Cracker Barrel (CBRL) Q2 2026 Earnings Transcript

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DATE

Wednesday, March 4, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• President and CEO — Julie Masino
• Senior Vice President and CFO — Craig Pommells
• Director of Investor Relations — Adam Hanan

TAKEAWAYS

• Total Revenue -- $874.8 million, representing a 7.9% decrease.
• Restaurant Revenue -- $694.3 million, down 7.5%.
• Comparable Store Restaurant Sales -- Decreased 7.1%, with a 10.1% traffic decline.
• Restaurant Average Check -- Up 3.4%, driven by 4.2% price and a negative menu mix due to higher discounts.
• Off-premise Sales -- 23.6% of restaurant sales, a modest year-over-year increase.
• Comparable Store Retail Sales -- Decreased 9.2%.
• Google Star Rating -- 4.28, the highest quarterly score since Q2 fiscal 2020.
• Guest Food Taste, Service, and Value Scores -- Increased 4%–5%.
• Management Turnover -- Improved by 10%.
• Retail Cost of Goods Sold -- Increased to 56.8% of retail sales from 53.4%, primarily due to tariffs and discounts.
• Restaurant Cost of Goods Sold -- Rose to 27.4% of restaurant sales from 27.1%, due to higher waste, discounts, and commodity inflation (1.3%).
• Labor and Related Expenses -- 36.1% of revenue, up from 34.4%, due to sales deleverage and lower productivity; wage inflation was 2%.
• Adjusted General and Administrative Expenses -- 4.9% of revenue, improved by 60 basis points, driven by lower incentive compensation and cost savings.
• Adjusted EBITDA -- $38.2 million, or 4.4% of revenue, down from $74.6 million (7.9%) prior year.
• Adjusted EPS -- $0.25; GAAP EPS was $0.06.
• Loyalty Program Membership -- Over 11 million, contributing over 40% of tracked sales.
• Net Interest Expense -- $4 million versus $5 million prior year.
• Consolidated Senior Debt to Adjusted EBITDA Ratio -- 0.3, below the 3.0 maximum.
• Capital Expenditures -- $26.6 million during the quarter.
• Expected Net Cash Benefit in Q3 -- Approximately $46 million from litigation settlement; will be included in EBITDA for debt compliance calculation, but excluded from reported adjusted EBITDA.
• Guidance: Fiscal 2026 Revenue -- Projected at $3.24 billion to $3.27 billion.
• Guidance: Pricing -- Approximately 4% increase planned.
• Guidance: Commodity Inflation -- Anticipated at 2%–2.5%; hourly wage inflation expected at 2.5%–3%.
• Cost Savings -- Corporate restructuring expected to drive $20 million–$25 million in annualized G&A savings; advertising spend in the second half planned to be $13 million–$17 million lower.
• Guidance: Adjusted EBITDA -- Full-year outlook is $85 million–$100 million.
• Guidance: Traffic -- Annual traffic expected between negative 8.5% and negative 9.5%.
• Thanksgiving Week Sales -- Generated nearly $110 million.
• Guest Preference Metrics -- New and returning menu items, notably Breakfast Burger and Carrot Cake, outperformed preference expectations.

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RISKS

• Craig Pommells said, "Restaurant average check increased 3.4% and included price of 4.2%. Menu mix was negative, driven primarily by higher discounts."
• Retail cost of goods sold rose by 340 basis points to 56.8% due to higher tariffs and increased discounts.
• Labor and related expenses increased by 170 basis points to 36.1% because of sales deleverage and lower productivity.
• "Comparable store restaurant sales decreased by 7.1%, including a traffic decline of 10.1%," indicating continued negative comp trends.

SUMMARY

Cracker Barrel Old Country Store (NASDAQ:CBRL) reported a pronounced revenue and traffic decline, reflecting ongoing headwinds in restaurant and retail performance. Management highlighted improvements in operational and guest satisfaction metrics, including a record Google star rating and increased guest loyalty engagement, but acknowledged continued challenges from cost inflation, elevated labor expense, and negative menu mix. Strategic initiatives included significant cost reductions, targeted menu innovation, and a focus on value-oriented offerings, with the annual outlook forecasting modest adjusted EBITDA and continued negative traffic.

• Sales softness included both restaurant and retail, with Q2 traffic down 10.1% and retail sales down 9.2%.
• Margin pressure was driven by negative menu mix, higher discounts, increased waste, and commodity inflation in both divisions.
• Loyalty member sales represented a growing share of tracked revenue. Re-engagement of lapsed guests contributed to sequential traffic stabilization in January and early February.
• Fiscal 2026 guidance incorporated moderate pricing, ongoing cost controls, lower capex, and tightening marketing spend, yet anticipated continued high-single-digit traffic declines for the year.
• Leadership stressed leveraging menu enhancements—particularly limited-time offers and bundled value—to drive preference, with Breakfast Burger and Carrot Cake cited as exceeding internal benchmarks.

INDUSTRY GLOSSARY

• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain items such as restructuring or impairment charges, providing a normalized view of core operational performance.
• Menu Mix: The sales composition across menu items; negative mix indicates a shift towards lower-margin or discounted offerings affecting average check growth.
• LTO (Limited-Time Offer): Promotional product available for a defined period, often used for guest traffic or marketing impact.
• Retail Attachment: Percentage of restaurant guests who also purchase retail merchandise in a single visit.

Full Conference Call Transcript

Operator: Good day, and welcome to the Cracker Barrel Old Country Store, Inc. Fiscal 2026 Second Quarter Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. 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 Adam Hanan, Director of Investor Relations. Please go ahead. Thank you.

Adam Hanan: Good afternoon, and welcome to Cracker Barrel Old Country Store, Inc.'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 01/30/2026. 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 to the GAAP financials. On the call with me are Cracker Barrel Old Country Store, Inc.'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 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 furnish to the SEC. Finally, 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 will now turn the call over to Cracker Barrel Old Country Store, Inc.'s President and CEO, Julie Masino. Julie?

Julie Masino: 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 are gaining traction and are encouraged by some important guest metrics and green shoots around traffic, and we are energized in terms of driving improved performance. I would like to start by thanking our store teams for their hard work every day. Operationally, we are 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 2020. We have 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 are 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 are continuing to reintroduce favorites, both to our core menu and as part of our limited-time-only promotion. Our holiday menu promotion featured our Country Fried Turkey. This fan favorite continues to resonate with guests, and we again sold out of product. In January, we reintroduced Hamburger Steak and Eggs in a Basket.

Then, with our spring menu that launched in mid-February, Sugar Cured and Country Ham dinners returned to the core menu. We also brought back Carrot Cake as an LTO. We continue to use Front Porch Feedback, our guest feedback mechanism, and there are more returning favorites in the pipeline, and as we bring back items, we are doing so through the lens of improving taste, consistency, and ease of execution. We also continue to innovate and close menu gaps with the introduction of new items. In the fall, we added the Breakfast Burger. Topped with our signature Hashbrown Casserole, this delicious burger is the ultimate combination of country cooking and a breakfast-for-dinner entrée. Our spring menu provides additional examples.

Guests have been asking for omelets and scrambles for years, and we recently debuted our new Garden and Farmhouse Scrambles. We also added Smoky Southern Salmon, and this LTO offering provides a more premium lighter fish option. Collectively, these items, both the new offerings and returning favorites, have been well received, and we have been particularly pleased with the Breakfast Burger and Carrot Cake, both of which have outperformed our expectations on preference. In addition to introducing items, we are also evaluating food quality improvements to existing offerings as part of our targeted efforts to drive greater guest satisfaction across the menu. We are testing improvements to several signature items and have additional tests planned in the coming months.

Finally, as it relates to our menu, we are also leaning into value. We already have a strong everyday value foundation, which we have strengthened with our barbell pricing strategy, and we have been layering in new constructs and targeted promotional offers. This has allowed us to evolve the way that we talk about value by amplifying our communications around compelling price points to drive traffic while reinforcing affordability as a hallmark of the brand. This fall, we launched Meals for Two starting at $19.99. This offer, available for dine-in on weekdays, includes two full-size entrées and one choice of shareable or dessert.

We continue to evolve this platform, and we have seen a meaningful lift in guest preference since launch. Our approach to value also includes pulsing short-window offers to create urgency and trial. In the weeks leading up to Christmas, we ran a promotion for a free toy up to $5 with the purchase of a kids meal. We were pleased with the results and impressed by the team's agility in quickly creating and implementing this offer. It delivered incremental margin dollars and contributed to outperformance of the choice category during the promo window. Our ability to connect restaurant and retail in a single experience is a real point of differentiation.

We are exploring additional ways to capitalize on this advantage and believe that by lengthening the lead times for planning and execution, we can make these integrated promotions even more impactful. In fiscal 2025, we were pleased with the positive mix we delivered, and the team has been focused on developing menu enhancements to build margin while reinforcing our value proposition. We introduced several changes in January. For example, guests can now upgrade to three sides for a modest upcharge and add a soup and salad to their meal for just $5. They can also choose bundled shareable duos and trios.

Early results from these actions are encouraging, as we have seen an improvement in our mix trend following these additions. Another important way we are driving traffic and delivering value is through our loyalty program, Cracker Barrel Rewards. After a little over two years since the program launched, we now have over 11 million members, and they account for over 40% of tracked sales. That scale gives us a meaningful way to understand guest behavior and directly engage with guests to reinforce value and drive frequency. It is a tremendous benefit for guests and an increasingly important tool in improving traffic. Engagement in the program remains strong, and traffic among loyalty members has held up better than nonmembers since August.

From a marketing perspective, our guest connection strategy remains centered on food, value, and the heritage that makes Cracker Barrel Old Country Store, Inc. distinct, and every campaign is designed with a clear objective: drive traffic and strengthen brand affinity. We are seeing early signs this is working, as evidenced by our improving traffic trends and the fact that our brand sentiment scores improved 2% over Q2 compared to Q1. As part of this, we have deepened our storytelling and leveraged key partnerships to reinforce emotional connection, expand reach, and drive visitation. We continue to highlight our scratch-cooked food made with care through the Our Country Friends series on social media.

We are emphasizing and expanding our longstanding commitment to the military community. We again offered a complimentary Sunrise Pancake special for military members on Veterans Day. This contributed to a strong traffic comp performance for the day, and we also helped support 30 worthy veterans organizations throughout November. Most significantly, we launched an ongoing 10% military discount, available all day every day, both restaurant and retail. This discount is available through Cracker Barrel Rewards and is helping to drive continued growth in loyalty membership while also recognizing this important group. We are building on our efforts from the past year and continuing our successful partnership with Speedway Motorsports.

We are once again sponsoring the Cracker Barrel 400 in May, as well as increasing our on-site activations at races across the country, which kicked off at Daytona last month. Last year, our partnership with Speedway Motorsports gave us cultural moments to amplify our story in ways that guests loved and that supported traffic and brand trust. We are looking forward to leveraging similar opportunities this year. We are also excited to feature our Campfire Meals platform again this summer. Campfire is one of our strongest nostalgia anchors and a clear expression of Cracker Barrel Old Country Store, Inc., Americana, travel, and gathering.

Turning to retail, as a reminder, Q2 is our biggest quarter for retail sales due to the holidays. Overall, our retail results remain pressured due to traffic, but we were encouraged by the guest response to our seasonal holiday assortment. We were also encouraged that retail attachment was flat versus prior year, given that it has generally declined in recent quarters, and that our average order value increased slightly. We are excited about our upcoming assortment. Looking ahead, the team remains focused on effectively managing inventories, mitigating tariffs, and enhancing the shopping experience. Finally, in addition to our efforts to drive traffic by improving consistency of food and the guest experience, we are also focused on cost savings.

In Q2, we continued the restructuring of the corporate office that began in Q1. We remain committed to returning G&A closer to historical levels as a percentage of sales and are continuing to closely manage our expense structure to protect our balance sheet. As we look ahead to the back half of our fiscal year, we are encouraged that we continue to welcome back more guests. Our number one focus is serving delicious food and delivering experiences guests love. We have a number of tactics to support this, and we are confident in our team's ability to execute. We are engaging our guests through our menu, messaging, and continued commitment to value.

We are committed to operating with excellence, and we are implementing actions to improve profitability, all to strengthen the business and to return to positive momentum. I will now turn it over to Craig to review our results and discuss our outlook.

Craig Pommells: 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%–11%. We were encouraged by the improvement in January, which declined 9%, including an approximately 50 basis points net year-over-year unfavorable impact from weather. Restaurant average check increased 3.4% and included price 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, overall 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. Order and inventories were $180.3 million compared to $173.0 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 24.8% of revenue, compared to 23.2% in the prior year. This 160 basis point increase was primarily driven by sales deleverage and higher store occupancy costs, including increased maintenance spending, which was in part due to elevated snow removal costs.

Adjusted general and administrative expenses were 4.9% of revenue and exclude $2.6 million in expenses related to the proxy contest and a $2.6 million corporate restructuring charge related to organizational and leadership structure changes. Compared to the prior year, adjusted general and administrative expenses improved 60 basis points, primarily driven by lower incentive compensation and cost savings initiatives, including the corporate restructuring. Our GAAP financial results include a noncash store impairment charge of $400,000 related to Maple Street stores. Net interest expense was $4 million compared to net interest expense of $5 million in the prior year. This decrease was primarily the result of a lower revolver balance and a higher convertible debt balance.

Our GAAP income taxes were a $4.9 million credit, and adjusted income taxes were a $3.5 million credit. GAAP earnings per diluted share were 6¢, and adjusted earnings per diluted share were 25¢. Adjusted EBITDA was $38.2 million, or 4.4% of total revenue, compared to $74.6 million, or 7.9% of total revenue, in the prior year. Now turning to capital allocation and the balance sheet. Our balance sheet remains strong, and we continue to have ample access to liquidity. We ended the quarter with $531.5 million in debt, compared to $471.5 million in the prior year. At quarter end, our consolidated senior debt to adjusted EBITDA leverage ratio was 0.3, which is below the maximum allowed of 3.0.

In the second quarter, we invested $26.6 million in capital expenditures. I also want to note that in our third quarter, we expect to record a net cash benefit of approximately $46 million following the settlement of certain litigation matters. This amount will be included in the calculation of EBITDA as defined by the credit agreement for purposes of calculating applicable ratios for debt compliance and borrowing capacity. However, we expect that it will be excluded from the calculation of reported adjusted EBITDA to enhance comparability to our adjusted EBITDA results across periods.

Before sharing our annual outlook, I want to provide some context on current trends and how variability between last year's third and fourth quarters are expected to affect comparisons for the remainder of fiscal 2026. If you recall, in fiscal 2025, traffic declined 5.6%, in large part due to weather and macroeconomic factors. That was our lowest traffic performance of the year. As a result, we have an easier comparison in this year's Q3. We are pleased that our traffic trend in February further improved on January's results. Regarding Q4, traffic in fiscal 2025 declined 1%, a significant step up from our third quarter. As a result, we will have a more challenging lap in the fourth quarter.

Turning to our fiscal 2026 outlook, our guidance reflects our best estimate as of today. The rate and level of our traffic recovery, as well as the level of investment required, remain key drivers of our fiscal 2026 EBITDA performance. As outlined in our press release, we anticipate the following for fiscal 2026: total revenue of $3.24 billion to $3.27 billion; pricing of approximately 4%; and lower menu mix resulting from higher discounts; commodity inflation of 2% to 2.5%, and hourly inflation of 2.5% to 3%. As discussed on the last call, we have implemented a number of cost savings measures.

We executed a corporate restructuring that began in Q1 and continued in Q2, which we expect will result in annualized G&A savings of $20 million to $25 million. Additionally, we have reduced our advertising spend and anticipate that our aggregate advertising spend in the second half of the year will be $13 million to $17 million lower than the same period in the prior year, reflecting a more targeted approach to our advertising. Taking all of the above into account, we now anticipate full-year adjusted EBITDA of approximately $85 million to $100 million.

Finally, we are now planning for lower capital expenditures of $105,115,000,000, and this reduction is part of our comprehensive efforts to manage cash flow and the balance sheet. With that, I will now turn the call back over to Julie for a few closing remarks.

Julie Masino: Thanks, Craig. I want to wrap up by reiterating that all of the initiatives I described across menu and marketing are part of our focus on consistently delivering delicious, flawless food, improving guest satisfaction, and driving traffic. We are highly encouraged by the green shoots we are 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 am so proud of their hard work and commitment to the guest experience.

I am confident that our continued focus on food and the guest experience will enable us to return to positive momentum. Operator, we will now open for questions.

Operator: Thank you. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. The first question comes from Dennis Geiger with UBS. Please go ahead.

Dennis Geiger: Great, thanks. 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. I was curious if that was on a one-year basis you were referring to, if you are seeing continued traction and an underlying trend improvement, anything else on the latest and greatest as it relates to where traffic trends are and how you would size up traction against plan so far?

Craig Pommells: Hi, 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 at the end of the month, and we are encouraged by an even better start to February. We did try to balance all of that, 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.

Dennis Geiger: Great. And then as a follow-up, encouraging to hear about the improvement in the brand sentiment scores as well as 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 help you assess where you are in the recovery process as we try and get a better sense for the leading indicators ahead of further traffic improvement?

Julie Masino: Yes, thanks, Dennis. We are really encouraged by the improvement in everything you mentioned: Google star rating, the brand sentiment, our food and value scores, as well as just the way the teams are really executing. Being in our restaurants, they feel so good right now. I am in a lot and talking to guests, talking to our team members, and I feel like we are at our best more than we have been in a while. That said, we are moving in the right direction.

As I have said to you in the past, I do not have a crystal ball, and we do not have a correlation that says when scores improve by X, traffic follows by Y weeks or months. We do not know that, but we know these are leading indicators. We have checked all correlations. They still correlate to same-store sales growth and improvement, so we know we are headed in the right direction, and everybody is working hard to make that a reality.

Operator: Thank you. The next question comes from Jon Tower with Citi. Please go ahead.

Jon Tower: Thanks for taking the question. Julie, you had mentioned earlier that you are starting to do things a little bit differently on the marketing front, and I know, Craig, you had mentioned that in the back half of the year you are expecting a lower spend in terms of advertising. So I am curious what tools you are using to ensure that consumer awareness remains high as the advertising spend drops lower in the back half of the year, and can you dig into the exact tactics that you are going into, particularly on social and digital, to draw in either new or lapsed guests?

Julie Masino: Sure. Hi, Jon. I am 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. We have a holistic plan to reach them in those channels to bring them back and build their trust. It is targeted and nuanced, and then there is some broad-based media that gives us reach across that.

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 has not manifested in traffic. We are actively testing messaging, we are testing offers, campaign constructs, really through our loyalty member base to make sure that they are going to work and get the right people. Loyalty is a great way for us to reach guests, and we have been using that to refine messaging, try out offers, test different messaging constructs with different segments within our loyalty population, and ensure that we are 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. We have tried to dial that in to meet them where they are and welcome them back.

Jon Tower: And maybe, Craig, this one on the tariff outlook. I know there is quite a bit of fluidity in terms of what is happening now. I believe on the last call you had mentioned for fiscal 2026 there is about a $24 million or so incremental impact on the business from tariffs. Has that changed?

Craig Pommells: Hi, Jon. You said it right. It is dynamic, and the tariff environment is changing. As you know, there is relatively new news out there. Maybe just a couple things on the dollar impact. In part, there is a component there of traffic and retail sales that will impact the absolute dollar impact. The team continues to do a really good job here, but it is also late-breaking and evolving. We do expect it to be a smaller tariff impact a little bit this year. 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.

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.

Jon Tower: Okay. Thank you. I will pass it along.

Operator: The next question comes from Jake Bartlett with Truist Securities. Please go ahead.

Jake Bartlett: Thank you so much. My first question was just to make sure I understand the guidance for traffic. Before, you had talked about negative 8% to 10% for the year. I am wondering if that is still the case. Maybe if you can be a little more specific about what you expect in the back half and what that implies. Maybe you would share whether you expect to be in the higher or low end of that range or something like that. And then I have a follow-up.

Craig Pommells: Yes, hi, Jake. In terms of the back half, I think the key takeaway for us is we are thinking about what we are comping on and what happened in the prior year. As we shared, Q3 was a bit of a challenge last year. We had some 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. We have 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%.

Jake Bartlett: Got it, great. It was encouraging to see the brand sentiment improvement versus pre-August. I am wondering if you can share how far you are from what it was prior, maybe how much you have to go to get back to normal, or pre-August, pre-rebranding. I am also wondering whether you can share whether there is different sentiment from cohorts of your customers, and I am 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.

Julie Masino: Yes, hi, Jake. I will start with that one, and then maybe Craig will have an assist. 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. We are a little bit below the average for casual at the moment and really working to claw that back and improve our trends there, but again, we are pleased with the progress that we are making. You hit the nail on the head a bit.

The way we are doing that—and it is a little bit my answer to Jon's question as well—we are really segmenting our loyalty audience by what we know about them, how they shop with us, what they want to hear from us. We have done a lot of research in the last six months, talking to them about their feelings and what they want to hear from us and what they want to see from us, and we are using that learning to welcome them back.

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 are a breakfast customer or a dinner customer and whether you are a retail customer. We are using all of those things to meet you where you are and to welcome you back with open arms. We are really pleased with the progress we are making. We have some ways to go, but we are 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 are pleased with that, and that is encouraging because we have such a large base there, and we have been investing behind that for a long time. We are going to continue to utilize and leverage those capabilities.

Jake Bartlett: Got it. And if I can just sneak one more in, I apologize for this. Your guidance for EBITDA and the margins—you have taken down your inflation guidance for commodities and for labor, you are talking about spending much less in marketing year over year, you beat in the second quarter, but your overall annual guidance did not change very much. Are there some offsets or some costs that you had not anticipated that you think you are going to incur? I am trying to get at to what degree this might be conservative.

Craig Pommells: 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. I think all of that factors into our thinking.

Jake Bartlett: Got it. Thank you.

Operator: The next question comes from Sara Senatore with Bank of America. Please go ahead.

Sara Senatore: Hi, thanks. I have a question and then maybe a couple of follow-ups or clarifications. First, on the demand environment, we are hearing a lot about gas prices potentially spiking. I know in the past we have talked about Cracker Barrel Old Country Store, Inc. having some relatively high exposure to people who are traveling or coming from other ZIP codes. I was curious if you could speak to that and perhaps any historical correlation, and then, like I said, just maybe one quick clarification.

Craig Pommells: Hi, Sara. On gas prices in particular, we have looked at this a couple different times. Pre-COVID, gas prices did have a really strong relationship to traffic. More recently, we have focused more on disposable income because that has been a little bit more impacted with all of the other moving pieces and people spending. Gas prices are obviously one input into that. Potentially, if gas prices are up, that could be a negative, but going the other direction is that tax refunds are expected to be higher this year than they were in the prior year, and retirees also have a larger deduction this year. So there are multiple moving pieces that flow into 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 65 and they are likely to have a benefit as well from the tax changes.

Sara Senatore: Thank you. I will ask a clarification on this and then I will follow up later with the other questions. To your point, tax refunds also typically benefit higher income consumers. Can you talk about your income exposure? There is a perception that perhaps your customer base skews a little bit lower income. As I think about the puts and takes, you make a good point, but just asking from an income perspective.

Craig Pommells: It is a good question. Our income exposure is pretty close to average, maybe a little bit lower than average, but not dramatic. In this case, I do think this particular tax environment is different, and the folks that are retirees do get a larger benefit. There are a lot of moving pieces as you think about disposable income this year, a little bit more so than in the past.

Sara Senatore: Okay. Thank you so much.

Operator: Once again, if you have a question, please press star then one. The next question comes from Todd Brooks with Benchmark. Please go ahead.

Todd Brooks: Hey, thanks for taking my questions, and congrats on a nice quarter. I wanted to dig in. We all see the weekly sales and traffic data, and if I look across the last eight to ten weeks, you have seen a pretty material step up in traffic. The drag post August was in that down 10% range, give or take, and recently it feels like it is more in the down mid-single-digit range.

With your data and how well you can track and measure your customers, do you sense this is the displaced customer coming back that is causing most of this lift, or is it a function of what you are doing against loyalty and promoting to those customers that maybe you did not really lose post August and just getting them in the restaurant more frequently? What is the data telling you, Julie, for where this traffic is coming from?

Julie Masino: Sure. Hi, Todd, and thank you for the congrats. We are proud of the quarter. Everybody is working hard. We have a ways to go, but we are getting after it. With respect to your question about the lapsed guest, what I think is probably best to share is that we have really been working on those loyalty guests, and we are encouraged that the percentage of our highest-value loyalty guests who visited us in Q2 was consistent with our historical levels. We are retaining that, and that is really important to us. We also captured a meaningful percentage of lapsed guests that we had not seen in Q1 who came back in Q2.

To Jon’s and Jake’s questions about how we are really targeting some of those people, we are seeing movement there, and that feels good to us because increasing frequency with people that know us and are already in our ecosystem is really important to us. We are using feedback and research to reach out to them and figure out what is meaningful to them and make sure that we are delivering on that, and just executing really well. When we are operating well and getting great experiences and delicious hot food, that is the key thing. In terms of people that we have lost, we did see a lot of new people come into the business with Campfire last Q4.

Some of those people have not returned to us, and we are working on a net to get those people back into the business.

Todd Brooks: If we did not talk about holiday meal performance—and I know the strategy has maybe even changed to better balance profitability versus sales—could you review how holiday meals performed during the quarter? Is that behind any of the improvement or maybe less-bad restaurant COGS than what some of us were expecting, and just how that overall offering resonated at holiday? Thanks.

Julie Masino: We did a little bit on the last call because it was right after Thanksgiving. We built on the learning last year because, if you remember, 2025 was a really strong performance for us, and we had spent a lot of time 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 were not overspending on labor and all of those things. We took those learnings into this year, really simplified the operation, made 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 did not 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.

Operator: 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.

Julie Masino: Thank you for joining us today. We are encouraged by the improvements we have seen in key guest experience metrics and in our traffic trend. 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.

Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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