Release Date: June 05, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cracker Barrel Old Country Store Inc (CBRL, Financial) reported positive comparable store restaurant sales for the fourth consecutive quarter.
- Adjusted EBITDA exceeded expectations, indicating effective execution of the transformation plan.
- The company successfully launched new culinary promotions, such as the Campfire meals and shrimp dishes, which have been well-received.
- Cracker Barrel Rewards program achieved its fiscal '25 target of acquiring 8 million members, driving incremental sales and traffic.
- The company is leveraging AI technology to improve efficiency, including traffic forecasting and guest relations, which has shown positive results.
Negative Points
- Retail revenue decreased by 2.7%, and comparable store retail sales fell by 3.8%, indicating challenges in the retail segment.
- The company faces a $5 million EBITDA impact from tariffs, with ongoing uncertainty about future tariff effects.
- Labor and related expenses remain high, although there was a slight improvement in productivity.
- The macroeconomic environment and weather conditions negatively impacted traffic, particularly in February.
- The company is still in the early stages of its transformation plan, with significant investments required, impacting short-term profitability.
Q & A Highlights
Q: You noted that Q4 is off to a strong start. How does this compare to the 1% restaurant same-store sales growth reported in Q3?
A: Craig Pommells, CFO, explained that while February was challenging due to weather and consumer uncertainty, improvements were seen in March and April, continuing into Q4. The Campfire promotion is resonating well with guests, although no specific numbers were provided.
Q: Can you provide more detail on how you managed expenses in Q3?
A: Craig Pommells, CFO, stated that expenses were timed in several areas, particularly around G&A. Discretionary projects were adjusted, and G&A levels in Q4 are expected to resemble those in Q1 and Q2, including some project shifts from Q3.
Q: How should we think about G&A as a percentage of sales in the future?
A: Craig Pommells, CFO, mentioned that fiscal '25 is an investment year, and the intention is for G&A as a percentage of sales to return closer to historical levels. More details will be provided in the September call.
Q: What are the drivers of the improved outlook for margins despite the $5 million tariff headwind?
A: Craig Pommells, CFO, highlighted improvements in menu mix, labor gains, and benefits from initiatives like the back-of-house optimization. These structural improvements are part of the broader transformation plan.
Q: Can you elaborate on the $5 million tariff impact and mitigation efforts?
A: Julie Masino, CEO, explained that the company has been working on mitigating tariffs through vendor negotiations, alternate sourcing, and pricing adjustments. More specifics on the fiscal '26 impact will be shared in September.
Q: Will the back-of-house optimization initiative lead to a permanent reduction in labor hours?
A: Julie Masino, CEO, stated that the initiative aims to improve food quality and job ease. Craig Pommells, CFO, added that the initiative is expected to provide permanent structural benefits to labor costs and quality.
Q: What have you learned from the remodeling initiatives this year?
A: Julie Masino, CEO, noted that the company is still learning from the 20 remodels and refreshes completed. The results are positive, with feedback indicating improved guest and employee experiences. More details will be shared in September.
Q: How are traffic trends developing, and what are the demographic impacts?
A: Craig Pommells, CFO, mentioned that while February was challenging, trends improved through the quarter and into Q4. Demographic performance was steady, with no significant differences between age or income groups.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
