Cracker Barrel (CBRL) Q3 2026 Earnings Transcript

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DATE

Tuesday, June 9, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Julie Felss Masino
• Senior Vice President and Chief Financial Officer — Craig A. Pommells

TAKEAWAYS

• Total Revenue -- $797.4 million, as stated by Pommells, with restaurant revenue of $658.4 million and retail revenue of $139 million.
• Comparable Store Restaurant Sales -- Decreased 2.6%, driven by a 6.7% decline in traffic and partially offset by a 4.3% increase in average check.
• Average Check -- $15.85, significantly below casual dining peers at over $27 and family dining at over $19, supporting management’s pricing strategy emphasis.
• Off-Premise Sales -- Represented 19.6% of restaurant sales, increasing approximately 50 basis points due to catering and third-party delivery growth.
• Comparable Store Retail Sales -- Decreased 1.8%, but retail comps outperformed restaurant comps for the first time in over four years.
• Adjusted EBITDA -- $40.3 million (5.1% of total revenue), compared to $48.1 million (5.9%) in the prior year; excludes $47.4 million in litigation settlement income.
• Litigation Settlement Income -- $47.4 million in cash proceeds received in the quarter, bolstering the balance sheet and excluded from adjusted EBITDA.
• Inventory -- Ended at $179.9 million versus $168.7 million in the prior year, with management stating comfort with inventory levels.
• Labor Costs -- 37.9% of revenue, up 80 basis points primarily due to sales deleverage; wage inflation approximated 2%.
• Restaurant Cost of Goods Sold -- 26.1% of restaurant sales, down 10 basis points, with commodity inflation of approximately 2.5% and benefits from lower egg and dairy prices.
• Retail Cost of Goods Sold -- 49.8% of retail sales, up 90 basis points mainly due to higher tariffs, partially offset by pricing actions.
• Operating Expense Management -- Other operating expenses reduced to 24.9% of revenue, a 40 basis point decline due to lower advertising and supplies expenses, offset partly by higher utilities.
• General and Administrative Expenses -- 6.2% of revenue, up 60 basis points mainly from $2.9 million in higher incentive compensation, $2.8 million in legal fees, and $1.1 million in separation costs.
• Debt and Leverage -- Quarter-end debt was $486.6 million (entirely convertible notes), with consolidated total debt leverage ratio of 2.4 and no revolver balance drawn.
• Capital Expenditures -- $27.1 million for the quarter, with a full-year expectation of $105 million to $115 million, primarily for maintenance.
• Loyalty Program -- Membership reached nearly 12 million, with member-tracked sales above 40% and loyalty visits up year over year.
• Guest Satisfaction Metrics -- Year-over-year Google star rating rose 4% to the highest since 2018; food taste and service scores improved 5%, and food temperature rose 7%.
• Value Scores -- Q3 value scores increased 5%, and entry price points highlighted through menu offerings such as the $7.99 Sunrise Pancake Special.
• Retail Initiatives -- SKU rationalization, markdown optimization, and merchandising enhancements cited as drivers of improved units per transaction and average unit retail.
• Litigation Settlement Liquidity Impact -- $47.4 million settlement increased available liquidity, with $541.3 million in available capacity at quarter end.
• Fiscal 2026 Guidance -- Raised revenue outlook to $3.27 billion to $3.3 billion and adjusted EBITDA to $120 million-$125 million; assumes low 4% pricing, low 2% commodity and wage inflation.
• Corporate Restructuring -- Actions executed in Q2 are projected to deliver $20 million to $25 million in annualized G&A savings.
• Technology Initiatives -- Website upgrade planned to enhance digital ordering and personalization; AI deployed for traffic forecasting, labor planning, guest relations, and feedback analytics.
• Tariff Refunds -- Claim filed for $17 million, with $5 million received (all in Q4) and most expected to be reinvested in the business.
• Cost Savings Measures -- Marketing expense down $7 million year over year in Q3 and targeted menu, side, and discount changes contributing positively to cost structure.

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RISKS

• Craig A. Pommells stated, "fuel prices are up, and that will impact the business in terms of distribution on the restaurant side. It also impacts the retail side of the business. So there is some impact in the fourth quarter related to fuel, and all of that is included in the guidance."
• Pommells noted persistent "we have all read about that. We are seeing that as well, particularly with the lower income consumer," explicitly stating traffic softness among lower-income guests.
• Corporate restructuring yielded $1.1 million in employee separation costs within the quarter, contributing to increased G&A expenses.
• General and administrative expenses rose 60 basis points, driven by higher incentive compensation, legal fees, and separation costs totaling $6.8 million.

SUMMARY

Cracker Barrel Old Country Store (NASDAQ:CBRL) reported revenue of $797.4 million with adjusted EBITDA of $40.3 million, highlighting disciplined cost management and gradual improvement in guest traffic. Management raised fiscal 2026 revenue and adjusted EBITDA guidance, citing positive trends in loyalty engagement, menu mix optimization, and cost savings from restructuring and marketing efficiency. The loyalty program expanded to 12 million members and supported above-40% member-tracked sales, while retail sales outperformed restaurant sales for the first time in over four years. Management explicitly noted challenges from fuel price inflation affecting both restaurant and retail operations and continued softness among lower-income consumers. Capital expenditure guidance was maintained with a focus on maintenance rather than remodels, and a $47.4 million litigation settlement improved liquidity and reduced leverage ratios.

• Pommells stated, "the underlying trend is improving," positioning the company for gradual sequential performance gains despite tougher year-over-year comparisons in the fourth quarter.
• Masino confirmed, "We put the remodel program on pause this year," indicating a shift toward targeted repairs and refraining from major store image investments in the near term.
• Management reported, "reminder, accounts for approximately 20% of restaurant sales," underlining the continued significance of digital and catering channels for revenue.
• Loyalty-linked promotions, such as the summer road trip sweepstakes, were launched to retain and attract valuable guests in the peak travel and gas price environment.
• Retail leadership changes and SKU strategies were called out as key to improved comp performance and merchandise sell-through in the current quarter.

INDUSTRY GLOSSARY

• SKU Rationalization: Deliberate reduction or optimization of stock keeping units to focus on high-performing inventory and improve merchandising efficiency.
• Barbell Pricing Strategy: Simultaneously offering value-focused low-price items and premium-priced menu items to appeal to a broad range of consumer segments.
• Comp Store Sales: Comparable sales growth metric measuring year-over-year performance for stores open at least one year, excluding new locations.
• Campfire Platform: Cracker Barrel’s seasonal menu and marketing initiative centered on nostalgia and Americana, spotlighting Campfire-branded food promotions.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding one-time or non-operational items for comparability across periods.
• LTO: Limited Time Offer; menu item or promotion available only for a short promotional period.

Full Conference Call Transcript

Julie Felss Masino, and senior vice president and CFO, Craig A. 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 and information.

Many of the factors that could affect results are summarized in the cautionary description of risk 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, 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 will now turn the call over to Cracker Barrel's President and CEO, Julie Felss Masino. Julie?

Julie Felss Masino: Good afternoon, and thank you for joining us. Q3 results exceeded our expectations. Total revenue were $797 million and adjusted EBITDA came in at $40 million This performance was driven by strong cost management across the P and L. As well as improved traffic and check. Our dedicated teams have positioned us for success they continue to execute at a high level. They are key to implementing our strategic initiatives, which are grouped into 3 areas. Improved operations, deeper connections with guests through our menu, marketing, and value proposition, increased profitability. I will now discuss each 1. First, operationally, we remain focused on consistent execution and delivering an exceptional guest experience.

This resulted in strong improvements across important guest metrics for the third consecutive quarter. Year over year, our Google star rating increased 4%, reaching its highest quarterly score since 2018. While our food taste and service scores rose 5%, and food temperature scores increased 7%. Managerial turnover improved by 6%, outperforming the industry. And we continue to see positive trends in hourly turnover. We are pleased with the favorable trends in these metrics, which are important leading indicators and are confident these gains will translate into improved traffic over time. Turning to our menu. Our multipronged strategy combines bringing back guest favorites, introducing new offerings, enhancing quality, and leaning into value.

We are incorporating these elements into each of our seasonal menus in an effort to improve guest satisfaction and drive traffic. Our spring menu featured the return of our sugar cured and country ham dinner to the core menu and our very popular carrot cake as an LTO. We also introduced our garden and farmhouse scrambles to address a menu gap and respond to a long-standing guest request. Additionally, our spring menu featured our new smoky southern salmon which provided a more premium lighter fish option. Our summer menu is centered on our campfire promotion.

As a reminder, last year marks the return of the Campfire platform, 1 of our strongest nostalgia anchors and a clear celebration of Americana, travel and gathering. This year, we made enhancements to our Campfire chicken and beef offerings to improve flavor and consistency. We also extended the platform into the morning daypart with a new campfire breakfast skillet. This hearty meal consists of bacon, smoked sausage, roasted peppers, onions, and cheese served over 3 eggs with crispy campfire seasoned potatoes. Value is incredibly important in today's environment. For Cracker Barrel, it is not a response to the moment. it is part of who we are, delivering meaningful abundance and everyday value for our guests.

Our value remains strong as evidenced by the fact that our Q3 value scores increased 5% year over year. There are a number of reasons we are confident that our proposition will continue to resonate. First, our absolute check remains well below the industry. In Q3, our average check was $15.85. Compared to over $27 in casual dining and over $19 in family dining. Underscoring our lower prices versus competitors. In fact, guests can order add ons with us, and their check will still be lower than an entree at many of our peers. In addition to lower relative prices, our overall value proposition is strengthened by the high quality ingredients delicious food, and genuine hospitality we are known for.

Second, we have maintained a strong everyday foundation further enhanced through our barbell pricing strategy that includes compelling entry price points such as our Sunrise Pancake Special for $7.99 and early dinner deals starting at $8.99. Third, we have implemented targeted menu changes to reinforce our value proposition and expand guest choice while also building margin. This includes bundled shareable duos and trios as well as options for guests to upgrade to 3 sides or add an extra breakfast protein to select entrees for a modest surcharge. Transitioning to loyalty. Cracker Barrel Rewards remains a meaningful traffic and value driver for the business. The program has grown to nearly 12 million members with continued strong engagement.

In Q3, member tracked sales remained above 40%. We saw strong retention among our most valuable loyalty guests that was consistent with historical norms. Overall loyalty member visits increased year over year, reinforcing the program's role as an important traffic tailwind. Beyond points and rewards, we are using the loyalty platform to create more meaningful reasons for guests to engage with the brand. A good example of this is our fuel your summer road trip sweepstakes. As part of this sweepstakes, which launched May 19 and will run through July 26, loyalty members who purchase an entree will have a chance to win Cracker Barrel and fuel gift cards.

Each week, 25 winners will receive a $500 Cracker Barrel gift card and a $500 gas card. With $250 thousand in total prizes awarded. These loyalty exclusive engagement opportunities are expected to support member acquisition and encourage repeat visits while reinforcing Cracker Barrel's role as a trusted destination for gathering, comfort, and hospitality during the summer travel season. From a marketing perspective, our guest connection strategy remains centered on food, value and Cracker Barrel's distinct heritage. We continue to leverage key partnerships and cultural moments to deepen emotional connection expand reach, and drive visitation.

For example, our partnership with Speedway Motorsports continues to be an important platform, and we are using it along with our broader summer marketing efforts to generate excitement around Campfire and drive traffic. Building on last year's successful partnership, we have expanded this year's program through broader national awareness, deeper local store engagement in key race markets, and enhanced on-site activations across the season. This year, Cracker Barrel Fan Zones will be present at every Speedway Motorsports race, giving us a larger physical presence with fans and extending the brand beyond the track itself. We were especially proud to have once again served as a title sponsor the Cracker Barrel 400.

This year's sold out race on May 31 was action packed and included 31 lead changes among 15 different drivers with Denny Hamlin ultimately winning in an exciting finish. Moving to retail. This business continues to gain momentum under the leadership of Heather Hager. Who joined us in September 2024 and was promoted to Senior Vice President this past February. We are pleased with the improvement in our retail performance and are seeing good results from key initiatives such as SKU rationalization, optimized markdowns, and improved merchandising. In fact, retail comps outperformed restaurant comps for the first time in over 4 years.

Additionally, we saw year over year improvements in important metrics such as units per transaction and average unit retail. Most importantly, our product is resonating with our guests. I will provide a few examples. First, the toys category has been a particular strength in part because we successfully capitalized on social media driven trends related to sensory play and fidget toys. Second, our salt and pepper shakers remain a hit. These unique collectibles are an incredible value as well as a great expression of the brand. And third, our American heritage theme remains a beloved summer assortment full of merchandise proudly celebrating America and patriotism.

This year, we are featuring merchandise commemorating America's 250th birthday, and the guest response has been strong. Our last strategic initiative is improving profitability. Our teams, from the operators at our stores to team members at the support center, have done an outstanding job managing costs. As a reminder, we executed a corporate restructuring in Q2 that is expected to deliver $20 million to $25 million in annualized G&A savings. We also reduced our advertising expense in the second half of the year compared to the prior year. Collectively, these efforts and cost savings were a significant driver of our Q3 adjusted EBITDA results. And we will continue to diligently manage our expenses going forward.

As our team continues to execute our strategic initiatives to improve operations, make deeper connections with guests and increase profitability, we are also taking other steps to advance the business and position us for the future. Particularly through the use of technology. I will provide a couple of examples. First, in the coming weeks, we are upgrading our website to create a more frictionless and intuitive digital journey. The new platform will better support online ordering, rewards, and targeted content. Importantly, this also serves as the foundation for expanding personalization across more channels over time. Allowing us to deliver more effective messaging and reasons to visit wherever guests are engaging with Cracker Barrel. We are excited about these enhancements.

Which will improve the guest experience while simultaneously driving our off premise business. Which as a reminder, accounts for approximately 20% of restaurant sales. Second, we are using AI across the company to enhance our team's capabilities and to support the guest experience. We have deployed enterprise wide tools, built foundational data and established governance to ensure responsible use and scaling. In building these capabilities, we are also investing in our people. Upskilling teams and ensuring leadership adoption. We are leveraging AI as a force multiplier that allows us to be more productive while making our teams' jobs more efficient. For example, our machine learning traffic forecasting model has improved our projection accuracy, which supports better labor deployment and execution.

Additionally, we are using AI and guest relations to more efficiently resolve tickets and where appropriate to more quickly connect guests with live support. Finally, as part of our focus on the guest experience, we developed an internal agent that can quickly mine data across all guest feedback channels and provide actionable insights. In closing, we are executing at a high level and gaining traction across the business as evidenced by our Q3 results. We are focused on sustaining this momentum over the coming quarters. I will now turn it over to Craig to walk through the financials.

Craig A. Pommells: Thank you, Julie, and good afternoon, everyone. Before reviewing the results, I would like to build on Julie's remarks and thank our teams. I am proud of their work and their progress, as reflected in the improvements in our key guest metrics expense management, and overall financial results. Now turning to the third quarter's results. Total revenue was $797.4 million. Restaurant revenue was $658.4 million. Comparable store restaurant sales decreased 2.6% which included a traffic decline of 6.7%. Although traffic remained negative, we are encouraged by the gradual improvement in the underlying traffic trend. The restaurant average check increased 4.3%. Including pricing of 4.4%. Menu mix was slightly negative.

But improved from the first half of the year driven by the menu changes Julie mentioned. Off premise sales were 19.6% of restaurant sales. An increase of approximately 50 basis points compared to the prior year. Driven by growth in catering, and third party delivery. Retail revenue was $139 million Comparable store retail sales decreased 1.8% driven by lower traffic partially offset by increases in average unit retail, and units per transaction. Turning to the quarterly expenses. Total cost of goods sold in the quarter was 30.2% of total revenue versus 30.1% in the prior year. Restaurant cost of goods sold was 26.1% of restaurant sales. Versus 26.2% in the prior year.

This 10-basis-point decrease was primarily driven by menu pricing partially offset by commodity inflation. Commodity inflation was approximately 2.5% driven principally by higher beef, pork, produce, and seafood prices. Partially offset by lower egg and dairy prices. Retail cost of goods sold was 49.8% of retail sales, versus 48.9% in the prior year. This 90-basis-point increase was primarily driven by higher tariffs, partially offset by pricing. Quarter end inventories were $179.9 million compared to $168.7 million in the prior year. Although inventories are modestly higher, we are comfortable with the level and believe we are well positioned with clean inventories. Labor and related expenses were 37.9% of revenue compared to 37.1% in the prior year.

This 80-basis-point increase was primarily driven by sales deleverage. Wage inflation was approximately 2%. Other operating expenses were 24.9% of revenue compared to 25.3% in the prior year. This 40-basis-point decrease was primarily driven by lower advertising expense, and lower supplies expense. Partially offset by higher utilities expense. General and administrative expenses were 6.2% of revenue compared to 5.6% in the prior year. This 60-basis-point increase primarily driven by the following items. Which totaled approximately $6.8 million. First, $2.9 million in higher incentive compensation expense. Driven by a year to date true up based on higher expectations for the year. Second, $2.8 million in higher professional fees driven by legal expenses. And third, $1.1 million in employee separation costs.

During the quarter, we received $47.4 million in cash proceeds from a settlement agreement resolving interchange fee litigation. This amount was recorded in the litigation settlement income line on the P&L. It is included in our GAAP results but excluded from the calculation of reported adjusted EBITDA to enhance comparability across periods. Net interest expense was $3.7 million compared to $5 million in the prior year. This decrease was primarily the result of a lower revolver balance and a higher convertible debt balance. GAAP income taxes were $7.7 million. Including the tax impact of the interchange fee litigation income. Adjusted income taxes were a $3.5 million credit.

GAAP earnings per diluted share were $1.90, and adjusted earnings per diluted share were $0.29. Adjusted EBITDA was $40.3 million or 5.1% of total revenue, compared to $48.1 million or 5.9% of total revenue in the prior year. In summary, Q3 results exceeded our expectations driven by our operating and cost actions, while guest facing metrics continue to improve and position us for further traffic recovery. Now turning to capital allocation and the balance sheet. We continue to diligently manage the company's capital resources. Capital expenditures are lower relative to recent years. Investments remain focused on core business operations, while maintaining modest debt levels.

The $47.4 million litigation settlement further bolstered the balance sheet and we continue to have ample access to liquidity ending the quarter with $541.3 million in available capacity. The quarter ended with $486.6 million in debt. Which was approximately $3 million below the prior year. The current debt is comprised entirely of the 2 convertible debt notes. With the revolver undrawn at quarter end. As a result, the consolidated senior debt to adjusted EBITDA ratio was 0. The consolidated total debt leverage ratio was 2.4 including the $47.4 million litigation settlement. Capital expenditures in the third quarter were $27.1 million Turning to the fiscal 26 outlook.

Want to remind everyone that in Q4, we are lapping a stronger quarter in the prior year, and this more difficult comparison impacts our year over year expected comp store traffic and sales results. That said, controlling for the variability between last year's third and fourth quarters and the resulting comparison in the current year, the underlying traffic trend continues to show gradual improvement. Regarding tariff refunds, we filed a claim for approximately $17 million. To date, we have received approximately $5 million. All of which was received in Q4. We expect to reinvest nearly all of this during the quarter.

I want to point out that our guidance does not contemplate any additional refunds given the uncertainty regarding the remaining amount applied for but not yet received. Now moving to the guidance. As outlined in the press release, anticipate the following for fiscal 26. Total revenue of $3.27 billion to $3.3 billion Pricing in the low 4% range, Commodity inflation in the low 2% range. Hourly wage inflation in the low 2% range, Taking all the above into account, we are increasing our full year adjusted EBITDA guidance to between $120 and $125 million Finally, capital expenditures are expected to be between $105 and $115 million The majority of which relates to maintenance.

I will now turn it over to the operator for Q&A.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1. Our first question comes from Todd Brooks with The Benchmark Company. Please go ahead.

Todd Brooks: Hey, thanks for taking my questions and congrats on a really strong quarter. Well done. I was wondering if we could talk about the full year guidance for revenue. Q3 beat by about $20 million you are raising the ranges on revenue guidance by $30 million which implies a guide up to expectations for Q4. Can you walk through what is giving you the confidence? You just talked about tough comparisons year over year and I did not hear anything in the comments to date around higher prices at the pump. And reliance on, summer driving season and travel by car.

So if we could kind weave all that together into a commentary about why the constructive nature to the Q4 guide.

Craig A. Pommells: Hi, Todd, Thank you. Sure. You did cover a lot there with that question. Number 1, we you know, we are obviously pleased with the improving trend that we saw in the third quarter. Underpinning all of that is this kind of gradual improvement in the underlying traffic trend. As you noted, Q4 does have a more challenging comparison relative to the prior year than did Q3, Q4 last year, was 1 of the best fourth quarters we had in a while. But, again, the underlying trend is improving. And at this point, we are you know, over a month into--you know, into the quarter. In terms of gas prices, gas prices are obviously an input into discretionary income.

Discretionary income is important as it relates to the restaurant industry, and it does impact us as well. So that is potentially a bit of a bit of a headwind. But, again, for us, you know, we are we are continuing to execute really well. We are continuing to get better and better. And as a result of that, again, we are seeing that improvement in the underlying trend. So we are feeling good about that. there is clearly think, implied in your question, there is a little bit of, you know, what is going on with the consumer and the pressure with the consumer. And, certainly, we have all read about that.

We are seeing that as well, particularly with the lower income consumer. But again, as Julie mentioned, if you think about our check average at $15.85, relative to casual dining at $27, and family dining at $19. We are really good value. And then we also have the barbell pricing strategy as it relates to really sharp entry price points and then some more premium offerings as well. So you know, underpinning Q4, it is a tougher comparison But, again, we do have that gradual improvement trend that is supporting it as well.

Todd Brooks: that is great, Craig. And my follow-up you talked about a pressured consumer, especially as we get down the income scale. The retail performance, though, was dynamic in this past quarter. And I guess the thought would be that people could preserve the visits to the rest restaurant, but maybe you do not attach retail in the same fashion. Julie, you highlighted a couple categories that are working really well. But overall, are you surprised by the sturdiness that you are seeing in the retail business given where the consumer is?

And as you look forward, as we start to get holiday on the radar here, Any changes in the kind of SKU rationalization or anything else anything like that we should be thinking about as we get to the holiday season? Thanks.

Julie Felss Masino: Yeah. Thanks, Todd. And I appreciate the question because we were really, really proud of the performance in this quarter and especially the restaurant teams are working so hard, but so are the retail teams. We have a new leader in retail. I think I have chatted with you about her before. I am so proud of Heather Hager. She joined Cracker Barrel in 2024 and was promoted to senior vice president of retail just this past February.

She's got a really, really broad background across retail and hospitality and, you know, all facets of that in retail design, brand and customer experience, strategy, finance, I am pleased with the way she's really leading the business and the teams and the work that they are doing there. So as mentioned in the call, retail comps outperformed restaurant comps for the first time in over 4 years. And the increases were in the units per transaction and the average unit retail. And I your point, I think there is a few things going on there.

1, the initiatives around SKU rationalization the optimized markdown strategy that Heather and the team have really been working hard on is really driving a lot for us as well. And the improved merchandising, they are working on bringing sight lines down, widening aisles. They have been running a lot of tests all year, and a lot of those are coming together now, and you will see some of those move into next year for us. They are gaining traction, and it is really-- it is really working. So I have talked about the updated retail strategy in the past. there is more to come there, but they are really doing a nice job around all of this.

In addition to all of that, remember, they have also mitigated a bunch of tariffs. Right? We had $17 million worth of tariff impacts in this last year. So they did a great job around that. And then I think finally, the most important thing truly, right, I mean, obviously the hard work and how you manage the business and buy the business merchandise, it is important, but you got to have the right stuff. And the team's done a really wonderful job of making sure that we have product that resonates with guests. I called out a few on the call as well, but in particular, toys have been a bright spot for us.

Toys in general have done well in the industry, but our team's done a really nice job focusing in on sensory play, fidget toys. I mean, we have we have had runs on NeeDoh. Like, it is it is a-- it is a great category for us. They have done a wonderful job there. And then the other thing you will see a lot in our social media is our collectible salt and pepper shakers. They are such a hit, and what a great sort of brand expression. We are able to play up on things from our legacy, things that stories that we wanna tell, things that are uniquely Cracker Barrel.

And they are just fun, and they are very affordable. So when you think about a pressured consumer and wanting to have a little retail therapy at a very affordable price, those fit the bill. And then finally, right now, our front and center theme in stores is the American Heritage theme. This has been a beloved part of our summer assortment for years now. The team really worked to hone that assortment given it is the 250th anniversary of the signing of the Declaration of Independence this summer.

This merchandise is selling out so fast for us. it is been so popular that actually we had to pull Halloween up because we have been running out of this American Heritage product, so Halloween actually hit the floor for us this past week, and that is actually off to a great start as well. So thanks for the question. Really proud of the team and all the hard work that they are doing there. But, honestly, I will take this opportunity to really just thank the entire Cracker Barrel team because everyone's worked so hard this last quarter.

Our teams in the stores, the team at the support center, and everyone's working really, really hard to effectuate the change that we are seeing in the results.

Operator: The next question comes from Jeffrey Farmer with Gordon Haskett. Please go ahead.

Jeff Farmer: Thank you. You guys did touch on it, but the middle of the EBIT guidance range increased by more than 30%, which was a very big number. So I am just curious if you can provide just a little bit more color on the nature of that greater than expected flow through you are seeing on the EBITDA line?

Craig A. Pommells: Sure, Jeffrey. it is Craig. Good to be talking to you again. I think that we really the teams did a really good job in the quarter and that is continuing you know, into the fourth quarter fourth quarter as well. We were a little bit higher on our comp store performance Again, referencing that kind of gradual improvement. So that drove the top line to be a little bit stronger. So traffic was a bit favorable. We also did a lot of work on menu mix. In particular with add ons. We made some changes to our side strategy as well as our barrel bites or appetizers, and that paid off well.

You know, we have got the operations team was really humming as well during the quarter, so we had a really good performance with food waste as well. So all of the pieces, all of the work that the team has been doing over the past few months, and we have been planning for it and purposeful That just came together really well, from a cost perspective. And, you know, as importantly, if not even more importantly, it also translated into the guest experience, which also improved a lot. So it is a function of, you know, team coming together, putting together a good plan, and executing the plan.

And it just you know, on a number of fronts, the plan was a little bit on the higher end of our expectations. And that drove the improvement that we saw in the quarter relative to our expectations. And it also, you know, we expect will continue to contribute to that gradual improvement that we have laid out for the fourth quarter.

Jeff Farmer: Okay. Like you said there, I will I will I will process that. But actually, here's my follow-up on that. So as it relates to cost control relative to everything you just sort of highlighted how big a role has cost control played in driving that EBITDA revision, the upward revision to EBITDA?

Craig A. Pommells: On the cost control front. Yeah. It was significant. And, you know, in this case, the cost control actually starts with actually, I am gonna go all the way back. it is cost control, but even starting at the sales level. So thinking about check and thinking about add ons, and what the marketing team has done there to really enhance our add ons. We have also updated the way that we discounted during the quarter. So we made a lot of improvements in Q3 with our discount in relation where we were in Q1 and Q2, really driven by the marketing org and executed by the operations org.

And then as I mentioned, a number of cost benefits there in terms of waste, in terms of labor, in terms of supplies. So it is all of it. You know? All of those pieces coming together that, you know, some of them, you know, a lot of cost controls, but also things that drove the top line in the form of check and improve improving our check performance as well during the quarter.

Julie Felss Masino: there is no doubt, Jeffrey, that we are operating better in our stores. Right? And all the metrics that I shared, the consumer facing metrics in terms of Google star rating, our quality scores, our value scores, our food taste scores, the service scores are better. The teams are just really focused. Again, I am I am really proud of every everybody's hard work. And under Douglas's leadership, they are very focused taking care of the guests, but also, making sure that they are doing things properly, and that is that is improving waste. that is improving the scheduling. All of those things are coming together really, really nicely.

So it is it is just some real hard work, and attention to detail by the teams on all the fronts. Thank you. Thank you.

Operator: The next question comes from Jon Tower with Citi.

Jon Tower: Hey, thanks for taking the questions. Appreciate it. Maybe just starting in terms of, the guest composition that obviously, it looks like you are focusing a little bit more on fan favorites of the past and bringing those back and then innovating around them. I am just curious, if you could share some color on, you know, the guests that you are drawing in during this quarter relative to past? Are they older, younger, You know, the income level, it sounds like you are still seeing some pressure in the lower income cohort. But any color you can provide around that would be great.

Julie Felss Masino: Hey, John. it is Julie. Thanks for the question. Obviously, it is Julie. Craig does not sound anything like me. Sorry. I will start and then I will have Craig jump in a little bit on some of the finer points. So let me take you back, because this time last year, John, we had actually brought new guests into, into the business. And we were really excited about that work. I am proud of that work. Around Campfire, around the Cracker Barrel 400, and how the marketing, the full marketing funnel really came together. Around that. If you remember, Q1 and Q2, we lost a lot of those new guests.

And we have turned very, very intentionally to our core guests, to our loyalty members, and made sure that we really retained them and brought them back as we were pulling ourselves out of, the Q1 situation. So we have been very, very focused on that. The teams have done a great job in the high value loyalty guests, making sure that they are back in. Making sure that we are growing loyalty as a percent of tracked sales, and making sure that our guests know that we are still the Cracker Barrel that they know and love and that we are up operating even better for them.

The food is even more delicious. it is made the way that they remember and the service is going to be out of this world. So that is really what the teams are doing every single day, and we are very, very focused on that. In that in that, I will let Craig give you the numbers around it, but we are we have been pressured, as you mentioned, on the lower income, but we are seeing some growth in the upper income guests. Which has been nice to see. Across the demographics, it is been pretty consistent.

There has not been a lot of newness or people coming in differently there, but we are pleased with the progress that we have been making most intentionally around holding on to our core guests. And we have got lots of stuff to share with you as we go into next year around, how we are moving that forward.

Craig A. Pommells: Yeah. I would just really reinforce that from an age perspective, again, relatively consistent across the different age cohorts. Not a big difference. In terms of income, as we have mentioned, better performance at the higher end of the spectrum, and pretty linear performance as income as income goes down. And this really was the quarter of the core guests, kind of bringing back our legacy guests--you know, particular guests that are part of the loyalty program, and that really was a big driver for us this quarter.

Jon Tower: Got it. Thank you. And maybe going to the marketing side of the equation, I know that as of last call, you were talking about marketing spend in the back half of the year being down $13 million to $17 million Curious how you are thinking about that shaping up for next year. Are you contemplating kind of a reset back to previous levels? Or are you comfortable with kind of the run rate that you are at the moment? Yeah.

Craig A. Pommells: We will Yeah. Yeah. Yeah. We will we will touch on the marketing spend on, you know, on the next call. You know, clearly, in the second half of the year, we adjusted down. It was you know, we are down about $7 million versus prior year in Q3. We will be down roughly $7 million. versus prior year. That puts us in a range that is kind of In Q4, over the longer term advertising as a percent of sales, what we have done over the very long term.

Now we are gonna continue to test and learn and to the degree that there is a compelling business case to spend more, you know, we will, you know, we will do that But for right now, given where we are and the p and l objectives that we had, we, you know, we were pretty effective with the level that we Executed in Q3 and that we have got planned for Q4. And as we move into next year, we are going to use the data that we have as best we are able to and combine that with some test and learn and that data says we should stay where we are, we will do that.

And if it says we should do more, we will we will do that. Yeah.

Julie Felss Masino: And I think what I would add to that, John, the teams are really you know, what you are what you are seeing in the performance in Q3 is the team's really getting creative, really getting scrappy. Getting focused on maximizing every single penny that we have. And that marketing is another place where the team's done really nice job of that. So it is not simply about reducing dollars. it is examining that entire funnel. The team's gone back through and said, okay, we are focused on retaining our guests. Where do we find them? How do we go after them? We have created lookalike audiences for all of them last year.

If you remember, I have talked about the work that Sarah and the team did to really relook at all of the audiences, relook at all of the media, and last Q4 was the first time that we had that sort of new funnel and those new audiences. And then given everything that happened in Q1 and Q2, we went back and reexamined all of that. So oh, anyway. They went in and did that. I think the last thing I would add into that is the work that we are doing around the CB400 has also been really exciting.

We have actually doubled down there even more to show up across all of the races with Speedway Motorsports this summer and really bring the value proposition to life. It gives us a chance to get outside of the stores in real authentic ways to connect with people, share Campfire with them, So we are looking across all pieces of the funnel, not just like your traditional media and your digital and all of the social and all those things. But the activations that we are able to pull together this summer have been really phenomenal in our partnership with them.

Craig A. Pommells: And maybe 1 more lever there, John, as well, is just, you know, the loyalty program. And we have got 12 million members, and just a lot more efficient for us to-- efficient and effective for us to talk to them directly. And as that population has grown and continues to grow, it gives us another way to communicate with guests, you know, they get, you know, a little bit more out of that in terms of, you know, earning Pegs and redeeming Pegs, and they would love to do that, in retail. And for us, it is more cost effective. Yeah.

Julie Felss Masino: I think I will just build on that 1 because that is an excellent point, Craig. I think that is what you were whispering to me, and I missed it, is you know, this summer, we also launched, John, a new promo for our loyalty members as a way to drive both activations and, excitement for them. And frankly, given the macros that everybody asks us about and that we know all the consumers are experiencing out there, really let our guests know that we have got them. Right? So we launched food and fuel, and we call it food and fuel internally, but it is the fuel your summer road trip sweepstakes.

And this is an example of really using the loyalty program in an exciting way to bring value to guests this summer. Anytime a loyalty member purchases an entree, it started the weekend before Memorial Day, the end of July. They are entered in the sweepstakes. We have got 25 people winning every week. They win $1 thousand. Like, $500 worth of gas cards and $500 worth of Cracker Barrel food. So it is a great, I am super pumped about it.

I think it is amazing because I think it really speaks to what people are feeling out there right now in terms of groceries and food or more expensive and gas is more expensive and at Cracker Barrel we want people to still be able to enjoy their summer. And we know we are an affordable option for them this summer. We pointed out where our average check is versus the competition So we think this is a great way for us to reward those loyal guests frankly, to get some new people into our loyalty program as well.

Jon Tower: Nice. Thank you for all the color. Maybe just 1 last 1 on me. From me is, CapEx spend is obviously down this year relative to where it had been or at least originally thought about over time. I am just curious where are you guys thinking about the remodel cycle again? Because obviously, there is quite a bit that still can be done at the stores with respect to bringing it to a kind of modern image. But you know, how far out are you thinking before that kicks up again to the system?

Craig A. Pommells: You know, I so we are you know, there is a lot of the great things about Cracker Barrel is, in a lot of ways, the look is a look that is enduring. Now what we have continued to you know, to do is you know, really improve on areas that are do not really impact that. You know? So we have done work in areas like the bathrooms as an example. You know? We have made updates there. You know, we are continuing to make updates to the way that we show items in the retail area.

So we are spending in the store in a in a format that is you know, not a traditional remodel, but really makes the experience more you know, easier for the guest a little bit more effective but really preserves the it really preserves the brand's core. Yeah.

Julie Felss Masino: If I may, John, we have been really clear. We put the remodel program on pause this year, Given everything that happened to us in Q1, wanted to really listen to our guests. We learned a lot from that program in fiscal 2024 and 2025. There are a lot of things that Craig's alluding to that worked really well for that we were pleased with. But our guests, did not want us to move forward with that at this point in time, so we put that on hold. And when we get to 2027, we will talk about kind of what we are thinking about going forward, but it is really more in the lines of what Craig's talking about.

We are just updating paint, updating bathrooms, things like that. We do not have big plans to roll a remodel program. Got it. Thanks for taking the questions.

Operator: The next question comes from Peter Saleh with UBS. Please go ahead.

Peter Saleh: Great. Thank you so much for the question and congratulations on the great results. I guess my first question, I think you have mentioned the pressure on the lower-income consumer. Just wondering if you notice any other impacts, from the elevated gas price and specifically if there is any indication from gas surcharge like gas price surcharges from vendors or suppliers that is probably going to I know. Potentially hitting the flow through.

Craig A. Pommells: Hi, Peter. Yes. In certainly, fuel prices are up, and that will impact the business in terms of distribution on the restaurant side. It also impacts the retail side of the business. So there is some impact in the fourth quarter related to fuel, and all of that is included in the guidance.

Peter Saleh: Gotcha. And, maybe just 1 more, on, maybe some bigger-picture thing. Like, wondering if you have seen any early signs from the usage of GLP-1, if there is any shifting guest ordering, customization trends, if you have seen anything maybe on the order size. Any color you can share with us?

Julie Felss Masino: Yeah, Peter. We have been actively monitoring GLP-1s for over a year now and really watching what is going on. We have not seen any measurable impact at Cracker Barrel to date. Our menu strategy continues to really think about, you know, our bring backs, our innovation, the categories, and all of those things. And we already have a lot of protein forward categories. We reorganized our menu about a year ago to really make it easier for people to order by the protein that they like, whether that is beef or chicken or seafood. And we have got portion flexibility for all of our guests. Right? We have know, 2 sides or 3 sides.

I love to say you can add an egg to anything. at Cracker Barrel. Douglas does not like it when I say that. But we have got lots of options for people. We have got lighter comfort food. We just did an add-a-soup and a salad for $5, and you can take all of this home. So what we are seeing is that people are able to customize their Cracker Barrel experience the way that they want to. You know, if they want more protein, if they want a smaller portion, we have got that early dine option for them. And with that really sharp price point Monday through Friday.

So right now, we are feeling like we are meeting people's needs, and that is what we are hearing from our guests, and that is what we are seeing. And, the menu mix is up and just everything seems to be working okay for us right now. Remember, people love abundant portions at Cracker Barrel at a very fair price point. We hear that again and again from our guests as we look at our pricing and as we are constantly talking to our guests and evaluating their needs, that continues to be the resonant theme, which is abundant portions at a fair price, and that is what you get here at Cracker Barrel. Great.

Thank you so much for the color.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Julie Felss Masino for any closing remarks. Please go ahead.

Julie Felss Masino: Thank you for joining us today. I want to again thank our 70 thousand-plus team members who are doing such a great job focusing on our guests and executing our plans. We are encouraged by our progress and are confident that our continued focus on serving delicious food and delivering an exceptional guest experience will sustain this momentum.

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

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