Cracker Barrel Old Country Store, Inc.

Good day, and welcome to the Cracker Barrel Fiscal 2022 First Quarter Earnings Call. All participants will be in lesson-only mode. Should you need assistance, please signal a conference specialist by pressing the Start key followed by 0. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jessica Hazel, Head of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Cracker Barrel's first quarter fiscal 2022 conference call and webcast. This morning, 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 for the first quarter ended October 29, 2021. The first quarter non-GAAP financial measures are adjusted to exclude the non-cash amortization of the asset recognized from the gains on our sell and leaseback transactions and the related tax impacts. The company believes that excluding these items from its financial results provides investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered 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 this morning are Cracker Barrel's President and CEO, Sandy Cochran, Senior Vice President and Interim CFO, Doug Cuvion, and Senior Vice President and CMO, Jennifer Tate. Sandy will begin with a review of the business and Doug will review the financials and outlook. We will then open up the call for questions for Sandy, Doug, and Jen. 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, Sandy Cochran. Sandy?

Thank you, Jessica, and good morning, everyone. This morning, we announced comparable store restaurant sales growth of 1.4% compared to the first quarter of fiscal 2019. I'm pleased with the work of our teams to accomplish this sales recovery in spite of the headwinds we faced from the Delta variant and difficult staffing environment as we began our fiscal year. We believe the improvements we made to staffing levels during the first quarter played a significant role in driving our sales recovery. Our recruitment efforts, including a new virtual orientation program that streamlines our onboarding process and reduces training hours, helped us to hire an average of more than 2,000 employees per week during the quarter. And while we still have some challenges with COVID-related call-outs and pockets of understaffing, we feel confident that we have the appropriate staffing in place to handle the elevated holiday volumes we anticipate for Q2. I'm pleased to share that we saw almost no year-over-year decline in off-premise sales, even as first quarter dine-in volumes further recovered, and we continue to explore new channels for growth and expansion for our off-premise business. In the last week of the quarter, we expanded our virtual brand, Chicken and Biscuits by Cracker Barrel, to approximately 500 locations total. We launched a second virtual brand, The Pancake Kitchen by Cracker Barrel, and we opened our first-ever ghost kitchen location, all of which I'll speak to shortly. First quarter retail sales maintain their strong growth over pre-COVID levels, with comparable store retail sales up 17.6% compared to the first quarter of 2019. We continue to see strength from everyday categories, particularly toys, food, and home decor. Additionally, our holiday themes have resonated strongly with guests this year, and our Christmas themes are delivering solid double-digit growth over fiscal 2019 to date, despite some headwinds from shipping delays. Our retail teams have done an excellent job of managing the ongoing supply chain challenges, and we brought in the majority of our containers at contracted rates during the quarter. By pushing forward ordering timelines for seasonal merchandise and leaning into our everyday assortments, we are successfully navigating the impact of shipping delays while providing guests with a unique and appealing retail experience. Maple Street maintained its run of strong sales performance during the quarter. Average weekly sales for the brand were up by more than 50% compared to pre-COVID levels. which includes the benefit of being open on Sundays. We hope to open 15 new units this year, the first of which opens next week. Our real estate team has done an excellent job of building a strong pipeline to support new unit openings through the remainder of this fiscal year and beyond, and given the strong unit economics that have exceeded our expectations, I'm optimistic about the long-term growth potential for the brand. Doug will take you through additional financial details for the first quarter and provide current thinking on our outlook. Before he does, I'd like to share with you a little more detail on our second quarter expectations and progress on a few key strategic initiatives. As many of you know, the Cracker Barrel brand has a deep connection to the holiday season, and our stores typically run higher volumes during the second quarter. This year especially, I believe our guests are embracing Cracker Barrel's unique holiday offerings as they look forward to a more traditional season, complete with family gatherings and holiday celebrations with friends. While we expect that Q2 dine-in traffic will remain below pre-COVID levels, we're optimistic that the recent improvements in our restaurant and retail sales trends will continue through the holidays. We've seen strong demand from our off-premise Thanksgiving offerings. Pre-orders for our traditional heat and serve feast that serves eight to 10 guests have remained high compared to pre-COVID levels, which is impressive considering our guests now have the additional option of our smaller heat and serve family dinner that serves four to six guests. Not only is off-premise a key driver in our second quarter, but the week of Thanksgiving is typically our largest sales week of the fiscal year. While we cannot fully predict what the dine-in consumer behavior will look like over the next few days, we expect a strong Thanksgiving sales week that should exceed pre-pandemic levels. While the operating environment remains challenging, I'm confident that our stores will deliver on our mission of pleasing people this entire holiday season. Looking longer term, I remain excited about the strategic initiatives we have in place to deliver sales growth and strengthen our business model. That starts with the launch of our Ghost Kitchen and the expansion of our virtual brands that I spoke to earlier. Our Ghost Kitchen concept, Cracker Barrel Kitchen, opened in Los Angeles at the end of October. Cracker Barrel Kitchen offers a streamlined version of the Cracker Barrel menu of our traditional favorites, as well as chicken and biscuits and the pancake kitchen offerings. We've seen positive guest response so far, and we believe this format can be a meaningful revenue driver for us. We plan to open additional ghost kitchen locations in Los Angeles in the near future, and long-term, I'm very excited about the potential to bring homestyle food of Cracker Barrel into additional urban areas. We've also expanded the rollout of virtual brands as an added sales layer to our existing stores. Our second virtual brand, the Pancake Kitchen, launched in the last week of the quarter, and initial sales results are promising. We believe this brand helps us address unmet demand for breakfast offerings via third-party delivery in many geographies. Additionally, we remain optimistic about the sales potential for the Chicken and Biscuits brand which helps us to leverage excess kitchen capacity during underutilized day parts and to target additional users of the brand who might not otherwise visit a Cracker Barrel restaurant. The first quarter also marked the one-year anniversary of the launch of our digital store. As a reminder, this was a new digital platform that integrated restaurant retail and catering offerings into a unified and convenient user experience. In its first year of existence, the digital store registered over 43 million sessions and handled over 3.4 million orders. In addition to supporting the growth in our off-premise business, it enhances the dining guest experience through features such as online waitlist and mobile pay. Our digital investments have created a platform for us to build direct digital relationships with our guests, including email and SMS text marketing, personalization through our website and app, and the introduction of a loyalty program. Additionally, we've seen positive results from the shift in our paid media towards digital channels, which allows us to better target our messaging to specific audiences. We expect to continue to shift more advertising dollars to these channels as we find new ways to leverage our expanding digital capabilities. Lastly, I'd like to provide an update on our leadership team. As we previously announced, Craig Pommels will be joining us as our new Senior Vice President and Chief Financial Officer starting next month. Craig brings with him over 20 years of experience in the restaurant industry, most recently as CFO of Red Lobster. Prior to that, Craig served as Senior Vice President at Red Lobster for five years, and served in various financial and data analytics roles at Darden for over a decade. Craig's track record of financial leadership and strategic planning will be a great asset to our leadership team as we continue to explore ways to drive sales growth and strengthen our business model in a post-COVID world. Before I turn the call over to Doug, I want to thank him for his outstanding contributions to the company, particularly over the last year. During his time as interim CFO, he's been extraordinarily helpful to us as an organization and a wonderful partner to me. Doug's a 20-year Cracker Barrel veteran, and he'll remain a valuable part of the Cracker Barrel senior leadership team as he continues his responsibility as senior vice president of sourcing and supply chain and helps Craig familiarize himself with our company and our people. Thank you, Doug. And with that, I'll turn the call over to you.