Cracker Barrel Old Country Store, Inc Q2 FY2020 Earnings Call

Good day and welcome to the Cracker Barrel Second Quarter Fiscal 2020 Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Adam Hannon, Manager of Investor Relations. Please go ahead.

Good morning and welcome to Cracker Barrel's Second Quarter Fiscal 2020 Conference Call and Webcast. This morning, we issued a press release announcing our second quarter results and our outlook for the 2020 fiscal year. On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran; Senior Vice President and CFO, Jill Golder; and Vice President of FP&A and CFO of Emerging Brands, Jeff Wilson. Sandy will begin with a review of the business, and Jill will review the financials and outlook. We will then open up the call for questions for Sandy, Jill, and Jeff. 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?

Good morning, and thank you, Adam. I'm pleased with the results we announced this morning, which included positive comparable store restaurant sales that outperformed the industry, GAAP earnings per share of $2.55, and operating income growth of 3.2%. Jill will review the financial results for the quarter as well as our updated full year expectations, but before she does, I want to speak to some highlights from the quarter and provide an update on our plans for the remainder of the fiscal year. Holidays are an important time for Cracker Barrel, and we believe this year we further strengthened our reputation as a destination for both in-store and off-premise holiday dining occasions. Our second quarter menu promotion featured the return of our popular Country Fried Turkey offering, and it was supported by seven weeks of national TV. Additionally, we built awareness of the brand throughout the holiday season by featuring our vintage red truck and a Cracker Barrel tiny store in events throughout the country that earned media attention and built excitement for the debut of our float at the Macy's Thanksgiving Day Parade. During the quarter, we also completed updating the creative on our billboards, which continues to be a key channel for communicating with our guests. The new billboard messaging is balanced to highlight two of our differentiators: our everyday value and our heritage of serving breakfast all day. I was pleased with the menu promotion and marketing campaign, which drove top line growth that was in line with our expectations. The second quarter is a key period for our off-premise business, and we again saw strong growth across all three channels of this business, which meaningfully contributed to our top line results. There continues to be strong demand for our Thanksgiving and Christmas Heat n' Serve offerings. In fact, this quarter, we sold a record number of Heat n' Serve units even with an average price increase of nearly 15%. We believe the continued growth of this business underscores the trust that guests have in Cracker Barrel to provide a convenient and delicious home-cooked meal at a good value. The employee and guest experience remains a focus. We implemented several enhancements to drive an improved guest experience during this high-volume quarter, and while we still have room to improve, I believe we made progress and I was encouraged by the results. Additionally, I was pleased with how strongly our operators managed the labor line, while also having a heightened focus on the guest experience during this high-volume quarter. Turning to retail. While we improved our comparable store retail sales trend over the previous two quarters, our top line retail performance fell short of our expectations. This year's seasonal assortments, particularly our Christmas to core merchandise, delivered strong sales growth over the prior year. However, continued weakness in women's apparel and softness in our gifting assortments contributed to results that were below expectations. We're working to drive improvements in our retail sales performance by continuing to review and refine our assortments and continuing to optimize the price-value relationship of our offerings. But this will take some time, and we've lowered our full year comparable store retail sales guidance given the underperformance in the first two quarters. Looking to the remainder of our fiscal 2020, we will continue to execute our business priorities, which include driving top line growth through craveable signature food, accelerating our off-premise business, enhancing the employee experience and guest experience, and leveraging long-term growth drivers, such as Maple Street Biscuit Company and Punch Bowl Social. I'm excited about our current menu promotion, which is centered around Cracker Barrel homestyle favorites such as our Chicken n' Dumplins, Country Fried Steak, and Grandma's Sampler. In addition to reminding our guests of offerings that they know and love, featuring these core menu offerings will benefit our stores by reducing complexity while we implement our menu evolution initiative. As a reminder, this initiative is targeted at strengthening the dinner daypart by introducing new signature craveable items, while also simplifying our menu to increase consistency and execution and providing a more optimized menu. Earlier this month, we began implementing specification and process changes that improve the quality of several targeted offerings. In the coming months, we'll be introducing offerings such as a new and improved Chicken Pot Pie and Country Fried Pork Chop as well as a new menu design that reorganizes the menu into some new categories and better highlights our signature menu items and our abundance, value, and variety. For off-premise, we continue to be pleased with the demand for third-party delivery, which, as a reminder, is available in approximately 600 stores. And we'll be testing several initiatives such as increased marketing support to help us further expand our reach and frequency. We're also looking forward to Easter as we look to further grow this Heat n' Serve occasion. While this occasion is smaller than the Thanksgiving and Christmas occasions, we're optimistic about its sales growth over the prior year. Regarding our investment in Punch Bowl Social, we continue to partner with them to leverage our expertise and experience. Joe will speak to the financial impact of this investment in Q2, but we were pleased with their holiday sales and are looking forward to the upcoming opening in Miami this weekend and in Phoenix in April. Lastly, we continue to make progress on the Maple Street Biscuit Company integration, which includes the conversion of Holler & Dash into Maple Street. Our teams have been working diligently to execute our plans. Scott and his leadership team have done an excellent job leading through this transition. During the second quarter, we rolled out an initiative to open all Maple Street locations on Sunday. We've been encouraged by the early results, and we believe this will help Maple Street improve its business model, increase AUVs to over $1 million and deliver solid store-level EBITDA of over 17%. We remain very excited about this acquisition and are looking forward to growing the brand after we complete the integration and build a strong foundation for its long-term success. With that, I'll turn it over to Jill.

Good morning, everyone, and thank you, Sandy. I would like to begin by discussing our financial performance for the second quarter of fiscal 2020 and then our outlook for the fiscal year. In this morning's release, we reported second quarter net income of $61.2 million and GAAP earnings per diluted share of $2.55 compared to prior year earnings per diluted share of $2.52. Our reported earnings per diluted share includes a $0.15 loss from the company's equity method investment in its unconsolidated subsidiary, Punch Bowl Social. For the quarter, we reported total revenue of $846.1 million, an increase of 4.2% when compared to prior year revenue of $811.7 million. Our restaurant revenue increased 5% to $663 million and our retail revenue increased 1.4% to $183.1 million. Our total revenue increase was primarily driven by positive comparable restaurant sales, the net opening of four new Cracker Barrel locations, and our acquisition of 28 company-owned Maple Street locations. Cracker Barrel comparable store restaurant sales in the quarter increased 3.8% as average check increased 4% and traffic decreased 0.2%. The increase in average check reflected core menu price increases of approximately 2.2% and a favorable menu mix impact of 1.8%. The second quarter mix favorability was driven primarily by the growth of our off-premise business, off-premise price increases, and our Signature Fried Chicken platform. Second quarter comparable store retail sales increased 1.3%. While we had strong sales growth in this year's seasonal assortments, our overall retail sales performance was below expectations. We are working to address the underlying drivers, but we believe retail will remain challenged in the back half of the fiscal year. Moving on to expenses. Total cost of goods sold in the quarter was 32.2% of total revenue versus 32.7% in the prior year quarter. Our restaurant cost of goods sold was 26% of restaurant sales, a 30 basis point decrease versus the prior year. This decrease was primarily due to the recognition of favorable vendor allowances. On a constant mix basis, our food commodity costs were approximately 1.4% higher in the quarter than in the prior year quarter, driven primarily by increases in beef, dairy, and pork. Our retail cost of goods sold was 54.4% of retail sales compared to 55% in the prior year quarter. This 60 basis point decrease was primarily a result of higher initial margin. Labor and related expenses were $284.8 million or 33.6% of revenue compared with $276.8 million or 34.1% of revenue in the prior year quarter. This 50 basis point decrease was primarily due to productivity improvements. We were pleased that we saw another quarter of strong execution and labor management from our operators, which has been a point of emphasis for our organization. Other store operating expenses were $171.6 million in the quarter or 20.3% of revenue compared with other store operating expenses of $156.8 million or 19.3% of revenue in the prior year quarter. This 100 basis point increase was primarily driven by the following: first, higher advertising expense to support our menu promotion; second, planned depreciation increases related to investments in our strategic initiatives; and third, costs associated with the growth in our off-premise business. General and administrative expenses were $38.4 million in the quarter or 4.5% of revenue compared to G&A expenses of $36.2 million or 4.4% of revenue in the prior year quarter. GAAP operating income was $79.1 million or 9.4% of revenue compared with $76.7 million or 9.5% of revenue in the prior year quarter. Net interest expense for the quarter was $3.5 million compared to $4.2 million in the prior year quarter. This decrease was primarily driven by the benefit of interest income resulting from our lending to Punch Bowl Social. Our effective tax rate for the second quarter was 14.4% compared to an effective tax rate of 16.2% in the prior year quarter. This decrease was primarily driven by the tax benefit generated from our investment in Punch Bowl Social and the tax benefit of the retroactive reinstatement of the work opportunity tax credit. In the second quarter, we paid $31.3 million in dividends and repurchased shares totaling $5.8 million, which resulted in us returning $37.1 million to shareholders in the quarter. Turning to our balance sheet. We ended the fiscal quarter with $72.8 million of cash and equivalents compared to $169.6 million at the prior year quarter end. Our total debt was $460 million at quarter-end. With respect to our fiscal 2020 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. Our fiscal 2020 earnings estimate continues to assume total revenue of approximately $3.15 billion to $3.2 billion. We now expect Cracker Barrel comparable store restaurant sales growth in the range of 2% to 2.5%. We now anticipate Cracker Barrel comparable store retail sales growth will be approximately flat. We continue to anticipate our fiscal 2020 core menu pricing will be approximately 2%. We continue to expect to open six new Cracker Barrel stores and one Maple Street location in fiscal 2020. As a reminder, we are in the process of converting Holler & Dash units into Maple Street locations, and we expect these conversions to be completed in the next few months. We now expect increased food commodity costs, on a constant mix, basis in the range of 1.5% to 2% for the fiscal year. This lower estimate is driven by updated expectations for the pork and poultry categories. We plan to reinvest a portion of these expected savings in various initiatives, including training to support the rollout of our menu initiatives and increased marketing support in our fourth quarter. However, we still anticipate marketing as a percent of sales in the fourth quarter will be lower than the prior year. We have locked-in our pricing on approximately 60% of our commodity requirements for fiscal 2020 compared to approximately 60% at this time last year. We continue to project that our retail margins as a percent of sales for the full year will be approximately flat to the prior year. We now project approximately $11 million in business model improvements, resulting from sustainable cost savings. Taking these assumptions into account, we continue to expect full year operating income margin of approximately 9% of total revenue. We continue to project net interest expense of approximately $12 million. As a reminder, this includes the benefit of interest income resulting from our lending to Punch Bowl Social. We now anticipate an effective tax rate for the fiscal year of approximately 16%. As a reminder, this guidance includes the expected tax benefit from the estimated loss from our equity method investment in Punch Bowl Social. We now expect capital expenditures for the year of approximately $125 million. This increase is primarily due to updated expectations for the rollout of our new POS system. We now expect depreciation of approximately $115 million. Our guidance implies an increase in fiscal 2020 EBITDA of approximately 2% to 3% compared to the prior year. Taking these assumptions into account, we now expect to report GAAP earnings per share between $8.55 and $8.65. I want to remind everyone that this estimate includes the following: first, an expected loss from our equity method investment in Punch Bowl Social of approximately $0.80; and second, transaction and integration expenses related to the acquisition of Maple Street of approximately $0.15. Lastly, I would like to note that our current guidance contemplates some impacts from the coronavirus such as expected delays in some shipments of retail products. However, if the situation worsens, our future results could be negatively impacted by higher retail cost of goods sold and/or missed retail sales due to further delays in receiving products. And with that, I will turn the call over to the operator so that we can take your questions. Thank you.

The first question today comes from Jon Tower of Wells Fargo.

Great. I just need a quick clarification on a question. What was the off-premise growth in the quarter? Additionally, could you discuss the traffic growth during the period in-store compared to off-premise and how that developed throughout the quarter?

Great. This is Jill. We were really pleased both with our in-store and off-premise performance this quarter. So off-premise grew 210 basis points versus the prior year quarter. We saw growth across all three channels, so individual to-go, occasion and catering. And all three of those channels were up double digits. So we're very pleased with that. As we look at the in-store, and I'm sure you've seen some of this from an industry standpoint, we, as well as the industry, benefited from some weather favorability, primarily in January. For us, it's really difficult to pinpoint exactly what that favorable weather impact is just given our travel consumer. So if I had to give you a number, I'd say it was approximately 60 basis points. I'd give a range around that number. But overall, we were pleased with both our in-store performance as well as off-premise.

Okay. Looking ahead for the rest of the year regarding guidance, I believe you mentioned this earlier, but I want to confirm. It appears that the guidance indicates growth in the second half of the year will slow down in terms of EBITDA and EPS. I want to clarify that most of this slowdown is due to the reinvestment strategy you're discussing, particularly the plan to take some of the commodity cost savings and reinvest them into various initiatives and training. If you could provide some clarification on this, that would be appreciated.

Yes, you're right, Jon. We had a strong performance in the second quarter. For the year, we have slightly increased our same-restaurant sales guidance and slightly decreased our retail same-restaurant sales guidance. We decided to reinvest much of the favorable commodity costs into marketing, particularly in the fourth quarter, as we are wrapping up our chicken launch from last year during that time. However, our marketing spend will still be lower than the previous year's fourth quarter. Additionally, we are investing in training and support for our menu initiative that Sandy mentioned, and we will also be adding some new point-of-sale systems in the fourth quarter. We are currently finalizing those plans, but training will be included in that. So far this year, we have about 170 stores equipped with our new point-of-sale system, which we refer to as Max, and we will add a few more in the latter half of the fourth quarter.

I just had a couple of questions. The first is, Sandy, the dinner daypart initiatives that you're doing, can you just remind me maybe where SKUs are today and where you're trying to get them to, kind of as you get through this program?

I'm not sure what you mean by SKUs.

Well, like, I think you talked about menu simplification kind of through this process and just kind of where you envision it to get to versus where it is today?

So first, maybe I'll start by reiterating that the initiative is targeted at strengthening the daypart from a consumer standpoint first, which was the daypart that we've seen under the most pressure. And it's sort of introducing when we finish new signature craveable items, while also simplifying the menu to increase consistency and ease of execution. So the purpose in simplification wasn't necessarily to reduce the number of SKUs, although that may be an outcome when we've finished it all, it will allow us reducing some SKUs in the short term. Some delays will allow us to introduce as we roll through the initiative, which will go into next fiscal year, new items and sort of allow our field leaders to be able to execute at a high level against that. But we're in test right now with various phases of the initiative. I think we've got a little over 100 stores on it, and we'll be rolling as we go through the next few months. Stop as we get into the fourth quarter. And then we'll begin again in the first quarter next year.

Got it. And in terms of labor this quarter, it exceeded our expectations. Can you discuss some of the productivity improvements and provide specifics about what you're doing in that area? What is really driving the improvements in labor?

Yes, Greg. We were pleased with our labor-related decrease of about 50 basis points in the quarter compared to the prior year. We have seen productivity improvements from several cost-saving initiatives. We haven’t provided many specifics, but the measures are fairly straightforward, like the use of pan liners which we have discussed previously, affecting the dish area. The team has also excelled in better forecasting and labor scheduling. We are managing our labor effectively by ensuring we have the right personnel in the right places at the right times. The team is doing well in this regard. Additionally, our overall sales growth during the quarter helped us optimize labor costs. Looking ahead to the second half, we anticipate inflation to be somewhat higher. In the second quarter, inflation was closer to the low 3s, but we expect it to rise to the mid-3% range for wage rate growth in the second half, which should be beneficial.

That's helpful. Maybe I'm going to sneak one last one in here. Sandy, you talked a little bit about the coronavirus impact on your sourcing out of China. Can you maybe just help us understand, as you look to the next holiday season, when do you need product to ship by this year to kind of have that in stores? Is that the next couple of months? Is that sort of more like the summer, just as we kind of try to frame that out.

It starts now. We have production underway for the Christmas ornaments and decor, which is our typical approach to launching the Christmas season. As we move into the gifting phase, which occurs a bit later, we are currently focused on our inventory situation and will remain so until we feel confident that we have addressed the issues. This process will take several months.

Great. If I could, a few questions. First, would you care to share any more detail on just how the quarterly cadence went, what you're seeing across regions or even any incremental color since quarter end given what we've seen out there in the landscape? And then a couple of operational questions.

So we don't want to get into monthly cadence, except to the degree that we talked about the fact that weather was more favorable in January. So as we look at the daypart's weak performance, our breakfast daypart was the strongest daypart, specifically weekday breakfast. Lunch and dinner were comparable performance, probably weekend dinner continues to be the most challenged, given the competitive environment. Beyond that, from a region standpoint, performance was broad and similar in our outperformance versus the industry.

Great. Now that you have about 107 units with the Max POS, what are you seeing in terms of potential savings, productivity? How does that differ from what you're able to do on the other scheduling items that you called out as drivers for this quarter?

I'll start and then turn it over to Jill. The POS system really allowed us to do a variety of things. It's a platform that we will use to add additional functionalities. Tablets are likely to be the first addition, and we are pleased with the testing results we've received. We are continuing to address some technology issues, ensuring that the battery lives align with our business needs and that the tablets can handle the high volume at Cracker Barrel. This will improve speed in the kitchen and reduce server labor hours. With the new functionalities, we will be able to integrate our PCM, food, and labor systems, which excites us as it enables operators to manage food, fixed costs, and labor allocation effectively. The benefits go beyond just reducing labor; it's also about ensuring labor is allocated correctly. Additionally, we will have more functionality in our retail stores for promotional activities, although that's a lower priority for us.

Yes, Brett. I think Sandy covered it. I just want to make sure. So we now are in 170. I just want to make sure that you heard me correctly. I wasn't sure if you said 107, so we're in 170 today.

This time, I actually got it right. And if I could just field one last question. Do you have any measure on what level of incrementality you're seeing from off-premise and then I'll go back into the queue.

That sounds like a question for Jill. Would you like to begin?

No, I'll let you.

Awesome. We believe it's a great question and hard to determine. Certainly, as we have entered the third-party delivery space, it became easier to assess that incrementality early on, and we see it as an addition. However, measuring overall incrementality is challenging. In the second quarter, we felt a significant portion was indeed incremental, as there was an improvement in both dine-in and off-premise dining. Additionally, special occasions create different meal opportunities for our consumers.

Great. Mine was about the same-store sales guidance for the year. And it looks like the implied in the back half of the year is about 1% to 2%, given what you did in the first half. And just trying to understand why the potentially more conservative view for the back half? I know you have a difficult compare in the fourth quarter but easier in the third. But what are some of the puts and takes as to why you think comps might decelerate?

No, that's a great question, Jake. As we look at the second half, we still expect the industry to be weak, although we forecast some modest improvement in industry performance excluding any weather factors. Additionally, as you mentioned, we are ramping up the rollout of our successful platform for bone-in fried chicken in the fourth quarter, although we will provide somewhat lower marketing support for that initiative. Currently, off-premise sales are significant for us in the second quarter, and we anticipate continued growth, but the special occasions for off-premise sales represent a smaller portion of the business in the second half.

Okay. And then you mentioned take-in at the weekend dinner is the most challenging. How would you characterize the competitive environment in terms of value orientation? And do you think that that's getting more challenging or less challenging? And then also just how you'd expect to react to that. I know in the past, you did the Daily Delights and kind of had promoted that. Is that something that you might work more into your marketing plan in the back half of the year?

It remains very competitive out there and it feels like it has become more promotional. We believe we are well positioned in this environment because we provide the everyday value we are known for. We reinforced this in the second quarter by updating our billboards to focus on value and breakfast all day, which we viewed as a differentiator. We are also working on our dinner initiative and have redesigned the menu to ensure we maintain great value and make it easy for our guests to find that value. In our opinion, this is simpler than our previous Daily Delights. We believe we will be well positioned for an environment that we expect to remain competitive and promotional moving forward.

Got it. As for the last question, this is more of a modeling question for Jill. The other expenses you mentioned increased, along with store-level expenses, by about 100 basis points in the second quarter, similar to the first. I just wanted to clarify what is driving that. I believe you mentioned some increased marketing in the second quarter, but it seems quite consistent throughout the first half of the year. Should we anticipate that this will decrease in the third or fourth quarters as the marketing investment is lower compared to the previous year?

Yes, I know, Jake, that's a great question. So within the second quarter, other operating expenses were higher by approximately 50 basis points driven by the higher marketing. And so we expect in the back half marketing will be slightly less than it was in the first half. So that won't be as much of a headwind in that line item. But the items that will continue is, as we've talked about a number of our initiatives, like the platform for the bone-in fried chicken, as well as our new POS that we call Max. We've had increased spending in our capital expense, which will result in higher depreciation. We expect that to continue. Also in other operating expense is where we capture supplies associated with our off-premise sales, and we would expect that to continue.

I have a few follow-up questions, starting with what Jake asked about depreciation. I believe the accelerated depreciation we've seen over the last few quarters is primarily linked to the investments made in this business. Will those adjustments decrease as we enter fiscal year 2021, or should we anticipate accelerated depreciation and an increase in the depreciation line year-over-year as we move into fiscal year 2021?

So at this point, we're not guiding to '21.

Okay. But even taking a step back. So in terms of thinking about the accelerated depreciation, when did the lion's share of that begin? What quarter does the lion's share of that begin? And are we almost four quarters through it, more to come?

So we're really in our second year of that spending.

Okay. I'll move on from that. So talking about the top line. Beyond weather, which a lot of your Casual Dining peers have pointed out as the driver for the January same-store sales, did you see anything else that you believed to be driving the strength in January Casual Dining segment same-store sales trends? And if yes, is there something out there that you think is sustainable that potentially rolls into February, March, April?

Jeff, what we're saying is that January was surprisingly good. Certainly, some of it is the weather. Jill tried to quantify for us how much is very noisy. And the question that is whether the improvement is sustainable, I think we're being cautious about that.

So for the second quarter, our off-premise was 13.2% of sales. And what I'd say is, we are on track to deliver at least the 10% of sales.

The sales results this quarter were impressive. I wanted to follow up and delve deeper into your experience with Punch Bowl Social during its first holiday season. What insights have you gained about the brand? Are you observing any consistency in unit performance? There has been discussion about potential brand extensions, such as repurposing some anchor spaces in malls or exploring a lodge-in concept. What are your thoughts on the brand's current performance and its readiness for expansion into new opportunities?

So I'll give you just a couple of comments. I won't speak to some of the questions you have, I'll let the folks at Punch Bowl. We learn every day about things going at Cracker Barrel, Maple Street, and Punch Bowl. As we said, we're pleased with the holiday performance, and we're pleased with the work that the team is doing there on a number of fronts, attacking things like site selection and how to improve that. The middle of the P&L, with labor, attacking capital. So they have work streams against a number of areas and are making progress against it. I won't speak to what the views are of the brand going forward. Jill, do you want to add any more?

Yes. I mean, I guess, on the financials, we don't want to get into much detail. But Todd, as you said, it's a young brand, so we continue to learn every day, as that team is learning. And as Sandy talked about, it's the site collection and then what does the honeymoon period look like? There's just all kinds of great learning and partnership with that team.

Okay, great. Following up on Maple Street, it seems that the testing for Sunday openings has been successful, and plans to implement it across all units are moving forward. The average unit volumes appear to be aligning with your expectations. While it's still early, when can we expect to receive guidance on the growth trajectory of this business? Should we anticipate hearing about it at the Analyst Day in June, assuming that this adjustment to the opening schedule has validated the return model for you?

We were pleased with the model even before they opened on Sunday, and the successful initiative to open on Sunday has further enhanced it. The leadership team at Maple Street has done an outstanding job managing the organization through various challenges, including hiring and messaging. Now that we've stabilized the team, we are laying the groundwork for growth. We anticipate rolling out the growth plans at our Analyst Day this summer.

Yes. Quick question to follow up on Maple Street. This past quarter, you opened a store and closed a store. Specifically, were those both Old Country stores? Was one a Holler & Dash? Any details?

This is Jill. Yes, we opened one Cracker Barrel store and we closed one Holler & Dash.

Okay. You have a total of six Old Country stores planned for the year, with one already open. How do we foresee the next couple of quarters, with two to three stores expected to open each quarter?

So yes, we actually have two opening this quarter, and I think we've opened two already.

Okay. All right. Got you. As we think about Punch Bowl, just trying to model out, obviously, as best as we can, the losses that flow from the business currently. What's the timing on new store openings? I know, Sandy, you mentioned two coming up. Is it just two more for this fiscal year for the company?

Yes. We will be opening two locations this fiscal year, with one set to open in about a week. Those will be the only openings for this fiscal year, and we are not discussing any plans beyond that.

Okay. All right. That's fine. And then last question. Jill, you provided some insights on the commodity situation and your contract. I assume those comments were specific to the fiscal year? Is there any coverage for the second half of the calendar year?

So yes, whenever I talk about the commodities, it's always talking to this fiscal year. So right now, we've got 60% kind of locked in.

Okay. And any color for the balance of the calendar year?

No, I mean, I think as you look at the guidance, we brought the commodities guidance down modestly from what we had before. We brought it down primarily due to the port favorability, due to the near-term concerns about African Swine Fever a little less, although we've kept in some protection in our forecast. We also entered into good negotiations on poultry. So that's included in there. So versus the first half, you'll see that we do expect some increase in the commodities inflation in the back half. And some of that is because we're wrapping on low inflation a year ago.

This concludes our question-and-answer session. I would like to turn the conference back over to Sandy Cochran for any closing remarks.

Well, thank you for joining us today. Cracker Barrel continues to be one of the strongest and most differentiated brands in the industry, and we remain confident that our strategy and business initiatives will drive performance. We appreciate your interest and support.

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