We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect the results 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?

Julie Masino: Good morning and thank you. In the second quarter, we delivered solid sales, which included a meaningful improvement in our traffic trend of 300 basis points in Q2 compared to Q1. Our traffic driving tactics, particularly our efforts to improve the guest experience and the effectiveness of our marketing are working and supported this improvement. While we were pleased with our sales results, our margins remained pressured. As I will touch on later, improving profitability is a top priority. We are confident we will see improvements as our initiatives gain traction, but we anticipate continued margin pressure in the near-term, particularly in Q3 and improved margins in Q4. I'm going to start by covering some highlights from Q2, and then Craig will review our financials and give an update on our outlook.

Then I'll come back and wrap up by providing an update on our strategic transformation and some of our plans to drive continued performance improvements. Our second quarter is an especially important quarter for us due to, first, our seasonally higher volume; and second, because of the emotional connection our brand has with guests over the holidays. We have the privilege of still many of them inviting us into their homes or coming into our stores to celebrate the holidays. This is truly special. As I noted on our last call, we had an excellent Thanksgiving from a sales perspective, and the teams carried this momentum through the remainder of the quarter. I want to thank our 70,000-plus employees for their tireless efforts and extraordinary hard work during the quarter to help our guests celebrate this special holiday season.

From a culinary and marketing perspective, we leaned into our seasonal guest favorites such as Country Fried Turkey and Cinnamon Roll Pie as well as our off-premise offerings. We continue to see positive results from our marketing investments in refined tactics. In addition to promoting our seasonal offerings, a key focus of our marketing efforts during the quarter was highlighting Cracker Barrel Rewards. For this campaign, we partnered with Dolly Parton to promote Cracker Barrel Rewards and her collaborative album, Rockstar. This campaign was a resounding success and delivered a large number of impressions and high engagement rates and drove additional gains to our already strong levels of enrollment. We remain pleased with the early results of Cracker Barrel Rewards, which, as a reminder, launched in September.

In addition to the strong enrollment levels, we are encouraged by the engagement, feedback and response rates we are seeing. One of the many benefits of the program is how it enhances our ability to directly engage with guests. We continue to test various campaigns and activations and measure their efficacy, and we're excited about learning more about what drives engagement with our members. For example, loyalty members accounted for nearly 50% of our Thanksgiving heat and serve sales which we believe was partially driven by our direct engagement with them around this offering. We continue to believe the program with its easy-to-use and engaging design and rewarding value will be a meaningful brand differentiator and traffic driver over the long-term.

Our retail business remains challenged. We believe this is due in large part to the pressures the broader retail industry is facing, particularly in more discretionary categories, which is resulting in a highly promotional environment. While guests responded well to our value-focused holiday assortments, overall sales performance was softer than anticipated. However, the team has done a good job managing inventories and markdowns. Despite the sales softness, we grew margin rate over the prior year, and our inventories, which are below prior year, are well positioned. I will now turn the call over to Craig for a more detailed look at the quarter from a financial perspective and to discuss our financial outlook for the rest of the year. After he finishes, I will then provide an update on our strategic transformation.

Craig?

Craig Pommells: Thank you, Julie. And good morning, everyone. For the second quarter, we reported total revenue of $935.4 million. Restaurant revenues increased 1.8% to $730.7 million, and retail revenues decreased 5.2% to $204.7 million versus the prior year quarter. Comparable store restaurant sales increased by 1.2% over the prior year. Pricing was approximately 4.8%. Our quarterly pricing consisted of approximately 3.4%, carryforward pricing from fiscal 2023 and 1.4% new pricing from fiscal 2024. Off-premise sales were approximately 23.7% of restaurant sales. As a reminder, off-premise mix elevated during the second quarter due to the seasonally higher sales for our Heat n' Serve offerings and catering business. Although we were pleased with the sales for these offerings, they have the lowest margins of all of our channels, which pressured our overall margins this quarter.

Moving forward, we are focused on improving the profitability of this channel. Comparable store retail sales decreased 5.3% compared to the second quarter of the prior year. We saw declines across most categories with toys, food and decor, seeing the largest decreases. Although retail sales remain soft, we were pleased with how the team has effectively managed inventory levels, which remain below prior year. Moving on to our second quarter expenses, total cost of goods sold in the quarter was 33.7% of total revenue versus 35% in the prior year quarter. Restaurant cost of goods sold in the second quarter was 28.2% of restaurant sales versus 29.3% in the prior quarter. This 110 basis point decrease was primarily driven by menu pricing partially offset by higher mix of off-premise as our Heat n’ Serve and catering offerings have a higher cost of sales than other channels.

Commodity inflation was approximately 1.4%, driven principally by higher beef and turkey prices. Second quarter retail cost of goods sold was 53.2% of retail sales versus 54% in the prior year quarter. This 80 basis point decrease was primarily driven by higher initial margin. Our inventories at quarter end were $172.7 million compared to $187.3 million in the prior year. With regard to labor costs, our adjusted second quarter labor and related expenses were 35.1% of revenue, which excludes approximately $5.3 million of favorability related to a change in an employee benefits policy. This compares to labor and related expenses of 33.6% in the prior quarter. This 150 basis point increase was primarily driven by our investments in additional labor hours to support the guest experience and hourly wage inflation of approximately 5.4%, partially offset by pricing.

Adjusted other operating expenses were 22.5% of revenue versus 22% in the prior quarter. This 50 basis point increase was primarily driven by our investments in advertising. Adjusted general and administrative expenses in the second quarter were 4.8% of revenue, which was flat to the prior year quarter and excludes the following items: approximately $3.5 million in expenses related to the CEO transition; and approximately $3.8 million in professional fees related to our strategic transformation initiative. All of this culminated in GAAP operating income of $30.8 million. Adjusted operating income for the quarter was $35.9 million or 3.8% of revenue. Net interest expense for the quarter was $5.1 million compared to net interest expense of $4.4 million in the prior year quarter.

This increase was primarily the result of higher weighted average interest rates. Our GAAP effective tax rate for the second quarter was negative 3.3%, which reflects favorable state income tax settlements. On an adjusted basis, our effective tax rate for the quarter was 1.2%. Second quarter GAAP earnings per diluted share were $1.19, and adjusted earnings per diluted share were $1.37. In the second quarter, adjusted EBITDA was $63.7 million, or 6.8% of total revenue. Now turning to capital allocation and our balance sheet, the Board remains committed to a balanced approach to capital allocation. Our first priority remains invested in the profitable growth of Cracker Barrel and Maple Street. Beyond that, we plan to return capital to our shareholders while maintaining appropriate flexibility and a conservative balance sheet.

In the second quarter, we invested $26.4 million in capital expenditures and we returned $29 million to shareholders in dividends. We ended the quarter with $452.3 million in total debt. Lastly, as we announced in our press release, the Board declared a quarterly dividend of $1.30 payable on May 7, 2024, to shareholders of record on April 12, 2024. With respect to our fiscal 2024 outlook, I would like to provide some additional color on the guidance in this morning's release. Looking ahead, we continue to operate in an uncertain environment. We've been encouraged by the resiliency of the consumer and by the improvement in guest sentiment in recent months. However, the industry continues to face headwinds and we expect industry traffic to remain pressured for the remainder of the fiscal year.

Turning to the guidance, we now expect total fiscal 2024 revenue of $3.5 billion to $3.6 billion. The increase in our sales guidance reflects higher sales from increased advertising and our investments in other areas of the business. We now anticipate pricing of approximately 5% for the full year. We continue to anticipate the opening of our two new Cracker Barrel stores, both of which have already opened, and nine to 11 new Maple Street units during the year. We now expect commodity inflation of approximately 0% to 2% and hourly restaurant wage inflation of approximately 5%. As a reminder, and as noted in the reconciliation tables in our press release, our full year outlook contemplates certain excluded expenses in addition to the non-cash amortization of gains from our sale leaseback.

These include approximately $10 million in consulting fees related to our strategic transformation, approximately $10 million of one-time CEO transition costs and approximately $2 million in corporate restructuring charges, partially offset by approximately $5 million of favorability from the change to our benefits policy. Our full year outlook also includes the benefit of a 53rd week this fiscal year. Taking all of this into account, we now anticipate full year adjusted operating income of $125 million to $135 million. In addition to our second quarter operating income results, which were below our expectations, our updated range reflects a higher level of advertising investment and the movement of some cost reduction benefits from fiscal 2024 to fiscal 2025 to ensure we are fully focused on retaining and further strengthening our guest experience gains.

From a quarterly cadence perspective, we expect our Q3 adjusted operating income to be meaningfully below prior year, driven by the stated investments in labor and advertising as well as timing of other expenses. However, we expect Q4 adjusted operating income to be above prior year, primarily due to improved traffic, pricing, menu mix and the benefit of the 53rd week. We now expect a full year GAAP effective tax rate of 1% to 4% and an adjusted effective tax rate of 5% to 8% and capital expenditures of $120 million to $135 million. I'll now turn the call back over to Julie, so she may share additional details on our business plans and areas of focus.

Julie Masino: Thanks Craig. I now want to provide an update on our strategic transformation. As a reminder, this program kicked off in late September and the early months included a diagnostic phase in which we conducted significant guest research both with Cracker Barrel users and non-users. Our research confirms my own observations that I shared with you last quarter. The Cracker Barrel brand is beloved by guests and employees and we are working with a strong foundation. But it is also clear to me that we have a lot of work to do in some key areas to take the brand to the next level and improve our performance. This work revolves around three critical imperatives that have come out of our research which are informing our strategy and key work streams.

One, driving relevancy; two, delivering food and an experience that guests love; and three, growing profitability. While I'm going to talk about each today, I want to announce we will be holding a standalone investor presentation in May, prior to our Q3 earnings call at which time we will provide a more detailed strategy update. I look forward to sharing more with you then, details will be forthcoming. Turning to the three imperatives, the first is driving relevancy, which means evolving the brand to meet changing consumer tastes and needs. In my view, while we’ve taken some steps in this direction over the past few years, we need to do more. Cracker Barrel is a timeless brand, but even timeless brands must evolve as consumer preferences change, which means evolving our brand positioning, our stores, our menu and our messaging.

We’ve already started this work. In the coming weeks, we will be commencing a brand repositioning initiative, which entails a full review of our brand strategy and identity. Our refined positioning will inform all aspects of the brand from menu and marketing to digital and store experience. We have also begun testing changes to decor, lighting, paint, and fixtures, and our initial work suggests that we can update and brighten our interiors in a way that appeals to both core guests and people newer to the brand. Future changes will be informed by the learnings from this test and others, as well as our brand strategy work, and we are committed to being disciplined and thoughtful before deploying capital and expanding design changes to our stores.

With respect to our food and guest experience, it goes without saying that we must provide delicious, craveable food and unique retail product, and we must deliver an improved experience that keeps guests coming back time and time again. Delicious incredible food is an important part of what we do at Cracker Barrel and I’m excited to announce today that we are launching Golden Carolina BBQ Chicken Tenders and a Fresh Berry French Toast Bake. Innovation will continue to fuel relevancy in our menu for our guests. We recently launched a core menu revamp test and while it is only in a few stores, it is a significant test because of the scale of the changes. This test includes approximately 20 new items, several modified items and over 20 deletions, as we seek to balance our innovation with simplification.

We recognize that not all of the menu changes from this test will work and make it to the next phase. But I believe it’s important that we become more agile and innovative and I’m pleased with how the teams responded to my challenge to move quickly, to develop and implement these initiatives, and to test and learn in a more agile way. In addition to innovating with menu items, we are also innovating through day parted offers. Today, we are also debuting an early dinner deals menu. This dine-in only menu includes seven smaller portioned entrees starting at $8.99 that will only be available Monday through Friday from 4:00 to 06:00 p.m. We believe this menu will resonate with our more price conscious guests and that it will drive incremental traffic during a non-peak period to our most challenged day part.

Importantly, we believe it will do this without adding additional operational complexity. Operational excellence and consistent execution are a top priority. After considering over two dozen different key metrics as part of our research, we have honed in on the metrics that are most highly correlated with comp store sales growth and are focusing against these to drive meaningful improvements to the overall guest experience and create sustainable traffic growth. As part of our focus on what matters most, we are in the process of rolling out enhanced reporting of these metrics to our field leadership and we believe the improved level of focus will empower our teams to quickly diagnose where they can most impactfully react in real time. The guest experience is not limited to the in-store experience.

It is equally important to engage and delight our guests outside of our four walls and to win in digital. As I mentioned, we are proud of the initial success of our Cracker Barrel Rewards, but it is still early. The power of loyalty in digital is realized through the scaled collection of guest data, capitalizing on the behavioral insights through robust test and learn campaigns, and delivering individualized experiences that drive engagement, incremental sales and increased visitation. With our recent success, I believe we can do more to faster realize these goals. Finally, we must improve profitability. Our margins have compressed in recent years. This is due to a number of reasons, including historically high inflation, particularly on the labor side.

But we believe there’s significant margin recapture opportunity if we drive top line growth and reengineer some aspects of our business model to reduce the amount of fixed labor currently required and simplify our menu and processes. Ultimately, our goal is to deliver compelling shareholder returns, and improving profitability is the biggest lever for achieving this. One of the areas where we are doubling down is building our strategic pricing capabilities, as our research shows that this is one of our biggest near-term opportunities. We have shared with you on previous calls that Cracker Barrel has taken pricing in a thoughtful and careful manner so as to preserve our value. This is true and the teams have done a good job as far as they’ve been able.

What we need to improve and what we are working hard on now is dramatically improving our pricing sophistication. And by that I mean our capabilities to really measure and understand price elasticity at various levels to allow us to move to a more barbell pricing structure, utilizing the menu and messaging to more efficiently drive desired behaviors and getting more granular with our pricing at the market, store and item level. To be clear, this does not mean simply taking more pricing. Rather, it means improving our internal capabilities to be even more surgical and thoughtful with our pricing across the entire menu and across all stores. In the coming weeks, we will be launching the first of many tests using our significantly refined approach and these learnings will inform our future pricing actions, tests and strategy.

In closing, we're encouraged by our progress, but we have much work to do. Although, we anticipate continued margin pressures in the near-term, we firmly believe that our focus on the three imperatives, one, driving relevancy, two, delivering food and an experience that guests love, and three, growing profitability, will build on our momentum and deliver long-term value creation. Obviously, there is a lot of work to do and it will not be quick or easy, but I am excited and optimistic about the path we are on. I look forward to providing additional details on our strategy and initiatives in May and to keeping you informed as we move ahead. I'll now turn it over to the operator for questions.

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