Good day, and welcome to the Cracker Barrel Q2 Fiscal 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Jessica Hazel, Head of Investor Relations. Please go ahead. Thank you. Good morning, and welcome to Cracker Barrel's Q2 fiscal 2022 conference call and webcast. This morning, we issued a press release announcing our Q2 results. In this press release and on this call, we will refer to non-GAAP financial measures for the Q2 ended January 28, 2022. The Q2 non-GAAP financial measures are adjusted to exclude the non-cash amortization of the asset recognized from the gains on our sale and leaseback transactions and the related tax impacts. The company believes that excluding these items from its financial results provides investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials. On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran, Senior Vice President and CFO, Craig Pommells, and Senior Vice President and CMO, Jennifer Tate. Sandy will begin with a review of the business, and Craig will review the financials and outlook. We will then open up the call for questions for Sandy, Craig, and Jen. 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, the information shared on this call is valid as of today's date, and the company undertakes no obligation to update it except as may be required under applicable law. I'll now turn the call over to Cracker Barrel's President and CEO, Sandy Cochran. Sandy? Thank you, Jessica, and good morning, everyone. This morning, we announced total revenue growth of 6.2% compared to the Q2 of fiscal 2019. Comparable store restaurant sales versus the same period grew by 1.9%, and comparable store retail sales grew by 13.7%. I'm pleased with the work of our teams to deliver strong sales growth over pre-COVID levels. I want to start by highlighting what we did to drive our sales recovery in November and early December. Cracker Barrel has always had a strong connection to the holiday season, and this quarter we reinforced that connection through our culinary, off-premise, retail, and marketing efforts. On the culinary front, our Q2 menu promotion featured our new limited time offering, Cinnamon Roll Pie, and our seasonal favorite, Country Fried Turkey, which significantly outperformed our seasonal LTOs from last year. Our off-premise business maintained approximately flat sales to the prior year's Q2, when nearly 20% of our stores were operating off-premise only for at least a portion of the quarter. Our Thanksgiving and Christmas heat and serve offerings delivered modest year-over-year sales growth on a combined basis, and our catering offerings significantly outperformed our expectations. Our retail business delivered its fourth consecutive quarter of double-digit comparable sales growth versus fiscal 2019. We saw strength in our Christmas themes as well as in everyday categories such as candy and toys. We also drove growth in some categories that we expanded during the pandemic, such as our collegiate assortment, which we now sell year-round, and in men's apparel, a category that we continue to expand. Our retail performance was particularly encouraging in light of the challenging supply environment, and our retail teams did a great job navigating shipping challenges, minimizing delays, and driving sales during the quarter. We're optimistic that the steps we've taken will mitigate any material impact from the supply chain environment during the H2 of the year. During the quarter, we reinforced brand equity through various marketing initiatives, including our ongoing music programs such as our Macy's Thanksgiving Day Parade Float, which featured a performance from Grammy nominee Tauren Wells and our Sounds of the Season music program with Grammy Award-winning artists Mickey Guyton and Pentatonix. For those of you who saw Miss Guyton's performance of the national anthem during the Super Bowl, you can understand why we are so happy to be connected to such a talented artist. Lastly, Maple Street delivered another strong quarter with over 45% comparable sales growth versus pre-COVID levels and sequential improvement in average weekly sales versus the Q1. We remain pleased with the performance of Maple Street and look forward to accelerating unit growth for the brand in the H2 of this year. Now turning to the impact of the COVID resurgence and our plans for the remainder of the fiscal year. Prior to the emergence of Omicron in late December, our comparable restaurant sales versus 2019 were running in the mid-single digits%, and our comparable retail sales were running in the mid- to high-teens%. Once Omicron hit, we saw traffic declines in late December throughout January as guests became more cautious about dining indoors and staff called out at historically high levels, which limited our capacity in certain locations. Several unanticipated weather events in January also negatively impacted our traffic results. As the headwinds from COVID cases have receded, we're seeing more guests return to our stores, and I'm confident that we have the staffing in place to meet the anticipated traffic recovery in the Q3 and that we will be well positioned in this regard as we head into our busy Q4. Our near-term operations priority for the Q3 is on store-level execution. Over the past two years, our managers have done an outstanding job of handling disruptions from COVID restrictions, staffing shortages, and supply chain challenges in both restaurant and retail. As these disruptions continue to moderate, we should be better able to focus on and reinforce key Cracker Barrel operational fundamentals and offer our guests the consistently outstanding experience that they expect. To achieve these results, we are enhancing our training systems, implementing additional guest recovery behaviors, and further emphasizing our culture of caring and hospitality. I'm optimistic that our focus on operational excellence will drive improvements to employee retention and the guest experience. We also plan to support operational improvement efforts through our Q3 culinary promotion, which highlights several of our core menu favorites, such as Chicken and Dumplings and our signature pancakes, and will enable operators to continue to focus on basics and recovery. It also allows us to emphasize our everyday value proposition across all marketing channels, which is a key point of differentiation in this highly inflationary environment. In addition to focusing on execution, we're making progress on key strategic initiatives to drive additional frequency and attract new guests as we emerge from the volatile pandemic environment. For example, we continue to shift more of our marketing spending from traditional TV and into more targeted digital video channels. This shift drives improvement in our marketing ROI, and it also helps our marketing to be more flexible so that we're better able to respond to more sudden shifts in guest behavior like we saw during the recent Omicron surge. I'm also pleased with the progress on our beer and wine platform, which is now in roughly 550 stores. Our beer and wine mix has improved in recent weeks, and we expect to make further progress with additional focus on beer and wine in our in-store merchandising materials and additions to our lineup, including a new seasonal Jack Daniel's Lynchburg Lemonade. Regarding off-premise, we continue to focus on improving our guest experience to ensure we retain these sales as dine-in traffic recovers. This includes enhancing our curbside pickup process, improving the integration between our off-premise applications and processes with our back-of-house technology, and generally streamlining our processes for a more seamless guest experience. As I mentioned earlier, catering sales increased during the quarter, and we believe we have room to drive further growth in that channel. We're now looking at ways to further support the growth of this business, including better leveraging our van fleet and introducing more personalization to our marketing. Lastly, on off-premise, we're looking forward to the Easter off-premise season, where we expect to see strong demand overall and in particular for our prime rib heat and serve that we introduced last year. Turning to our business model and managing costs, we are focused on initiatives to drive operational efficiency. We expect to have our new point-of-sale system in all stores this quarter, which will support the continued rollout of our new food cost management system to all of our stores by the end of April. I've been encouraged by the initial savings from this system in the approximately 400 stores where it's currently installed and anticipate the completion of the rollout will drive additional savings in the Q4. The POS also supports a new labor management system that we're planning to roll out in fiscal 2023. Our food and labor management systems are part of a broader strategy to improve our business model to allow us to eventually move toward pre-pandemic levels of profitability despite the high inflationary environment in which we find ourselves. While commodity pricing is historically variable, wage rates are unlikely to recede. For this reason, in addition to the cost-saving projects on which we're always working, such as supply diversification and G&A management, we're also tackling larger and longer-term initiatives to simplify our operational environment, including reimagining how we approach and incentivize retail and restaurant responsibilities, as well as leveraging technology to improve operational efficiencies and consistency of execution. While these initiatives are important, improving traffic is even more so, which is why we are so focused on making sure our guest experience in both dine-in and off-premise meets our guests' expectations, and that our employees are supported with great training and systems to deliver it. Now more than ever, we have to leverage and enhance our core competitive advantages, which include an authentic experiential brand, a culture of caring and hospitality, and our home-style food and retail assortment. These core competitive advantages, our focus on operational excellence, and the progress we've made on our strategic initiatives, puts us in a strong position to continue our traffic recovery and improve our business model as we emerge from the unprecedented challenges we're currently facing. With that, I'll turn the call over to Craig. Thank you, Sandy, and good morning, everyone. For the Q2, we reported total revenue of $862.3 million. Restaurant revenue increased 25.9% to $656.1 million, and retail revenue increased 32.2% to $206.2 million versus the prior year Q2. Compared to the Q2 of fiscal 2019, comparable store restaurant sales increased to 1.9%, and comparable store retail sales grew by 13.7%. Our total pricing for the quarter was 5.3%, which reflects slightly over 2% carried pricing for fiscal 2021 and slightly over 3% from our August price increase. We are comfortable with the elevated pricing in this current environment and continue to see minimal impact to traffic and mix from our pricing actions. This pricing partially offset the impact of 8.5% commodity inflation and 10.8% hourly wage inflation during the quarter. Comparable store off-premise sales grew by 123% over the Q2 of 2019 and were 24% of restaurant sales for the quarter. As Sandy mentioned, we also held off-premise sales nearly flat to last year, significantly exceeding our expectations for off-premise retention. Both third-party delivery and catering sales produced a meaningful growth over the prior year, which offset modest declines in our individual to-go channel. Moving to expenses. Total cost of goods sold in the quarter was 32.9% of total revenue versus 33.2% in the prior year quarter. Restaurant cost of goods sold was 27.4% of restaurant sales versus 26.9% in the prior year quarter. This 50 basis point increase was primarily driven by commodity inflation in excess of pricing during the quarter. Retail cost of goods sold was 50.4% of retail sales versus 54.3% in the prior year quarter. This 390 basis point decrease was primarily driven by continued sell-through of inventory at higher levels, which resulted in lower markdowns than we have historically. I've been pleased with the continued guest demand for our merchandise, which we believe has been driven in large part by the quality, uniqueness, and timing of the products our teams have sourced. Q2 labor and related expenses were 34.4% of revenue versus 35% in the prior quarter. Our labor costs were pressured by significant hourly wage inflation. However, this was more than offset by improved hourly labor productivity and sales leverage on management expense. Adjusted other operating expenses were 21.9% of revenue versus 24.2% in the prior quarter. This 230 basis point decrease was primarily driven by sales leverage as well as somewhat lower depreciation as a result of reduced capital expenditures throughout the pandemic. Moving beyond the store level margins, our general and administrative expenses in the Q2 were 5% of revenue, which was flat to the prior year quarter. Investments in strategic initiatives and the growth of Maple Street, along with temporary costs associated with staffing and recruitment, offset the favorable impact of sales leverage. Net interest expense for the quarter was $2.2 million compared to $10.8 million in the prior quarter. This $8.6 million decrease is the result of lower debt levels as well as a lower weighted average interest rate due to the convertible debt offering we completed in the Q4 of fiscal 2021. Our effective tax rate for the Q2 was 15.4%. These Q2 results culminated in GAAP earnings per diluted share of $1.60, and adjusted earnings per diluted share of $1.71 when adjusting for the non-cash amortization of the asset recognized from the gains on the sale and leaseback transactions. In the Q2, EBITDA was $75.4 million, a 68% increase over the prior year Q2 EBITDA results. Turning to our balance sheet. We ended the quarter with $327 million in total debt, compared to $875 million at the prior year quarter end. We also repurchased $34.2 million in shares during the quarter under the $100 million repurchase authorization announced in September. Lastly, I'll speak to our expectations for the remainder of the fiscal year. With respect to our outlook, everyone should be mindful of the risks and uncertainties associated with this outlook, as described in today's earnings release and in our reports filed with the SEC. We have experienced continued headwinds from elevated COVID case counts in early February, but we're starting to see sales recover back to their pre-Omicron trend. Based on our sales recovery expectations, as well as the typical seasonality of lower volumes in the Q3, we anticipate Q3 total revenue of approximately $800 million. We continue to expect inflation to peak in the Q3 at elevated levels with commodity inflation of approximately 15% and hourly wage inflation in the 11%-12% range. Accounting for this elevated inflation and lower sales volumes, we expect Q3 adjusted operating margin of approximately 5%. During the Q3, we're taking substantial actions to offset more of the impact of inflation, which we expect will provide a significant benefit to Q4 margins. We are taking additional pricing this quarter, and when combined with the roughly 3.25% price we're carrying from previous increases, will put our third and Q4 total pricing at just over 6%. We're actively monitoring trends in inflation and the consumer environment, and believe we have the ability to take a modest amount of additional pricing on top of this in the Q4. We also plan to leverage add-ons and drive beer and wine mix to deliver additional check favorability. On the expense side, as Sandy shared, we are aggressively managing controllable costs and anticipate that our operational focus and the continued rollout of our food cost management system will drive improvements in hourly labor productivity, food waste, and supplies expense in the Q4 versus the rest of the fiscal year. We expect that absent another wave of elevated COVID cases, we will continue our sales and traffic recovery in the Q4, and we are preparing our stores to capitalize on the benefit of a more normalized summer travel season. In addition, we expect inflation to moderate in the Q4, combined with growth in average check, the cost savings actions we're taking, and an improved consumer environment. We currently expect Q4 margins to improve to near the prior year's Q4 level. Along with these quarterly estimates, we are providing the following expectations for the H2 of the fiscal year. We now expect H2 capital expenditures of $60 million, including the opening of two new Cracker Barrel locations and 9-11 new Maple Street Biscuit Company locations. This is in addition to the one Maple Street location that opened in the Q2. Our lowered CapEx and Cracker Barrel unit guidance reflects the impact of supply chain disruptions that have delayed the delivery of equipment and extended new unit development times. Lastly, we expect a H2 effective tax rate of approximately 14%. With that, I'll turn the call over to the operator for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. 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. At this time, we will pause momentarily to assemble our roster. Our first question will come from Brett Levy with MKM Partners. Please go ahead. Great, thanks. I guess just first clarification, just did you say that you expect Q4 margin, operating margin to be in line with fiscal Q4 from last year? Then, if you could give a little bit more color just on what you are seeing across cohorts, across regionalities just on the trends that you've seen and the timing and magnitude of the recovery of post-COVID. Okay, great. Good morning, Brett. I'll start and then let Craig speak to the guidance point. In general, we are seeing some regionality and historically or in the past few months assume that it has been primarily related to how those regions experienced COVID and Omicron. We've seen some strength in the Southeast, in particular Texas, Florida, slightly softer in the Midwest and Northeast as we've seen it go through. Yeah. Thanks, Sandy. On to the operating income margin or adjusted operating income margin. I think, the key there is we expect FY 2022 Q4 to approach FY 2021 Q4. You know, getting into that range, but approaching it, you know, versus necessarily being there. I think, Brett, too, the other issue that we've experienced recently, the weather really had impacts in some parts of the country more than others. That's also having an impact on the results, although generally speaking, the recovery has been broad-based. Just one quick question on the labor front. You talked about training. Where are you right now in terms of staffing levels, ease in hiring or challenges in hiring, retention levels, turnover, things of that nature? Can you parse out what you spent in overtime and training this quarter just as a color commentary? Thanks. I think you asked for every metric about hiring, staffing, and retention there that is. Let me just try to address it overall. In terms of overall in the labor market, we are seeing increased applicant flow, which has been encouraging, so we're able to be more selective in our hiring decisions. The workforce, you know, sort of does appear to be returning back to the job market, although I suspect the restaurant industry is gonna be more challenged in comparison to other sectors. In general, in terms of our performance, I think our operators and our HR team has done an amazing job of getting staffed. We really only have a handful of stores, and I would guess that's sort of in the neighborhood of 10, that I would call critically understaffed. As we'd mentioned on the last call, we feel really good about our back-of-the-house staffing and where we did see a shortage was in the server position, and I suspect that's still where it is. So we'd like to add additional servers across the chain. In terms of turnover, it's higher than it has been historically for us at both the manager level and the hourly. But we believe we are still underperforming the turnover that the industry overall is experiencing. I heard a statistic yesterday that I was really encouraged by, which is we've had incredibly high retention of our most tenured employees, which are. We call them our Par Fours. Those are the employees on our teams that wear four stars on their aprons and have been with us for a number of years. We have been very successful in retaining that core group of really important employees. I feel confident that our team will be able, now that we can get staffed and we're focused on training and bringing our new employees along, that we'll be in a position to, you know, as guests wanna come back, eat with us as we are heading into now our busy period, that we'll be ready. Brett, I'll build on that a little bit. This is Craig. It, you know, Q2 was very really interesting. You have November, December, and January, which was a lot of noise because of the call outs and so on. I would say we are in a much better staffing position today and overall on average for Q2. Because of that, we have more managers, we have more hourly employees. Our applicant flow is really good. All of that, you know, really helps. From a cost perspective, our costs are a little bit higher because we are fully staffed, and we were not almost fully staffed, and we were not previously. Thank you very much. Our next question will come from Jake Bartlett with Truist Securities. Please go ahead. Great. Thanks for taking the question. I got a question first on the sales guidance. You know, my rough estimate is, and maybe if you can. I'd love you to confirm, but you know, is that same store sales would be maybe 3.5%-4% versus 2019 levels. Maybe if you can confirm that kind of acceleration from the 1.9%. Just try to help us understand what that implies for the rest of the quarter. You mentioned that sales have been recovering as Omicron has faded. Are you back to the level you were pre-COVID or pre-Omicron yet? You know, just trying to understand the you know, the cadence of the expectation in the Q3. Thanks, Jake. This is Craig. Let me start with February. February started out in line with really the second part of January. However, we'll say that as we've moved into the second part of February, it looks much closer to pre-Omicron. It is. I don't know that we can 100% say that we're all the way there as yet, but I'll tell you that, you know, as we've moved into the second part of February, it looks very similar to pre-Omicron. As it relates to the Q3 comp guidance, I think what we would say is rather than giving the precise comp number, you know, we've given the precise number on the revenue. It's really this kind of gradual progression is what we're expecting. We do expect that it's gonna be a little bit lumpy. I think you've, you know, astutely determined that the first part of February was probably lower than that. So, you know, everything you're saying there, I think, it generally, the $800 million, I think, would imply that we have, you know, ongoing improvement as the quarter progresses. Great. Thanks. My next question is on the pricing that you talked about. One, I just wanna confirm, you know, what actual level of pricing we should see in the Q3 and the fourth, maybe before. I think you mentioned the combination of the two. I just wanna make sure I understood the cadence of the actual pricing in the Q3 and then in the fourth. You know, as part of that question, I'm also you know, I think one concern would be that you'll, you know, cater to a somewhat lower income consumer. You know, is that consumer gonna, you know, push back if your pricing gets too high? I want to just ask about your confidence in taking that price. Maybe any commentary that you're, you know, whether you're still seeing trade up within the menu and, you know, very little pushback. Just your level of confidence that your consumer won't push back. You know, and also just the detail on the third versus the Q4 pricing. Let me start. It sounds like there's a lot in that question, Jake, so probably I'll start. Maybe Jen can add some color to our thinking and confidence behind how we are approaching pricing. Then Craig, you can, if you're willing to give any additional color. First of all, I think that we are and continue to be really thoughtful about pricing and how we have made these decisions. One thing about this quarter, and Jen will explain in a little more detail, instead of doing two big increases, which is historically what we have done, now we're doing more small incremental pricing moves to give ourselves the opportunity to monitor the results of the pricing changes, to evaluate where we believe the consumers are in terms of their ability to, and their reaction to them, and to continue to monitor the consumer as we move forward. The pricing guidance that was included, I don't know how much you're gonna be willing, Craig, to break it down, but why don't first, Jen, you wanna give some additional color on the thinking? Yeah, absolutely. I think just to build on what Sandy said, we are breaking our pricing into several small surgical price increases. That gives us the ability to continue to very carefully monitor the guest reaction, versus our control group. That gives us the flexibility to, if at any time we see an adverse impact on traffic or mix, to cancel or change any of those additional pricing actions. I think that that's very important to us. Instead of one in the Q3 and one in the fourth, we have more small surgical, a couple in the third, a couple in the fourth, which gives us a lot of flexibility. You know, we have such strong equity in the area of everyday value that we've built over the years, you know, offering high quality home style food at a fair price. We've never relied on LTO deals or couponing. That is absolutely something we're committed to. That gives us confidence, you know, that by protecting the everyday value platforms that we have on our menu, that every guest in any cohort will be able to walk in in any day part and find that outstanding everyday value. You know, just as an example, if you come in at breakfast, you're still gonna see the Sunrise Specials section, which are at breakfast at $5.99. If you come in at lunch, you're still gonna see the weekday lunch features at just $6.99. These are not obscure things. These are classics like meatloaf and chicken and dumplings and Broccoli Cheddar Chicken, lunch or dinner Cracker Barrel favorites. These are things like Chicken and Dumplings at $7.99 or hand-breaded chicken tenders with two sides at $8.99. They're core favorites, broadly appealing, high mix items that are at these everyday values. I think because we're protecting those and we're committed to, we feel like our guests are still gonna know us as a destination for everyday value. This is Craig. Jake- Yeah. Go ahead. No, no, I think you're hopefully gonna ask the question I was about to ask. I think what's implied in that as well is because there are multiple pricing actions there that will be a little bit below 6% in Q3 and, you know, on average will be a little bit above 6%, but will be below that in Q3 and a bit above that in Q4. We're also keeping our optionality open as it relates to Q4 as well, just to see how things develop. We're continuing to read our pricing tests, which have done very, very well. We're keeping our options open. A little bit lower Q3, a little bit higher Q4. Thank you. Real quick, I don't see it in the release. Maybe I'm missing it, but could you provide what transactions were in the quarter just so we can kind of back into the mix? What transaction growth was with- We don't disclose that. No. I thought we did in the Q1, but maybe we can follow up. Thanks. Thank you, Jake. Thank you, Jake. Our next question will come from Alton Stump with Loop Capital. Please go ahead. Good. Thank you. You know, good morning. Congrats on the quarter and, you know, it was obviously a very challenging environment. Just wanted to ask, you know, on the labor front, you know, there was a lot of news industry-wide, you know, heading into the holiday season that there was, you know, some pretty massive shortages. That's obviously a big time of the year for you guys during, you know, fiscal 2Q. How were you able, if you were able, to kind of manage through that process, particularly during the holiday season? Yes, it was challenging. Let me back up, Alton. We went into the quarter. I think I said on our last call, feeling really good about the progress that our operators and HR teams were able to do in staffing, and had really gotten down to a relatively small number of stores that we thought were critically understaffed. Probably the bigger issue that we had to contend with, particularly as we got into December and January, were the COVID callouts or the callouts, which is when you're staffed, but you're not able to schedule the employees to meet the demand. You know, it's difficult to precisely measure that since we don't have a direct measure. It's really, we estimate it from something we call a missed shift percentage. We know that it impacted stores, in some cases, quite meaningfully and resulted in some cases, we had to close early, in some cases, we had to close dining rooms, in some cases, we had to actually go to off-premise only for a brief period of time while that particular store recovered. It's a little bit hard to measure too, because in a lot of cases where that was happening in the store, it was also happening in the community, so there was an impact in consumer demand. The good news is that we have seen a marked decrease in the level of callouts, in the H2 and, as we've moved into February, and as Craig mentioned, as we're seeing our sales performance improve, which we believe is partly because consumers are more comfortable going out. It is also because I believe our stores are in a better position to staff to accommodate the demand. Understood. Thank you for that color. Very helpful. As mentioned, Sandy, just on the weather front, you know, had unseasonably warm, you know, of course, November, December, you know, kind of eastern half the country, but, you know, has since turned very cold since then. You know, is there any, you know, actual way, you know, to quantify how much of an impact you think that might have had either on your January or, you know, on your February sales versus, you know, what you saw during the first two months of fiscal 2Q? We do look at it internally, and obviously the stores that are closed, we can pretty easily measure because we can isolate those. To your point, we had several severe storms in our core markets in January. The harder thing to measure, though, is the secondary implications. We found in the past or we've suspected in the past that when it gets really cold, that actually impacts the consumer, particularly an older guest's willingness to go out. We know that it might impact travel. Although we can measure a store that's closed in Dallas, we can't necessarily measure the store that they were heading to if they'd made their trip and would have dined with us along the way. We do believe that the storms had the biggest impact on us in January, in terms of the whole quarter. Beyond that, I don't think we are putting a number to it. Yeah. I think I agree, Sandy. It's definitely January, you know, multiple impacts in January, kind of combined with COVID callouts and all these things. We've just decided not to, you know, not to really put a number to January. Understood. Thank you so much. I'll hop back in the queue. Our next question will come from Todd Brooks with Benchmark Company. Please go ahead. Hey, good morning, everybody, and congratulations on fighting through what I'm sure was a brutal quarter operationally here. Well done. Thank you. You're welcome. Couple quick questions, if I may. One, Craig, for you. The concept of by Q4 moving back kind of towards the 8% operating margin seen in Q4 last year. I guess how much of that do we have line of sight visibility on? So if we can talk about maybe the improvement that's being seen from food cost management and what that piece is or what the better labor efficiency is anticipated to be versus what still has to happen as far as you need to be right on the inflationary outlook and looking for some easing there in Q4. Just would like to get some surety on the visibility of getting back towards that operating margin. Absolutely. Good question, Todd. There are a few pieces. The food cost is known. The inflation, while not 100%, you know, we're 40% locked for the H2, and it's just closer in. We have a number of other solves around productivity and so on that we think are reasonable, so we're not necessarily betting the farm, so to speak, on those things. Pricing is something that, while there is a little bit of an optionality there, it's mostly known. You know, we feel confident now. Yeah, what could happen there, what could really go sideways? We are assuming that the summer travel season returns to closer to historical norms, and which implies that, you know, there's not another massive, you know, externality that would prevent that from happening. So that's probably, at this point, nothing is for certain, but I think that would be the biggest variable as we think about Q4 and our confidence in it. Okay, great. Summer travel season returning to normal. I guess, how are you guys thinking about the impact of high fuel prices, and especially with some of the global tensions, if those spike higher, is that a delta point to the potential outlook of getting back towards that profitability in Q4? It's yeah, gas prices, as we've said quite often, it's probably less about miles driven as it is about the impact they have on discretionary income. The kind of inflation that consumers are experiencing now in a lot of places, including gas prices, is something we're keeping an eye on. That's the kind of thing that, as Craig mentioned and Jen mentioned, as we think about our pricing strategy, being cognizant that consumers, although many of them are experiencing higher wages, those are being more than offset on their everyday expenses like fuel, rent and all the other things. We're monitoring it, and we'll. You know, what we're hoping or assuming is that the consumer, there's still quite a bit of savings that maybe happened during the pandemic, that there was a lot of improvement to guest balance sheet, you know, individuals' balance sheet as they saved, that there's still is a huge interest and excitement about getting out and seeing the people that they haven't seen and taking the family vacation, and that all of that will offset these other pressures as they work through high inflation and an absence of stimulus money. Yeah, I agree. Okay. agree, Sandy. It's, you know, to some degree, I think we believe that folks have gotten, you know, more used to generally higher inflation right now. We think that will mitigate what we would normally see at these type of gas price levels. Now, if gas prices go up significantly from here, that could, you know, that could change the outlook. I think our thinking is, in the context of generally broader inflation, that those two things will kind of mostly mitigate each other. We'll see. Okay, great. The final one from me, and I'll pass it along. If we look to the H2 of this fiscal year, Craig, just can you give us some color or guidance around level of G&A needed to support what you're trying to do in the business? What I'm just trying to parse out is, I think you called out even in your comments that there were some temporary staffing and recruitment costs in the January quarter. I imagine there was some friction in the October quarter as well, as you guys were trying to ramp staffing efforts back up. What sort of G&A do we need the H2 to support the business? Yeah. It's a good question. You know, I would say we're. You know, there continues to be a number of these kind of puts and takes here. There are a number of short-term, you know, pressures on G&A, including the staffing, because while we are staffed, you have turnover, for example, that's still elevated, so that applies some pressure. We're still, you know, not at 100% with beer and wine. There are some costs there. Our technology enablers for, you know, productivity and a number of other initiatives, those are still investments that we think are very value-creating. We think the G&A number still has some investments in it. Sandy, anything you would add to that? No, I think, the only other point is that we're ramping up Maple Street's infrastructure to support their growth, which is also kind of a new number versus 2019 and an additional G&A, but that we think is important to support the longer-term growth initiatives. Okay, great. Thank you all very much. Our next question will come from Brian Mullan with Deutsche Bank. Please go ahead. Hey, thank you. Just a big picture question, you know, on your margins. If we were to say that fiscal 2023 was a truly normalized year from a staffing perspective, also consumer demand perspective, you know, how much of those fiscal 2019 store level margins do you think can be recaptured at this point? You know, I know in the prepared remarks, you spoke to some cost initiatives. I'm curious if there are specific targets you have in mind or that you will even attempt to manage the business to as you implement those initiatives or future pricing decisions, just any kind of framework? Yeah, I think, you know, we're not really as it relates to FY 2023, we're certainly doing a lot of work on it, but we're not really in a position to disclose our targets as yet publicly. Needless to say, there is a lot going on behind the scenes to prepare us for that. Okay. Understood. Thank you for that. Just a question on development, specifically at Maple Street, Sandy, you just referenced it. You know, it sounds like you're gonna open between nine and 11 in the back half of this year. I guess two-part, you know. One, is 15 still the right number to expect for next year, 15 units? Two, you know, what will you be watching over these next 18 months with the openings, that could influence how many units you want to open over the long term? I ask it that way because, you know, a lot of the units you have today, they were purchased as opposed to built by Cracker Barrel. This will be, you know, a new pace of growth. Any thoughts would be great. Yeah, I guess the number is sort of nine to 11, and it's really, we had the real estate pipeline to open more than that. I think our original target was 15 for the year. It has been construction delays that have impacted our timing. For next year, we haven't announced a number, but we'll open sort of the residual ones for that were supposed to open this year, if you will, and we were on track for probably at least that number, if not a little more next year. In terms of what you'll see, you know, you're right, we have had relatively few openings since we acquired them. Since almost immediately after the acquisition, we went into the pandemic. But we'll update you on performance in terms of sales AUVs and margins. As we continue to be confident about the site selection model that we're using and the operating model and about the progress we're making on the infrastructure to support the growth, we hope to be in a position to accelerate the growth from there on. We will keep you posted. Thank you. Our next question will come from Sara Senatore with Bank of America. Please go ahead. Great. Thank you very much. Two kind of follow-on questions, please. The first is about inflation expectations. You know, I think that they perhaps are a little bit higher than had them maybe last quarter, just based on, you know, the inflation outlook. Is that the right interpretation? Then on labor inflation in particular, you know, it strikes me that you're seeing kind of more normalization in the labor market, but you're still expecting very high wage inflation in the year ahead. So how do I kind of reconcile those? And as we look past 2022, is high single digits the right run rate, or you would expect it to look more like kind of mid-single digits? Sara, first good morning. Right as you were asking an important part of your question, you faded out here. Was your question that we've increased our inflation expectations since the last time and, since the last quarter, and why? We missed that part. Yeah, sorry. The first part was did you increase the inflation expectations? Yes. It seemed like that was the case. Then on the labor market, just trying to reconcile, you know, what seems to be more of a movement in the labor market and better applicant pools with still very high wage inflation, you know. Then as we look out, you know, is this just sort of temporary, and you would expect, for example, next fiscal year to get back to, call it, mid-single digits rather than kind of high single digit wage inflation as the new normal going forward? 'Cause that just seems like a very high rate to sustain over time. First of all, we did increase our CapEx guidance in terms of inflation expectations. I think we actually put something out in January around the ICR as we were seeing inflation exceed even that that we were expecting in November. Some of the biggest places we're seeing the inflation were driven by minimum wage increases that you know Florida had a really large increase. For example, we have a number of stores there, a lot of employees, and that then puts pressure on all of your employees, not just your new hires. Some amount of the inflation has been driven by that. I think it's just as the market has been super competitive and there's a fight for labor. We're still in that mode. Now, applicant flow, as I mentioned, is improving, and we hope to be able to reduce our turnover and improve our par levels. Yeah, I would hope that inflation environment's gonna moderate. The rate of inflation will moderate as we go into next year. What we don't believe is that labor rates are going to go down the way we're hoping actually commodities will in some areas. Okay. Yeah, exactly. I'll build on that too, is because if you think about the year-over-year inflation, so to some degree, what we're talking about with Q4 is we are coming down from Q3 to Q4 with wages because we're wrapping on when wages really started to go up last year. I don't know that versus say, week-over-week inflation or month-over-month inflation. I think as you kinda take the current wage rate level and we wrap on lower wages, that kind of gives you one inflation take. That doesn't mean necessarily that over the midterm, as we start to wrap up the levels that we're at today, that the high wage rate percentage continues. As long as we don't see absolute wage levels going down, then we're not... We really aren't. You're not gonna have wage deflation. I also don't think it means that over time, you end up with high single digit wages over a longer period. Great. That's very helpful. Thank you. Yeah, yeah. Wage disinflation, not deflation is sort of how I'm thinking about it. It sounds like you are too. And then just the second point is just follow up on, you know, you mentioned your catering business was stronger than expected. So are you seeing some of your customers come back to you for these celebratory occasions? I know that, you know, for a while they were sort of trading up to higher price point concepts. Is that normalizing you think, and is it, you know, as they lap stimulus, is that what's happening? Just trying to understand that dynamic. Thank you. Let Jen take that one. I think there are a lot of factors driving our catering business up. We've been really pleased with where that has come out, especially in Q2. One, I think just the receding of COVID has enabled a lot of both, you know, personal or large family gatherings and especially B2B or, you know, office or other, large, you know, business gatherings. That structural thing has helped. We have made some changes to our catering offering in terms of the sizes to better meet consumer demand. We've made it easier for our guests or our customers to calculate the per person pricing, which removes friction from the ordering process. Last year we rolled out the individually boxed catering meals, which I think is really fitting, filling a need, an unmet need, and we've been pleased with how customers have responded to that. You know, we continue to look at ways to better leverage our van fleet, which is a unique thing that we have. We have approximately 230 catering vans out there that help us meet that. You know, so we continue to build on that. I think our operators have done a great job stepping up and working out in their communities to sell catering 'cause our catering is fabulous. Our food travels well, it's broadly appealing, a lot of variety, good price point. We think catering is gonna continue to grow, as this year closes out and well into next year. Understood. Thank you very much. Our last question is a follow-up from Jake Bartlett with Truist Securities. Please go ahead. Great. Thanks for taking the follow-up. My question was on the efficiency gains that you expect from the food cost management system and the labor management system on top of the POS. You know, going back to 2017 Analyst Day, those two things I believe were a big part of the savings you expected over the next three years at the time, I think with the $40 million of savings. Maybe if you could just help us understand, I don't know, how big a deal these are in terms of, you know, what kind of cost savings you might expect. Should we expect some impact in the Q4, but then a much greater impact in 2023? Maybe how these initiatives roll out. Is it a sudden improvement in savings or is it gradual over time for each of those two components? Okay, Jake, I'll take that one. As you accurately remember, we started our POS rollout a few years ago, and that platform allowed us to then install both a food management system and a labor system that we believe and continue to believe will help us drive productivity and efficiency in our restaurants. In the food system, which is now in, I think it was in 400, but we'll have that completely installed in the system by March or April. We're seeing actually even more than I had hoped improvement in food waste. We haven't quantified it specifically, so I'm not gonna give you the exact number. What this new food system allows our operators to do is to more granularly and accurately manage their food waste, and we've seen that results in lower waste, which has even become more important as the inflation impacts have increased the cost of our waste. I'm also optimistic as we integrate that food system with our new labor system, which we are testing now, but don't plan to install till 2023, that the integration of those will help simplify for our operators the management of our restaurants. The sales forecasting, the production then of the food and taking into account the demand, the hold times, you know, and all the things that they now have to sort of do more manually, and as well as in the labor system will help us drive productivity in the back of the house. Those are important systems that we think will allow us to drive improved productivity and profitability in the restaurants. We haven't provided yet and probably not in a position today to quantify exactly what those are. Great. Thank you very much. I appreciate it. This concludes our question and answer session. I would like to turn the conference back over to Sandy Cochran for any closing remarks. All right. Well, thank you for joining us today. Cracker Barrel continues to be one of the strongest and most differentiated brands in the industry. I remain confident in our strategy and initiatives and believe we're well positioned to drive solid long-term results. We appreciate your support and look forward to speaking to you again in a few months. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.