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 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 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 in 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…

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 point net year-over-year unfavorable impact from weather. Restaurant average check increased 3.4% and included pricing of 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. Total 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. Quarter end 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…

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 traffic trends are and how you'd kind of size up traction against plan so far?

Dennis, 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, just recognizing 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 Stars 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 and the brand sentiment, our food and value scores as well as just the way the teams are really executing. Being in our restaurants is just -- they feel so good right now. I'm in a lot and 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 Y, 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, and 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 on 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, 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 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 want to 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?

Jon, 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 to receive the product, warehouse it, send it to our stores and then ultimately sell it. So 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's 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 on the higher or the 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 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 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 a 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, we'll see. There's a lot in there. So let's see. 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 are 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, 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 could just sneak one more in, and I apologize for this. But your guidance for EBITDA and the margins, you've taken down your inflation guidance for commodities and for labor. You're talking about lowering the spend 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 spiking. 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's 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 the other direction is 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, though those typically benefit kind of upper or higher income consumers. I guess, have you maybe talked about your income exposure? I guess there's the perception that perhaps your customer base maybe skews a little bit lower income. But I guess, as I think about the puts and takes, you make a good point, but just from an income perspective?

Yes, it's a good question. 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. I 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 lift is 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 lapsed guests, 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, 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 lapsed guests 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 a 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 COGS than maybe what some of us were expecting and just how that overall offering resonated at Holiday?

Sure. 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. Thanksgiving traffic was in line with the rest of the month. So it didn't crazily outperform or anything like that. We were pleased with the performance. We were 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.