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spk03: Good morning, ladies and gentlemen. Welcome to today's Roos Hospitality Group first quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. Following the company's formal remarks, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Christy Chipman, Chief Financial Officer and Chief Operating Officer. Please go ahead.
spk06: Thank you, Jason, and good morning, everyone. Joining me on the call today is Cheryl Henry, our President, Chief Executive Officer and Chairperson of the Board, and Mike Hines, Vice President of Finance and Accounting. Before we begin, I'd first like to remind you that part of our discussion today will include forward-looking statements. These statements are not guarantees of our future performance, and therefore, undue reliance should not be placed upon them. We would also encourage you to refer to the investor relations section of our website at rhgi.com, as well as the SEC's website at sec.gov for copies of today's earnings press release and our recent filings with the SEC for a more detailed discussion of the risks that could impact our future operating and financial results. During this call, we will refer to adjusted earnings per share. This non-GAAP measurement was calculated by excluding certain items. We believe that this measure represents a useful internal measure of performance. You can find a reconciliation of adjusted earnings per share in our press release for today's call. I would now like to turn the call over to the company's Chief Executive Officer, Cheryl Henry. Thank you, Christy, and good morning, everyone. Before we share the details of the quarter, I want to take a moment to acknowledge the efforts of our team members and our franchise partners over the past two years. Their hard work and commitment brought us through extremely challenging times and have positioned Ruth Chris as a clear leader in the fine dining category. As always, our success stems from serving the highest quality food with genuine hospitality. And with that as the company's foundation, we can better focus on and deliver the total return strategy that has benefited our shareholders over the years. That strategy starts with organic growth, and we're pleased to be investing more than $50 million this year into new restaurants, relocations, remodels, and digital technologies that drive that growth, improve our guest experience, and our restaurant operations. It also includes returning excess cash to our shareholders through debt paydowns, dividends, and share repurchases. Taken together, we believe these actions will sustain the underlying growth and profitability of the business while creating significant value along the way. As far as the first quarter, we're pleased to have delivered solid results with year-over-year earnings per share growth of 17%. This was driven by a sales recovery throughout the quarter and a continued focus on margins. And it's safe to say that despite ongoing challenges like inflation and supply chain disruptions, our team has delivered an impressive start to 2022. Our top line sales in Q1 beat 2019 levels and our momentum improved each month to end the quarter with comp sales exceeding 8%. This momentum continued, leading to double digit comp sales growth and positive traffic through April. This is especially encouraging given certain regions of the country and our private dining business remain below pre-pandemic levels. We attribute the recent demand compared to 2019 to a few factors. First, an increase in our Just Because and special occasion visits. Second, the continued contribution of our Roots Anywhere program. And finally, we've benefited from our digital transformation plan, which is now gaining traction. Moving on to profitability, we posted a solid restaurant margin as labor and cost of sales stabilized during the quarter. Christy will discuss our financial results, including labor and commodity expenses, in greater detail. But it's worth noting that changes in our labor model delivered savings of approximately 156 basis points during the quarter compared to 2019. All in all, our underlying business is strong, and we're confident that our current investments, which includes building new restaurants, will generate a solid return. Our focus for that development is to establish a dependable cadence of new units with the goal of five to seven new restaurants annually. In March, we successfully opened our first restaurant of 2022 in Aventura, Florida. And while early, we're pleased that it has outperformed the system and our sales expectations. Including Aventura, we remain on track to open a total of five new restaurants over the course of this year, with two expected to open in the third quarter and two in the fourth. In addition to those new restaurant openings, we have two relocations currently under construction, one in Winter Park, Florida, as well as one in Woodland Hills, California. These relocations reflect our new contemporary design that leverages outdoor dining spaces in larger bar areas as we expect these restaurants to open by end of year. In terms of future pipeline, we are finalizing the lease for a restaurant in Albany, New York and are in the final negotiations for two additional leases. When combined with leases previously signed, we expect to have a total of five restaurants in the pipeline for 2023 soon and continue our work to find the best sites for the future. Despite increased material and construction costs, we remain committed to returns consistent within our historical levels. Our investment in digital transformation is also a critical part of Roost's strategy. As we outlined in early 2020, we have focused our transformation initiatives on three key pillars, enhancing the guest experience, reducing friction, and increasing our team's productivity. I'm pleased to report that during the quarter, we rolled out our proprietary platform that uses restaurant-specific data to improve demand forecasts in our table management. While it's only been a few weeks, it has already resulted in high single-digit traffic increases on the weekend, which is encouraging. Of course, investments in new restaurants and new technologies won't be successful without the people behind it, and that is why we continue to invest in hiring, training, and deploying world-class team members. To that end, we made further progress during the quarter, adding managers to our restaurants, as nearly each of our locations are returning to pre-pandemic sales and traffic volume. Before I turn it over to Christy, let me quickly summarize where we stand on our total return strategy. As I mentioned earlier, we are investing over $50 million in capital with the majority of that investment supporting growth initiatives that we believe will generate a solid return for investors. To complement that investment, we are returning cash to shareholders through a 17 percent increase in our dividend payment, while also paying down $45 million in debt. We've done this while maintaining a net cash position of over $25 million and have roughly $25 million left on our most recent share reauthorization. So to keep our momentum, we will continue to focus on the details of execution, which includes providing an incredible dining experience for every guest every time they visit. We're not only confident that we can navigate external factors that might come our way, but also in delivering value for shareholders in the process. I will now turn the call over to Christy Chipman to cover the specifics of the quarter. Thank you, Cheryl. For the first quarter, ended March 27, 2024, Two, we reported gap net income of $10.4 million or $0.31 per diluted share. This represented a 14.1% and 16.5% increase respectively compared to the first quarter of 2021. Excluding adjustments, non-gap diluted earnings per common share was also $0.31. Total revenues for the quarter increased 44.5% to $126.1 million compared to $87.3 million in 2021. While company-owned restaurant sales increased 45.4% to $118.7 million compared to $81.6 million in the prior year. Comparable restaurant sales for the quarter increased 41.5% versus 2021 and increased 8.1% compared to 2019. As compared to 2019 by month, comp sales were negative 0.2 in January, positive 11.5 in February, and positive 14.4% in March. As Cheryl alluded to earlier, January demand was slowed by the Omicron variant, but as you can see, guests rapidly returned to our restaurants in February and March. As a reminder, we took a price increase in late March of approximately 3.4% on certain products, including beverages. We also recalibrated certain restaurants within pricing tiers. To date, we have not seen a noticeable change in mix or traffic due to this price increase. Franchise income for the quarter was $4.7 million of 24.7% versus the same period last year, driven by comparable domestic franchisee sales of 23.8% and international franchise comps of 29.5%. Other operating income was $2.7 million of 45% versus last year. Moving on to restaurant expenses, Food and beverage costs for the quarter increased 445 basis points versus 2021. The main driver of the increase was beef, which increased approximately 37% for the period, even though prices declined each month sequentially. As a reminder, we had a lock on approximately 70% of our beef purchases during the first quarter last year. Our total market basket increased approximately 28% compared to the first quarter of 2021, reflecting continued pressure in nearly all food categories, including beverages. During the quarter, we entered into a new forward pricing agreement, and we are now locked for approximately 20% of total beef volumes through mid-August of this year. Labor expense for the quarter versus 2021 increased approximately 150 basis points due to the operating restrictions that existed last year. However, when compared to 2019, labor expense for the quarter improved 156 basis points, driven by labor efficiencies, partly offset by increased wages. Our full year guidance of 200 basis points of improvement for the year versus 2019 remains intact as quarterly variations were considered in that guidance. Moving beyond restaurant expenses, Combined marketing and GNA as a percentage of total revenues was 11.2% compared to 10.5% in the first quarter of 2021, reflecting our investment in the digital transformation we have underway and adding resources back to the business. That said, we expect marketing and GNA to be in the range of 10.3% to 10.8% of total revenue. As of March 27th, we had 66.8 million in cash and our outstanding debt was 50 million. Since then, we've repaid an additional 25 million in debt for a total repayment of 45 million since the beginning of 2022. As of May 2nd, our net cash position was approximately $25 million. Finally, our board approved a second quarter dividend of 14 cents per share, and as Cheryl noted, we have approximately $25 million remaining on our share buyback authorization. I'll now turn the call back to Cheryl Henry for a few closing comments. Thank you, Christy. In closing, let me reiterate how pleased we are with a solid start to 2022 and the strong demand from our guests as they return to our dining room. This brand was established by a single working mom 57 years ago this month. We have veteran operators and franchise partners with decades of experience who have honed their skills and agility and have continued to elevate this business and our hospitality through every hardship and downturn. We believe the company is positioned for long-term success and would like to thank each of our team members, franchise partners, and shareholders for their continued support. Thank you for joining us on the call this morning, and I look forward to taking your questions.
spk03: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Brian Vaccaro from Raymond James. Please go ahead.
spk05: Thank you, and good morning. I was hoping you could give us a little more color on the sales acceleration that you saw in February and March, and it sounds like it's sustained in April as well, and obviously exiting the Omicron impact. But are you seeing – I guess to what degree are you seeing previously lagging regions catching up to other regions that had already recovered? And also, to what degree are you seeing business lunches and dinners recover in recent months?
spk06: Yeah, thanks, Brian. So – You know, regionally, we still, we had mentioned Hawaii and Boston and Manhattan specifically, and they still have not fully recovered. We're seeing slow recovery in a couple of those markets. That's more in the April timeframe. And as far as private dining, during the quarter, that really didn't see a recovery. We are seeing a bit more of that. I think, you know, as we've talked about it and people are back to work, you know, beginning of March, we saw a lot of back-to-work, and I think you're starting to see that reflected in the April numbers, but we still see that as an opportunity in front of us to continue to grow through the back half of the year.
spk05: Okay, and sorry if I missed it, but I think in past quarters, you've sort of stripped out Hawaii, Boston, Manhattan. Can you provide the comps, exos, markets this quarter?
spk06: Sure. Those markets had about a 600 basis point impact for the quarter still.
spk05: Okay. Okay, great, great.
spk06: Yeah, Brian, I think we mentioned 600 to 700 in the past, so you can kind of see where that was for the quarter. Yeah, and I would say that everybody is improving, including them, but as the rest of the system has positive comps, you know, we're still seeing that relative difference between those markets, even though they are improving from their lows. They're just not improving as quickly as the rest of the bases.
spk05: Understood. Okay. And the quarter to date, I just wanted to confirm, you're up double digits. That's versus 2019. I just wanted to confirm that. And then, Christy, could you level set what that means in terms of average weekly sales?
spk06: Yeah, Brian, so that is against both, but yes, 2019 is I'm speaking to you specifically when I mentioned it in the script. Yeah, so 2019 average weekly sales, 108.5 in period one, 141.7 in period two, 128 in period three, and the quarter was 124.7. I'm sorry.
spk05: Yeah, thank you for that. I was asking about April. Oh, I'm sorry. So we're up double, yeah.
spk04: So the high brands, the April average weekly sales look a lot like March in the 127 to 128 range.
spk05: Okay, okay, great. And then also I wanted to ask about some of the digital transformation you touched on, Cheryl, at the beginning of the call. And can you elaborate? You talked about a high single-digit traffic improvement, I think, with some of the new seating initiatives and the demand forecast. And just elaborate a little bit on what that means and how that's impacting the business.
spk06: Yeah, so, Brian, I mentioned specifically that that's on the weekends. I think if you go back even – probably 2019, we talked about changing out some of the way the restaurants were laid out and better utilizing all of the real estate in the building. It's benefited us greatly during COVID. We could not have anticipated that, but this is really where we're starting to see the data behind the initiative kind of combined with the work that we had done around the seating and floor plan. And so we're able to, on those high volume days, take advantage of that and make sure we're utilizing optimum capacity in the restaurant considering labor and guest experience as well. And so we fully rolled towards the end of January. I would say it was really in effect by the end of February, beginning of March. And so we're starting to see that positive impact. And again, it's early, but it's really behaving the way we, during tests, believed it would behave across the system.
spk05: Okay, great. And then last one for me, just on the commodity front. Christy, you mentioned the new contract in place through August. It seems like the spot market has moderated, especially on the prime side. Could you just touch on what you're hearing in terms of V fundamentals and perhaps give us a little bit of sense of how you expect your inflation to be in the second quarter, just to make sure we're all on the same page?
spk06: Yeah. So V fundamentals first, I think, you know, we continue to talk to our suppliers, certainly you know, herd size and drought conditions and things are working against us, but, and we've seen beef kind of increase from the first quarter lows, but not significantly yet at this point as it comes through our system. So, you know, heading into the summer, we think that beef prices are increasing from where they're at today, you know, seasonal demand, tight production, drought, higher transportation costs are a situation we're keeping a good eye on, while prime grading is slightly lower as well from a year ago. So I think overall, it continues to be very difficult, which is why we are not providing COGS guidance at this point in time. I think when you look at the rest of the basket, we would expect another quarter of inflation similar to what we've seen this year, because really our inflationary pressures didn't start until the back half of 2021. Non-beef.
spk05: Non-beef.
spk03: Okay.
spk05: All right. Thank you. I'll pass it along. Thanks, Brian.
spk03: The next question comes from Nicole Miller from Piper Sandler. Please go ahead.
spk00: Thank you. Good morning. Just following up on that inflation topic, what was inflation in the basket in the first quarter? And I think it was versus really no material inflation a year ago in the first quarter.
spk06: That's right, 28% in the total basket, including these.
spk00: In the second quarter, I understand what you're saying about no COGS, but I guess I would say maybe for the course of the year and knowing the lock, I think you said through August, is it this similar level of inflation then that runs through kind of that framework or something higher or lower?
spk06: Are you speaking to beef specifically, Nicole?
spk00: It's really up to you because I'm sure you can slice or dice it. I can take it either way. It doesn't matter.
spk06: No, I would say that we started to see higher beef prices in the back half of the year last year. And so we will be coming up and comping against those higher beef prices. And as I mentioned, we saw beef coming down sequentially through this quarter and into April. It is starting to come back and trend along the historical seasonal levels. And so I think that in the back half of the year, beef prices will moderate. And similarly, from an overall inflation, we start to lap a higher cost base in the back half of the year for the rest of the food items. And therefore, I think it will moderate. I can't give you a percentage, per se, of what we think inflation will be. It's just too uncertain right now. But I do believe moderation is coming in the back half of the year.
spk00: And then switching to development, are the two reloads considered within the five new stores, so it's three net, or those in addition to the five new store openings?
spk06: Yeah, those are in addition to the five new stores. opening, so seven total.
spk00: And what can you tell us about the pipeline? So one got opened right in Florida. I don't know how many more specific you want to call out, but just how is development tracking in 2Q and for the rest of the year? Is it a good pace? Do they pull forward? Do they get pushed back? How is that looking for the other four?
spk06: Yeah, so earlier this year, Nicole, we talked about getting to a more normalized cadence of five to seven I mentioned earlier, we will have five this year, and then again, the two reloads. And we've announced two sites for 23, and I mentioned today three other that are in the final stages of lease negotiation we expect to have soon. And we continue looking. I think some of the changes we talked about in the floor plan and the design have opened up some opportunities for us, and that's why we said five to seven versus kind of a pre-COVID three to five. And so we're, you know, we are looking, we will be as always careful and meticulous about how we choose our sites, but we are finding opportunities out there. So we continue with that thought around the five to seven going forward.
spk00: And just the last one, I realized the question around a recession is a little tricky and, you know, even just lower GDP is painful without an outright recession. You know, what's interesting is if that were to be the case, you don't have any or don't have as much business, business to lose, right? That went away with COVID and did a fine job more than of replacing it with a local business guest or a social user. So if we head in that direction, you know, what happens to the guest who has been just nothing but absolutely robust up until this point? We're still through this current today period.
spk06: Right. No, it's true. We haven't seen – I mean, we're seeing the same headlines in volatility in the market, especially this week. We've not seen that yet in our weekly sales and traffic numbers. You know, we've – I mentioned earlier we've been – we're a 57-year-old company this month. We've been through many downturns. The consumer will feel an impact at some point. We believe there's some resilience to our higher-end consumer, and that may be what you're seeing play out right now. But we have – Again, a very experienced team, very experienced franchisees, so we are prepared. We have some, you know, always we're putting a plan together. If we have guests that are more value-oriented, we're able to meet them where they are in the moment. And so I won't speak specifically. I'll let the economists opine on how deep and when. But I know that this team is prepared, and we understand when things get tight how our guests respond. And you were right. We were just talking about the idea that sometimes you start to see it. The windshield is a little bit of the corporate dining area. But given where that's been, we know we've had other revenue channels that can offset that, and we're putting our plans in place, and we'll be ready.
spk00: Great. Thanks again.
spk03: The next question comes from Andy Burrish from Jefferies. Please go ahead.
spk02: Good morning. How are you guys? Good.
spk06: How are you?
spk02: I'm good, thanks. Could you just, as we start to see the new unit growth ramp back up, can you Give us a quick refresher kind of on new unit productivity, just what you underwrite to in terms of top line volumes, just given some of the changes you've talked about and some of the smaller markets that you're starting to bring into the unit growth as well.
spk06: Yeah, Andy, I'll speak broadly about the expectations for these boxes. So as you mentioned, smaller markets, smaller boxes, larger patios. And then the way we're thinking about it, the costs, as I mentioned, are going up, but we're expecting more productivity out of them from a top-line standpoint, as well as when you overlay some of the digital initiatives and price as well, that these volumes will be considered higher. And we're seeing that. It's early. We've got a couple of And so, that's how we think about it broadly. Yeah, I mean, I think when you talk about it from an overall return standpoint, that's exactly right. So, even though material costs are up, you know, similar to, you know, about 20% or so, we are also seeing this hotline grow relative to the things that Cheryl mentioned. And therefore, you know, from a total return perspective, we're doing well with the openings we have. And as we start to build out going forward, we're looking at, you know, similar types of top-line volume.
spk02: Okay, great. Thank you. And just on the marketing and G&A, excuse me, obviously, you know, ran heavier in the first quarter, you know, versus your guide for the year. Can you just give us a little color in terms of what was going on there? Is it the tech spend kind of up front or just timing?
spk06: Yeah, so certainly our digital transformation technology spend, both from a capital perspective as well as an expense perspective, is loaded in the front half of the year. The other thing that I would mention is You know, we're adding – you know, we have started to see the lapping. We added some team members last year, so from an overall G&A perspective, that's coming in. And then on a marketing side, you know, we saw gift card sales really be strong in the first quarter, and the discounts associated with those flow through our marketing line, and so those – you know, those are sitting in there as well.
spk02: Interesting. And then just one other thing, Cheryl, you mentioned, you know, Roots Anywhere – you know, where is the off-premise mix and, you know, is that, did you call that out just seasonally? You know, in the winter months, you know, you see a little bit more of that as patios in some places are not as available or just give us a little more color on that, please.
spk06: Yeah, so broadly, you know, when we, Ruth and I was 100% of our business back in early 2020. And, you know, I think we are finding that right balance when the demand is so high for the experiential, four-wall, genuine hospitality, and then just seeing it as a valuable revenue channel at certain parts of the day and parts of the week, and so we're balancing that. Late last year, and yes, your point is seasonal, so I think, you know, as we were in the fourth quarter, it was a bit higher as a percent of sales. We saw Q1 as Omicron's and we were seeing the restaurants become busy again, we're looking at between 3% and 5% of sales still very valuable. And the work we're doing now is to understand where we can turn that up, if there's opportunities to take advantage of capacity that's not there, can we do it in to-go sales? And then when we really want to make sure we're focused on the in-restaurant experience.
spk02: Awesome. Thank you very much.
spk06: Thanks, Andy.
spk03: Again, if you have a question, please press star, then 1. Our next question comes from Todd Brooks from Benchmark Company. Please go ahead. Hey, good morning, everybody.
spk01: I was wondering if you could give us maybe some qualitative comments. We're coming into Mother's Day this weekend, Father's Day graduation. That occasion business, what are you seeing – relative to maybe fiscal 19 as far as maybe pent-up demand for gathering now that we're through two years of this and people are to an extent done with it and they want to get back out there and celebrate events with friends and family?
spk06: Yeah, you just said it. I think we are seeing a lot of that. I think, you know, we saw a little during the holidays, if you think, since fourth quarter, but again, that was kind of overshadowed by the beginnings of Omicron, and so I think now we are seeing a combination of the work, especially on the holidays and those really high peak, high capacity days, the combination of the demand from the guests and being able to meet that demand through the capacity utilization platform that's in place. So we are seeing fairly significant beats over what we saw in 2019. I don't know, Mike, if you have anything you want to add.
spk04: Sure, just the number on Easter, which was in April, our most recent holiday, Historically, Easter is not as strong for us as Mother's Day or Father's Day, but it's still a great holiday for us, and we saw performance this year plus 30% versus 2019 for Easter.
spk01: That's great. Thank you. Secondly, following up, and I know we've spent time talking about digital transformation and kind of the table efficiency, but are there any other early wins coming out of the program that you want to highlight for us?
spk06: Yeah, I'll just mention one. I mean, I think we had bucketed into three places, right, and that was enhancing the guest experience, reducing friction, and the productivity of the team. The productivity of the teamwork is in front of us, and we've got some tests in place, so I'm not going to speak too specifically yet on that, but I do look forward to sharing more. The other one I will mention is, you know, a tool we've been working on on the hospitality side, and I think that I've said this a lot is, you know, our caretaking of this brand is that the idea that this is a high human touch business and we don't want to ever use a piece of data or technology and put that in front of that hospitality. So we've actually taken an approach of how do we use data and technology to enhance the hospitality. And so we've put a test in place in many of our restaurants and seem to be fully rolled out that gives our restaurant team the access to information that allows them to make the experience even better for our guests. And early, very early, but early signs are it's paying off in the ratings we're getting from those experiences as well as some of the repeat visitation. And so that goes to our focus on making sure whatever we put in the restaurants and whatever data we use has a benefit to the guests and ultimately to the business. But that's another one we're excited about and look forward to sharing more about in the future.
spk01: Okay, great, thanks. And then final question from me. Christy, you talked about locking 20% of the beef needs through late summer. Does 20%, you can interpret it one of two ways. One, prices were coming down at that point, and maybe you were hoping for more moderation, so you didn't want to lock more, or your supplier partners felt like it was okay, we're kind of, we see the outlook for the back half of the year. We don't want to enter into big agreements to lock more beef. Would you lock more if you could, or do you feel there's more opportunistic levels to maybe lock more of the beef meats in the future?
spk06: Yeah, I mean, you know, we lock for certainty, right? We're not going to try to time it to get to the exact low. We're going to do our best to lock for certainty. Right now, I don't have any, you know, any... new locks to share, but we're always looking at it and making sure that we have a forecast out for what we think beef is going to be on the market. And if a lock seems to be good for us and favorable and in the money, we're going to lock as much of that beef as we can based on the projections we have.
spk01: And historically, how much would you run with locked typically?
spk06: Yeah, I think it's variable. I mean, last year this time we were locked, not this time, but in Q1 we were locked for 70%. Now we're locked for 20%. So, you know, again, it's just going to be based upon, you know, the volatility of the market, our confidence in the projections that we have from the suppliers, et cetera. So I can't set on one exact percentage for now.
spk01: Okay, great. That's helpful, though. Thank you.
spk03: The next question is a follow-up from Brian Vaccaro from Raymond James. Please go ahead.
spk05: Hi, thanks. Sorry if I missed it, but two quick follow-ups. On menu pricing, if you take no additional increases, could you just level set where effective pricing would be over the next couple quarters?
spk06: Sure. So no additional pricing. Q2 would be 7.4. Q3, 5.9. and Q4 4.0 if we take no pricing for the rest of the year.
spk05: What's your current posture or thinking towards potentially taking additional pricing with beef moderating, etc.?
spk06: We're going to be looking at our private dining menu more closely in the next couple of months, so I could see us taking something small there. No analysis yet, but We always look at that about this time of the year. And then, as I've mentioned in the past, we're sensitive to price, even though we've taken significantly more price over the last 12 months than we historically would have. But we're going to continue to look at it. I think the inflationary trends beyond beef will continue to happen with labor. All of that's going to go into our equation as we look in the latter half of the summer for whether or not we should take more price.
spk05: Okay, okay. And just in terms of the macro read, if there are any within your business in recent weeks or months, I'm not sure how real time you can see this, but is there any change recently on the number of celebrations, birthdays, et cetera, which I'd assume, I'm not sure, but I'd assume captures maybe some more economically sensitive guests that could be feeling some of the pressure of high gas prices, broader inflation, et cetera. Are you able to see anything like that in your recent trends?
spk06: I would say not particularly. It's nothing that we would call out specifically that that's what's driving our results and they should slow down if that's what you're kind of alluding to might happen. You know, obviously our guests are a cross-segment of the population, and so I think we're all in that wondering, you know, how strong are the balance sheets? How long will they be? coming into the restaurants for those celebratory occasions. But I think we also know that looking at and listening, people are favoring services, including restaurants and experiences, much more than they are hard goods. And so we are going to be ready to capture as much of that as we can for the rest of the year.
spk05: That makes sense. And then last one, I just want to take another shot at commodities. And I know it's uncertain, but I guess just everything – we know today, just in sort of the spirit of making sure we're not surprised everything we know today, make sure we're on the same page. And I don't know where you set the contract on the 20%, obviously, but it seems as you step back, it seems like your basket inflation could moderate towards 10% as a ballpark year on year in the second quarter. Is there anything material I might be missing if you'd be willing to comment on that?
spk06: So, you know, I think what I said was I think Q2 is still, especially if you exclude B, Q2 will be similar to Q1, which is, you know, about 19%. So I think we have one more quarter of higher inflation when you compare it to 2021, and then it will moderate. The degree with which it will moderate is really uncertain right now.
spk05: Okay, but year-on-year inflation on beef should moderate pretty meaningfully in the second quarter as well, right?
spk06: Absolutely. That is correct.
spk05: Okay, I'll pass it along. Thank you. Thanks, Brian.
spk03: There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Cheryl Henry for any closing remarks.
spk06: Thank you, Jason, and thank you all for joining the call today. We look forward to updating you again soon. Have a great day.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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