Katherine Griffin

Katherine Griffin questioned Cracker Barrel's retail business exposure to Chinese imports and potential tariffs, and asked for clarification on egg inflation, including its COGS mix and the impact of spot market purchases. She also inquired about pricing expectations for the second half of the year.

Answer

CFO Craig Pommells stated that while restaurant sourcing is domestic, about one-third of retail purchases are from China, which the team manages via vendor negotiations, alternate sourcing, and pricing. He clarified that eggs are a low single-digit mix of the commodity basket and that they are well-contracted through FY26, though supply remains a risk. He also implied that pricing in the second half would be lower than Q2's 6% to achieve the full-year target of 5%.

Katherine Griffin inquired about the consistency of the company's sales outperformance versus the industry during the quarter, both by month and by region. She also asked if certain strategic initiatives are resonating better than others, potentially altering investment allocation.

Answer

CFO Craig Pommells responded that regional performance was relatively steady, with slight strength in the Northeast/Midwest and softness in Texas, while monthly trends showed gradual, steady improvement. CEO Julie Masino stated that while it's still early in the transformation, she is proud that initiatives like pricing and the Thanksgiving strategy have already moved into normal operations. She emphasized that for remodels, it remains a 'learn year' to determine the right investment mix before changing allocation.

Katherine Griffin requested a breakdown of traffic and mix for the quarter and asked about the cadence of pricing actions planned for the upcoming year. She also questioned how the company intends to balance taking significant price increases while maintaining its strong value perception among consumers.

Answer

CFO Craig Pommels reported that Q4 traffic was approximately -4% with a positive mix of 0.2%. He stated that pricing actions are smaller and more frequent to avoid lumpiness. CEO Julie Masino addressed the value question, explaining that Cracker Barrel's value equation includes food abundance and quality. She highlighted the 'barbell' strategy, which balances value offerings like 'Early Dine' deals with premium items like upgraded steaks, allowing for price adjustments while value scores have actually improved. She also noted Cracker Barrel remains priced 8-12% below competitors.

Katherine Griffin from Bank of America requested a breakdown of expectations for the different components of restaurant-level margin and its likely sequential progression through the year.

Answer

CFO Mitch Reback expressed confidence in continued annual margin expansion. He detailed drivers for each component: labor will benefit from improved scheduling and historically low turnover; cost of goods will improve with scale in developing markets; and occupancy costs will decrease as the footprint expands beyond high-cost urban centers. He projects margins will progress into the low 20s, with the Infinite Kitchen rollout acting as a significant accelerator to this trend.

Katherine Griffin questioned the investment in an AI labor tool given the expansion of less labor-intensive Infinite Kitchens (IK) and asked about the trade-off between menu expansion and operational complexity.

Answer

CFO Mitch Reback clarified that even with IKs, labor remains a significant cost, making an AI optimization tool valuable across the fleet. CEO Jonathan Neman added that the tool also improves the team member experience. Regarding menu innovation, he stressed that simplifying existing operations is critical to create capacity for new items, which undergo a rigorous stage-gate process to ensure they fit the operating model.

Katherine Griffin asked for context on North Italia's Q4 comparable sales, which lagged The Cheesecake Factory's, and inquired if Flower Child experiences the same new unit inefficiencies and ramp-up period as North Italia.

Answer

EVP and CFO Matt Clark explained that North Italia's lower comp was due to a heavier negative mix impact from the alcohol category, while traffic and pricing were similar to The Cheesecake Factory. He noted that Flower Child, as a fast-casual concept, ramps to target margins much faster than North Italia, typically within 1 to 1.5 years compared to 3 years.

Katherine Griffin requested an update on Flower Child's comparable sales performance, its market share position, and a deeper explanation of the synergistic benefits the growth concepts gain from being part of the Cheesecake Factory portfolio.

Answer

EVP and CFO Matt Clark confirmed Flower Child's comps are the strongest in the portfolio, running mid-single-digits and outperforming the fast-casual category. Both Clark and President David Gordon detailed portfolio benefits, including G&A scale, supply chain leverage for commodities and other purchasing, deployment of operational best practices and analytics, and access to the company's favorable DoorDash relationship.

Katherine Griffin of Bank of America asked if the positive month-to-month comp trend commentary for Chili's also applied to Maggiano's. She also inquired about the conversion rate of TikTok impressions into restaurant traffic.

Answer

CFO Mika Ware stated that Maggiano's same-store sales were also relatively stable month-to-month without wild fluctuations, though the brand is in an earlier stage of its turnaround. CEO Kevin Hochman responded to the TikTok question by stating they do not have a formula to translate a specific number of social media impressions into a predictable sales amount. Mika Ware added that the key takeaway is the consistency of the business improvement across all dayparts and demographics.

Katherine Griffin inquired about the strategy behind the new '3 for Me' lunch combo and asked for the quantified sales lift from reimaging, as well as what would be needed for Chili's unit growth to accelerate.

Answer

CEO Kevin Hochman and CFO Mika Ware explained the lunch combo simplifies operations by aligning with the core menu, offers guests better value, and improves mix with its tiered pricing. CFO Mika Ware clarified that the company is not currently reimaging at scale, so there are no returns to share. She stated that unit growth remains slow and steady as capital is also prioritized for the base business and Maggiano's, which has more white space.

Katherine Griffin of Bank of America, on behalf of Sara Senatore, asked about the impact of reduced promotions on ticket, noting that traffic-driven growth was not apparent this quarter, and questioned if the primary goal is to drive more full-priced sales.

Answer

CFO Rachel Ruggeri explained the goal is a combination of serving Rewards members and reaching a broader customer base. She noted that shifting from discounts to broad marketing led to quarter-over-quarter growth in non-SR customers. The 4% ticket growth benefited from fewer discounts and pricing, which offset mix shifts to lower-priced items. The strategy aims to strengthen both ticket and the overall value proposition.

Katherine Griffin, on for Sara Senatore, asked whether the softer Q4 performance was attributable to the broader demand backdrop in California or to company-specific market share issues.

Answer

CFO Brian Scott clarified that California actually performed relatively well, in line with or slightly better than the system average, suggesting the issue is a broader QSR industry headwind. CEO Darin Harris added that Del Taco's California units are also top performers and that data shows reduced QSR spending across all consumer demographics industry-wide.

Katherine Griffin, on behalf of Bank of America, asked about the characteristics of lapsed users and competitor customers being targeted by marketing. She also inquired about the company's future priorities for technology investments.

Answer

CEO Chris Tomasso explained that marketing efforts aim to increase visit frequency from their core demographic, rather than chasing pure value-seekers, by leveraging brand strengths and relevant messaging. He stated that future technology investments will be focused on the consumer-facing side, particularly in marketing and demand generation.

Katherine Griffin, on for Sara Senatore, asked for an assessment of the broader steak category's performance, noting it appeared to have slowed recently. She also inquired about the extent of curbside to-go availability across Olive Garden locations.

Answer

CFO Raj Vennam and CEO Rick Cardenas clarified that Darden has not experienced a slowdown at LongHorn; in fact, September trends were at or above strong August levels. Cardenas confirmed that virtually every Olive Garden offers to-go, and almost all of those locations provide a curbside pickup option, which is the same system the Uber delivery drivers will use.