Cracker Barrel Old Country Store, Inc.

Good day and welcome to the Cracker Barrel fiscal 2023 second quarter conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Caleb Yohannes, Vice President, Investor Relations and Business Transformation. Please go ahead.

Thank you. Good morning and welcome to Cracker Barrel's second quarter fiscal 2023 conference call and webcast. This morning we issued a press release announcing our second quarter results. In this press release and on the call, we'll refer to non-GAAP financial measures for the second quarter ended January 27th, 2023. The non-GAAP financial measures are adjusted to exclude the non-cash amortization of the assets recognized from the gain on our sales and leaseback transactions and the related tax impacts. The company believes that excluding these items from the 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 CFO, Craig Pimels, and Senior Vice President and CMO, Jen Tate. Sandy and Craig will provide a review of the business, financials, and outlook. We will then open up the call for questions for Sandy, Craig, and 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 or 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 filed with or furnished to the SEC. Finally, the information shared on the 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, and good morning, everyone. This morning, we announced total sales growth of 8.3% and adjusted operating income margin rate of 4.5%. These results exceeded our expectations, and I was especially pleased with our continued strong retail and off-premise performance. I believe our results underscore the appeal of our brand, menu offerings, and merchandise, as well as the traction from our initiatives. While we continue to face macroeconomic headwinds and heightened uncertainty, we are making great progress on key initiatives and I believe we're well positioned to sustain our momentum and deliver further margin improvements in the back half of the year driven by Q4. I'd now like to speak to some highlights from our second quarter. As you know, our second quarter is of outsized importance to us due to the Thanksgiving and Christmas holidays, and our teams once again executed at a high level and bolstered our leadership for these occasions. particularly in our off-premise channels. We again saw significant demand for our bundled holiday offerings, meaningfully grew our catering business, and offered seasonal culinary promotions, including country fried turkey and cinnamon roll pie that continue to resonate with guests, as did the other menu items we introduced, such as our new sampler offerings. We saw and are continuing to see our catering channel do well, driven by enhancements we've made to our offerings and our optimized marketing support, and we're on track to achieve our target of growing this channel by 25% to $100 million this fiscal year. Our retail teams continued their streak of delivering strong results, which was especially impressive in light of the challenge retail backdrop and the performance we were lapping in the prior year. Guests responded enthusiastically to our holiday assortments, particularly our nostalgic blow molds, glitter globes, and holiday trim. Our retail margins, though well below last year's historically high levels, were in line with our expectations. From an operations standpoint, we remain focused on hospitality and the guest experience. We believe our staffing levels are solid, and we've seen improvements in both hourly and manager turnover. We're encouraged by the test results of our labor system, and we recently implemented it in over 150 stores, bringing the total to approximately 300, and are planning to complete the rollout to the substantial majority of the system by the end of the fiscal year. We believe this new system will enhance both the guest and employee experience while also delivering productivity improvements. From a guest visitation perspective, we again saw gains with the lower-income guests as we believe our strong value proposition continues to appeal to this group, who remain pressured by the macroeconomic environment. We saw moderate improvement in year-over-year visitation from guests 65 and over, which was in part due to lapping Omicron, and visitation among younger guests was relatively flat compared to the prior year. Lastly, Maple Street opened two locations during the quarter, both of which were in new markets, Columbus, Ohio and Houston, Texas, and were encouraged by the performance of these new locations. The team continues to prepare for successfully scaling and we're looking forward to accelerating their growth in the back half of the fiscal year and beyond. Fred will now cover our second quarter results in greater detail and provide an update on our expectations for the fiscal year. And once he's finished, I'll provide some additional details about upcoming initiatives.