feedback piece of it tomorrow because we've gotten so much feedback in the last few weeks. What we think is -- what we think we can do with front porch feedback is really here from our loyal guests who are in all the time who've had an experience with us we've set it up so that it actually is linked to the traffic so that we can understand their transaction, their store, and we can start to aggregate feedback in new ways. So we're really excited about it. It's just another way that we can value our guests beyond just the pigs that they earn or the discounts that we might provide to them.

Cool. And then, I guess jumping around a little bit. Maybe, Craig, you had mentioned 60% of the CapEx this year is going to be roughly maintenance. Is that a good that $80 million to $90 million maintenance CapEx, a good way to think about it longer term over the next several years, $80 million, $90 million for baseline maintenance?

Yes. I think longer term, what we have shared -- what we've talked about is on an inflation-adjusted basis, this kind of $125 million as being a base spend amount. And that's what we were -- that's what we did in '24 and about that -- about '24 and '23 at about $125 million because -- and that includes base maintenance. It includes the things that -- some other ongoing projects. I think that's a good base number once you adjust that for inflation. We've also said that -- for the next couple of years, as we got a bit behind on maintenance in the stores through COVID, that is really important to get caught up there. We're in a competitive industry. and we need to ensure that we are showing up the way that we intend to in terms of that. So we've been making incremental investments there.

Okay. So that $125 million is a decent baseline in the next several years, adjusted for inflation in terms of...

Well on top of the -- again, as a base. Now on top of the $125 million, like we had in '25 and '26, we are making incremental investments, particularly in catching up on deferred maintenance. And both in '25 and '26, we also have some additional technology spend. But once we get through that on an inflation-adjusted basis, that $125 million number has been our historical run rate.

Got it. And then just in terms of your comments around the tariff remediation measures, can you speak to what exactly is going on there? Are you guys just sourcing from countries with better lower rates of tariffs? Or are you effectively pricing to offset the higher tariff rates, like what's going on with these measures?

Yes. Jon, the team has really done a great job there. Very proud of the work they've done. I'll give you a little bit more texture. In fiscal '26, we expect incremental year-over-year tariffs of about $25 million. So $25 million more in tariffs, in '26 than we did in '25. And that's -- the vast majority of that -- vast, vast majority of that is being mitigated by a few things. Number 1 is vendor negotiations, and the team has been working really hard on that and have had a lot of success. We've had multiple rounds of vendor negotiations. The other change is just in our assortment, like we sell a lot of things that are largely discretionary. And if we can't make a reasonable profit on it, then we don't need to sell it. So we've made those adjustments. There's also pricing, as you mentioned, -- and we've also made adjustments to the country of origin. That is an ongoing process that does take a little bit more time. And finally, we've taken the opportunity with the tariffs, but part of our broader retail strategy to adjust our SKU count. So when we added '26, we expect our total SKU count in the retail side of the business to be down about 10%. And the team has really worked hard and accomplished a lot as it relates to working through the tariff impacts.

Our vendors are partnered nicely with us on a lot of that work, too. Yes.

This will conclude our question-and-answer session. I would like to turn the conference back over to Julie Masino for any closing remarks.

Thank you for joining us today. We're moving ahead with a strong plan in place, and our teams are focused on getting back to a positive trajectory. We appreciate your interest and look forward to keeping you updated as we make progress throughout the fiscal year. Finally, I really want to express my sincere gratitude to our 70,000-plus team members for their dedication and hard work, particularly in these last few weeks. Thank you.

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