Good day, and welcome to the Cracker Barrel fourth quarter fiscal 2025 conference call and webcast. 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 Adam Hanan, Director of Investor Relations. Please go ahead, sir.
Good afternoon, and welcome to Cracker Barrel's fourth quarter fiscal 2025 conference call and webcast. This afternoon, we issued a press release announcing our fourth quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA. Please refer to the footnote. The company believes these measures provide us. This information is not intended to be considered in isolation. The last pages of the press release include reconciliations from the non-GAAP information. On the call to me at Cracker Barrel and Senior Vice President and CFO correctly to be trusted with the responsibility of stewarding the Cracker Barrel brand.
Ever since the company's founding in 1969, Cracker Barrel has been a home away from home for America, with our restaurants, people, and food offering a reminder of some of the country's greatest attributes, not just an old country store or a restaurant. It's the front porch of America, and we take that very seriously. The feedback we've received from our guests in recent weeks on our brand refresh and store remodels has shown us just how deeply people care about Cracker Barrel. We thank our guests for sharing their voices and love for the brand and telling us when we've misstepped. We've listened carefully. As we've discussed on past conference calls and presentations, we've been advancing a multi-year plan to return Cracker Barrel to growth and ensure we're here to welcome families around our table for generations to come, while staying true to what is so special about the brand. We conducted extensive research to inform our strategic plan. But what cannot be captured in data is how much our guests see themselves and their own story in the Cracker Barrel experience, which is what's led to such a strong response to these changes. We have already taken steps to get back on track. We want long-time fans and new guests to experience the full story of the people, places, and food that makes Cracker Barrel so special. That's why our team pivoted quickly to switch back to our old-timer logo and has already begun executing new marketing, advertising, and social media initiatives, leaning into Uncle Herschel and the nostalgia around the brand, with more to come. We also hit pause on our remodels and are reverting the four locations with the modern design to our old-timer signage and more traditional interiors. And we've adjusted the investment plan for our restaurant. The brand refresh activities around our logo and our remodel tests were only one part of the work we were and are doing to make sure Cracker Barrel continues to thrive. A key imperative of our multi-year plan has been to deliver food and experience our guests love. and we are placing an even bigger emphasis in the kitchen and other areas that enhance the guest experience. In the past week, we've instituted process changes to ensure our signature biscuits are living up to our guests' memories and expectations and there is more to come on the food front. We look forward to continuing to invest in our loyalty program to seek even more direct feedback from our core guests. We are confident in our path ahead, leveraging the many elements of our multi-year plan that have been working, along with these recent changes we have made, leaning into Cracker Barrel's heritage, listening to and deepening the connection with our guests. We're moving ahead with a strong plan to regain traffic and the momentum we had a month ago. There is a lot to be optimistic about, and our teams are focused on getting back to a positive trajectory. I'll now turn the call over to Craig for details on our results, as well as our outlook, and I'll return later to dive more deeply into our key focus areas going forward.
Thank you, Julie, and good afternoon, everyone. Before reviewing our fourth quarter results, I will share a brief update on the full year. Adjusting for the impact of the 53rd week in the prior year, we grew revenue by 2.2%, which included comparable store restaurant sales growth of 3.5%. Additionally, we delivered adjusted EBITDA growth of 9%. Our teams did a great job delivering these results in fiscal 2020. Now, turning to the quarterly results, for Q4, we reported total revenue of 8, which included $0.2 million and retail revenue of $149.62.8 million benefit from the 53rd week in the prior year. Total revenue increased 4.4%. Comparable store restaurant sales representing the fifth consecutive quarter of positive comparable store restaurants. We continue to be pleased with the strategic pricing initiative as flow-through results remain favorable. Additionally, menu mix was also an increase of approximately 100 basis points. Parable store decrease, moving on to 0.5%. Restaurant cost of goods sold was 26.3%. This 30 basis point increase was primarily driven by, driven principally by higher beef, 51%. 50.90 basis points. Cap financial results include a $4.3 million credit for 30 cents. Turn into capital allocation and our balance sheet.
Our guest has not just to the old-timer logo, vintage Americana decor but to the sense of to recognize there are other areas where we must continue improving especially in our food and we are moving forward you've heard me say before that we have all the right pieces to return to being a leading restaurant company with meaningfully improved margins and growth potential there are many elements of our plan that have been working well and delivering results as you've seen from our five consecutive quarters of positive comp store restaurant sales and the nine percent growth in adjusted EBITDA we delivered in fiscal 2020. Some of these successful elements of our plan include actions we've taken so far with our food and menu, bringing back old favorites like Uncle Herschel's breakfast and chicken and rice, New York strip steak, enhancing how our food is presented on our menus, and evaluating and adjusting our pricing and value positioning. We've also taken significant steps in the back of house with the goal of improving food quality while increasing efficiencies and reducing waste. We've continued to invest in our people and training and in the last two years and better operational execution in our restaurants. And our initiatives continue to drive improvement in digital and off-premise. The return of campfire meals to our summer menu in 2025 is a perfect example. We brought back a menu item that many guests and team members asked for while improving quality and streamlining kitchen execution. The new offering started at a compelling price point of $10.99. The promotion was supported by an integrated advertising campaign that also highlighted our sponsorship of the Cracker Barrel 400, a NASCAR Cup Series motor race in June, and activations at key Speedway motorsports destinations nationwide. We shared the news of the return of Campfire first with our loyalty members, and they joined us. And the results were excellent. Our dinner traffic in Q4 was positive at 1% for the first time since fiscal year 19, excluding COVID. We're continuing to lean into craveable flavors and comforting dishes, which you can see on our current fall menu with our herb-roasted chicken and our sausage and egg hash brown casserole, another innovation with our beloved hash brown casserole. I mentioned earlier that we've instituted process changes to ensure our signature biscuits are living up to our guests' memories and expectations. And we're also making changes to our meatloaf and green bean preparation, along with accelerating testing on other core item improvements. I've talked before about back-of-house optimization as a key part of improving food quality and consistency while simplifying operations and execution. Phase 1 of our back-of-house optimization was rolled out in Q3, and adjustments on our processes that I just mentioned are a direct result of learnings from that rollout. Phase 2 was piloted in 15 stores late in the fourth quarter. We're encouraged by the initial results and plan to test a region in the second half of fiscal 26. We're also leaning even more into country hospitality and operational excellence. In early August, we implemented our new service principles, the Herschel Way, inspired by our beloved Uncle Herschel and the warm and gracious hospitality he showed to all. The Herschel Way builds on the updated service standards we introduced in Q3 and aligns our team members to consistently deliver exceptional guest experiences. Our guest loyalty program is another element of our multi-year plan that has been performing well and delivering results. Over the past year, we continue to see strong membership growth for Cracker Barrel Rewards, with membership increasing by 3 million people. We now have over 9 million members after just two years of the program, and those members account for over 35% of tracked sales and an even higher percentage of retail sales. Notably, our Cracker Barrel Rewards membership has increased in recent weeks, rising by over 400,000 members in Q1 to date and 300,000 in the most recent four weeks, both of which are above plan. Looking ahead to build on all we've heard in recent weeks, tomorrow we are launching Front Porch Feedback, which gives our reward members the opportunity after every visit to comment directly to our team on aspects of their visit. We will be listening to and actioning initiatives based on their valuable input. Before I close the call and we turn it over for your questions, I want to spend a few minutes on our previous remodel program and our updated capital investment plan. From the time we introduced our multi-year plan, we committed to being careful stewards of capital, only making large-scale investments if we felt confident in the returns, and to proceeding slowly with a test-and-learn mentality. In keeping with this philosophy, as Craig shared with you, the total invested in our remodel program during fiscal 2025 was approximately $20 million of our overall $159 million CapEx for the year. That number also includes some regular guest-facing maintenance in certain locations, such as restroom upgrades. Since the outset, we have been clear that our stores require significant maintenance and repair, and it's this defensive spending that has made up the majority of our store investments over the past two years. Along with those critical investments, we also saw an opportunity to provide an even more welcoming and comfortable experience with additional incremental improvements. The kind of things that would lead to loyal guests visiting us more frequently, team members staying with us, and new guests joining us, all while remaining authentically Cracker Barrel. We have shared information previously on our refreshes and various levels of remodels and have discussed the changes we were making in test stores. Over the past year, we have tested various elements, paint colors, lighting, sound, seating, and so on, listening closely to what our guests are telling us. We are still listening. The modern design that has been seen online and in social media was only tested in four of our locations. As we recently committed, and as I noted earlier, we will not proceed with these modern stores. And I've also begun reverting to our old-timer signage and bringing back more traditional Cracker Barrel interiors to these locations. Some of this will take time due to permitting and other constraints, but it is happening. In addition to those four modern design locations, we touched another 58 stores, or less than 10% of our system, since starting to test remodels. We've hit pause on these as well and will not roll out any further remodels or refreshes while we continue to gather and evaluate data on the existing stores, looking at the specific elements that guests love and those they don't. Of course, in all of our locations, the core elements that people expect from Cracker Barrel are there today and they will always be there. Rocking chairs on the front porch, vintage Americana decor and antiques pulled straight from our warehouse in Tennessee, peg games, fireplaces, and our unique retail shop. Going forward, we'll continue to maintain and repair our stores and improve them in ways that our guests and team members expect. And we'll leverage learnings from our test locations for any future improvements in a disciplined way. This brings me to our updated capital spending plan. As Craig noted, we expect to invest approximately $135 to $150 million in the coming fiscal year. The bulk of this will be maintenance CapEx, things like paint, parking lots, lighting, retail fixtures, flooring and restrooms, as well as investments in technology to support our stores and our loyalty program. Given the adjustments we are making, it's too early to set a specific CapEx range for fiscal 27, but we will be well below the prior three-year figure of $600 to $700 million that we provided at the outset of our program for fiscal 25 through 27. Our board remains committed to a disciplined approach to capital allocation, investing in our core business, approving our quarterly dividend, and authorizing a $100 million share repurchase program, all while maintaining a conservative balance sheet. This week, we will be celebrating Cracker Barrel's 56th birthday. As we cross this milestone and look ahead to America's 250th birthday, I want to say again how proud we are to serve our guests and to thank our hardworking team members. Cracker Barrel is a part of America's story. Our stores are in your communities. Our team members are your neighbors. Our suppliers are your local businesses. We are fortunate there's so much passion for the brand, our heritage, and our place in people's lives. We are more focused than ever on making sure Cracker Barrel is here to serve families for generations to come. Again, there's a lot to be optimistic about. Operator, we'll now turn to Carl over for questions.
We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone 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. And your first question today will come from Brian Mullen with Piper Sandler. Please go ahead.
Hey, thank you for sharing the traffic performance this quarter. Just given what you saw following the logo change, just had a question about the marketing plan this year. Do you still spend the same amount of dollars and maybe just change the message in order to drive that sequential traffic recovery you're expecting? Or maybe do you pull back on spending, regroup a bit? Just how are you thinking about that as you sit here today? And is there any way to perhaps actually take advantage of all this recent attention over time?
Hey, Brian. Thanks for the question. It's Julie. We expect marketing as a percent of sales will be a little bit higher in 26 than it was in 25, with Q1 in particular up a bit. We're continuing to invest in marketing. You saw some great performance from our investment there in Q4, but especially given the need right now to drive traffic in light of the current headwinds, we're going to continue to invest there.
Okay, thank you. And then just to follow up on, you know, some of the back-of-the-house initiatives, you know, I think phase two this year was always going to be focused on improving some of the processes. But separate from that, the prepared remarks, you've talked about improving some of the food quality, some of the items. Just trying to understand, like, was this always the plan on the food quality side, or is some of this maybe due to broader feedback you've gotten since the logo changed? So just really any color on the plans, both processes as well as food on the menu.
that you're working on? Sure. It's a great question. Look, food quality has always been a North Star for us in the plan. We've been focused on that as well as process simplification to make jobs easier and improve productivity. Phase one, as we've talked about, rolled out in Q3. Phase two started testing in Q4, like I said in my prepared remarks. Kitchen initiatives like this are complex, and I think as we shared with you guys a couple quarters ago, we said it was going to have three phases, multifaceted. We just continue to evaluate processes as they get out there. We're learning from scale. We continue to listen to our team members and watch food quality scores and value scores. We remain focused on all of that, and we'll just keep
focused on all of these things. Thank you. And your next question today will come from
Dennis Geiger with UBS. Please go ahead. Great. Thank you, guys. I appreciate the quarter-to-date or year-to-date color, wondering if you could share anything more sort of on how things have trended, just given the sensitivity and, you know, the magnitude of some of the pressure. Anything to share have gone by? If you've seen any kind of improvement within that trajectory, I understand you gave the 1Q guide, but just if anything more on the weekly cadence
so far? Hi, Dennis. It's Craig. I'll start on that one. I think for us, if we kind of think about where we were before all of this, before 819, traffic was down about a percent. Q4 was also down about a percent. And, you know, obviously we had reported the five consecutive quarters off same store, same restaurant store sales. So we're very happy with that and we're pleased with that performance, and obviously things have changed a bit here recently. I think, you know, the guide that we've given for the quarter is really our best thinking at this point. And as we think about the year, our best thinking right now is we'll continue to get better sequentially quarter over quarter, and we expect an even greater rate of improvement in the second half of the year. But, you know, this is a bit of an unusual situation, and we've factored all that into our guidance.
The only thing I'd add, Dennis, is the teams are hard at work. We have taken the feedback from our guests, pivoted quickly. We've got a plan to drive traffic, and we're optimistic that we can get back to that prior run rate.
Very helpful, guys. And the last one, I guess, is sort of two parts. You know, if anything additional on the weakness, you know, and the challenges, whether it's, you know, regional, anything by cohort or frequency of guests, if you've got anything more, or maybe it's just broad-based. And the more important second part of the question is kind of, Julie, what you just touched on. You know, from here, plans in particular to address kind of the near-term challenge. It sounds like the Front Porch Feedback Initiative is going to help to dictate some of the plans and the reaction here. Just wanted to see if I have that correct or if anything else to share on kind of near-to-medium-term stuff to recover that traffic.
All right, Dennis, it's Craig. I'll get started with the first part of that and then turn it over to Julie. We have seen declines that are relatively broad-based, but the declines are larger in the southeast, excluding Florida. In terms of cohorts by income, we're not seeing any substantial differences by income. In terms of age, again, fairly broad-based. We're doing a little bit better or a little bit less decline with the over 65 cohort. But speaking more generally, broad-based geographically, a little bit more in the southeast as Florida, and broad-based with income and age.
From a plan standpoint, Dennis, we had really planned to focus on a lot of new menu innovation this fall, driving our herb-roasted chicken, our sausage and egg hash brown casserole. We've also brought back two guest requests to the menu. Uncle Herschel's breakfast rejoined the menu, ironically, on the day of the logo change, as well as Country Morning's breakfast. So those are two breakfast items that guests have been asking for for a while. We continue to listen to our guests. I think we've shown that throughout the last year with items coming back like Campfire. We're continuing to do that right now as we really pivot and double down. Marketing plans that you're going to be seeing in the next few weeks really center around college football. We've got some advertising buys there that were existing prior to this event. We've got some big news coming next week that we're excited about. So just stay tuned. The teams are really actively engaged in making sure all of our guests know that we are honoring our legacy and our heritage and inviting everybody in for a great meal around our table.
Thank you, guys. And your next question today will come from Jake Bartlett with Truist Securities. Please go ahead.
Thank you so much for taking the questions. My first was on the margin guidance, implied margin guidance for 26. Maybe if you could kind of dig into the moving pieces. Before, we had talked about $55 million to $60 million in cost savings from the back of the house. It sounds like that plan has changed a little bit, but it seems to be on track. Maybe just to describe maybe, you know, how much savings you expect there. What you're looking at from G&A, I think, you know, obviously 2025 was an investment year, as you described it. The situation has changed, wondering whether G&A might, there's opportunity to bring that down. And then lastly, within the guidance, you know, are there any unusual items and, you know, something that won't be backed out, but that just are larger than normal, specifically maybe in the first quarter. Maybe there's some expenses that you've incurred as you've had to react to the near-term disruptions. Thank you.
Hi, Jake. It's Craig. I'll start with Q1. I think the biggest software traffic, and we've given the guide there in terms of our expectations, we also have that $16 million in additional cost marketing. So we did not encourage that together will be a meaningful impact to Q1. And as we think about the full year, that negative 7% to negative, that's a pretty big range, but obviously we're still early in this. We're only about 30 days away from, so that's going to be the big lever. And the marginal impact of that is also quite, the way that we think about that is a flow-through rate on 30%. Those are going to be the biggest drivers in do have, you know, a fair bit of cost savings in the plan, but we also have things going. So at this point, pull your guidance and point you to
the traffic performance. Jake, as I thought I heard you say 55 to 60 attributed to back of house. I don't think we've actually attributed 55 to 60 to back of house. We've just said we'd have 55 to 60 in cost saves, of which Back of House is one of the key initiatives in there. So just to clarify that for you, we are moving forward with Back of House. It's kind of a three-phase program. There are savings associated with that, but that's not the only thing, driving that 55 to 60.
Over multiple years as well as the other key.
Got it. Should we think about the 55 to 60? And I'd love to hear what the other big buckets there are. But as something that still would be expected within the 26 and 27 or the prior
plan, or has that changed materially? Yeah. I think given all of the, we're not going to
change, we think the 50 to 60, it may take the exact time. I think this company is really best at, we are really good at cost saves, and we have a history of delivering that over the last several years, even before my arrival. So the team's buckled down. They have some good plans there, and we will deliver there. Great. And then my other question was on the balance sheet and
in the return of cash to shareholders. You have the authorization now, the $100 million. I guess the question is what your approach is to the balance sheet. It looks like your EBITDA guidance is about equal to your CapEx guidance. So if you look at where your EBITDA guidance is, you're going to get a little bit higher leverage there anyway from that. So is it feasible to return cash to shareholders this year, given the framework of your guidance? or is that just kind of a tool maybe for upside or, you know, how do we think about your approach to the balance sheet, returning cash to shareholders, you know, in the context of your guidance?
Hi, Jake, I'll start with that one. They, for a long time to the allocation it's used, and they focus on, you know, investing and evaluate that and be a bit opportunistic, and they're going to continue to monitor that as things evolve.
Great. Thank you so much. And your next question today will come from Jeff Farmer with Gordon Haskett. Please go ahead.
Thank you. Several of your casual dining and family dining peers have been, looks like, increasingly aggressive in pursuing low price point offers or just value promotions at a certain price point. So, again, sort of as the logo dynamic has played out over the last five to six weeks, even in that narrow time, the segment has gotten increasingly competitive. So in lieu of what a lot of your peers are doing, how does that impact your own top-line strategy?
Yeah. Hey, Jeff. It's Julie. I'll start, and then Craig can jump in. We continue, as you've noted, to see that with the competition. There's a lot of promotional activity out there and dealing going on. Now, we would expect some of that because it's back-to-school season, and you usually see a lot of that this time of year. I remind you and everyone out there what an incredible value we deliver to our guests in so many ways. The first one that I love to point out is our check. Our check for fiscal 25 still ended the year right around $15, while family dining was a little over $18, and casuals at $27. So eating a meal at Cracker Barrel of our abundant scratch-made food, and remember, people at Cracker Barrel have told us, our guests have told us resoundingly, that they value our delicious food in abundance. People leave with doggy bags. They leave with, you know, to-go containers. And so we think that we really still represent that great value. We were recently on air with our Sunrise Special, which is our $7.99 all-day offering of two pancakes and your choice of either eggs or breakfast protein. We've got great items out there. If you think about Campfire, one of the reasons that landed so well with our guests is we had an opening price point at $10.99 on that new sausage and shrimp skillet as part of the campfire menu. Our barbell strategy continues to resonate with our guests. Think about how we've evidenced that in the last year, what we've been able to flow through in pricing. The one percentage point of mix we delivered every single quarter in 25. We've got early dinner deals starting at $8.99 that continue to perform well for us. And then, honestly, the cherry on the top is our loyalty program, which is another way that we deliver tremendous value. When we look at the promotional activity that we've put out there in the last couple of weeks, just to re-invite guests back into our restaurant, they've resonated really well. We had the Sunrise Special BOGO, and then this last weekend we offered the Old Timers BOGO because we know how much everybody loves the Old Timer. What's better than one? Two. So we brought in guests this past weekend with that. We saw that resonate not only with guests, but with our loyalty members as well. And they were able to earn pegs on all of those transactions. So, it continues to be a way that we deliver great value to our guests. So, we believe that we are well poised, as I've said in the past, to compete in this space because we have such great value day in and day out.
Yeah. And internally, we continue to see our value score particularly pleased with that. But we have some levers here.
Okay. And then I think I heard you guys say 4% to 5% menu pricing in 2026. Is that accurate? Correct. Yes. Okay. So then the question that follows that actually a couple would be, so that's quite a bit ahead of your commodity in wage inflation, roughly 100 to 200 basis points. And it would be one of the highest menu pricing levels in this sector. So two questions. So why do you guys feel the need to sort of push that pricing? Is this just, again, sort of going back to or rejiggering the pricing structure? and do you expect your consumers to sort of accept this pricing without too much?
So keep in mind, as you know, Jeff, we revamped our whole pricing approach a couple of years ago. We built up that capability, and that has been working well, and we measure that on an ongoing basis. We continue to see really good flow through. We continue to make gains with our value scores, and we've actually, even with that, we've been generating a positive mix. And I think, you know, if we think about 4% to 5% in context of $15, it is just still a smaller dollar increase, and it continues to work for us. We've also been really careful, as we use the kind of the barbell pricing approach, we've been really careful in terms of maintaining those entry price points, and that's been helpful. We also have the loyalty program that continues to grow and exceed our expectations, and so guests that dine with us more frequently effectively can get an incremental discount with that program. So we're taking higher pricing, but we've been really thoughtful about how to do that, and it continues to flow through well from a guest perspective. Thank you.
And your next question today will come from Sarah Senatore with Bank of America. Please go ahead.
Thank you. I guess one quick clarification. I think you said, Craig, that most of the age cohorts, or you didn't see a lot of variation outside of the geographic kind of split, but that the older cohort was perhaps less affected than younger. So I just wanted to clarify that, and then I do have a question.
Hi, Sarah. Yes, that's correct. We are seeing, you know, impacts really across all of the cohorts. However, our over 65 cohorts has held up best relative to the others.
Okay, thank you. And I guess in that context, and maybe Julie, some of what you said was that Cracker Barrel hadn't evolved with the guests for many years, which I think certainly makes sense. I guess if remodeling and rebranding isn't the way to sort of evolve or bring the brand forward, maybe you could talk a little bit more about what is as you think about maybe either shifting your customer base to perhaps maybe easing a little bit more youthful or how you think about evolving the brand in the context of your comments earlier.
Yeah, Sarah, thanks for the question. Look, I think the way we've talked about the plan is we, first of all, We spent a lot of time on research and really understanding where Cracker Barrel sat versus our competition and what our opportunities were and also what our strengths were. And that was always about food and experiences that guests love. And we were kind of in the middle of the pack on some of those scores when we rated ourselves against the competition. So one of the key tenets for our plan has been around food and experience. And when you think about the five pillars that we put out there, brand and even the logo piece was just one small work stream of those five pillars and the 21 work streams that we put out there. Same with remodels. It's one small work stream. We know that we've had work to do on food, experience. The loyalty program was a piece of that. Pricing was a piece of that. So all of those things are coming together in the plan. As we've talked on this call and in my prepared remarks, a lot of those pieces are really working. So we feel like this is still the right plan. And our focus right now, our renewed focus is on food and experience. We're really doubling down there, taking in a lot of the feedback from the recent weeks, and continuing to evaluate the menu and the work that we need to do there.
Thank you. That's very helpful. And just then, sorry, second quick modeling question, Craig. Can you just talk a little bit? I'm sorry if I missed it. DNA, you know, was a good guy again this quarter. I think last quarter you had said that, you know, there might be some timing shifts. So could you just maybe explain maybe what happened?
Well, we've been continuing to manage our G&A as a part of our broader cost savings effort. So we're always looking at our G&A spend, and whenever there is an opportunity to spend less, we're always taking that. So we've continued to manage it. The entire team is working to deploy those dollars as effectively as possible, and that paid off in the quarter.
Okay, thank you.
Again, if you have a question, please press star and then one. And your next question today will come from John Tower with Citi. Please go ahead.
Thanks for taking the questions. Keep jumping around on this, if you don't mind. You mentioned quarter to date, you're seeing good, you know, not good, but you're seeing traffic declines. But at the same time, you're seeing an uptick in loyalty signups, I believe you talked about, I think in recent weeks, 300,000 loyalty members sign up. So can you speak to what's happening there? Are you doing anything internally at the stores to get people to jump into the program more so than what you were doing previously?
Hey, John. It's Julie. Our loyalty program has not been impacted as we've talked by recent events. Your takeaways were correct. Traffic is a little bit down, not a little bit. I think you said good. I was like, oh, I don't know about that. Traffic is down since 8-19, but the loyalty program sign-ups are actually ahead of our plan. So we've signed up about 400,000 people quarter to date, and 300,000 of those people have come in since 8-19. Again, exceeding our plan, exceeding our expectations. We haven't changed any activity in the stores around that to specifically answer your question. We know that it's a great program. People really love being in it. As Craig and I talked earlier, it provides great value. And we're really excited to launch this Front Porch Feedback piece of it tomorrow because we've gotten so much feedback in the last few weeks. What we think we can do with Front Porch Feedback is really hear from our loyal guests who are in all the time, who've had an experience with us. We've set it up so that it actually is linked to the traffic so that we can understand their transaction, their store, and we can start to aggregate feedback in new ways. So we're really excited about it. It's just another way that we can value our guests beyond just the pegs that they earn or the discounts that we might provide to them.
And then, like I said, jumping around a little bit, maybe, Craig, you had mentioned 60% of the CapEx this year is going to be roughly maintenance. Is that a good, that $80 million to $90 million maintenance CapEx, a good way to think about it longer term over the next several years, $80 million, $90 million for baseline maintenance?
Yeah, I think longer term, what we've shared, what we've talked about is, and on an inflation-adjusted basis, this kind of $125 million as being a base spend amount, and that's what we were, you know, that's what we did in 24 and about that, about 24 and 23, about 125, because, and that includes, you know, base maintenance, it includes the things that, you know, some other ongoing projects. I think that's a good base number once you adjust that for inflation. You know, we've also said that for the next couple of years, you know, as we got a bit behind on maintenance in the stores through COVID, that is really important to get caught up there. We're in a competitive industry, and we need to ensure that we are showing up the way that we intend to in terms of that, so we've been making incremental investments there.
So that $125,000 is a decent baseline in the next several years adjusted for inflation.
Well, on top of the – again, as a base, now on top of the $125,000 like we had in $25,000 and in $26,000, we are making incremental investments, particularly in catching up on deferred maintenance. And both in $25,000 and $26,000, we also have some additional technology spend. But once we get through that on an inflation-adjusted basis, that 125 number has been our historical run rate.
Got it. Thank you. And then just in terms of your comments around the tariff remediation measures, can you speak to what exactly is going on there? Are you guys just sourcing from, you know, countries with better, you know, lower rates of tariffs, or are you, you know, effectively pricing to offset the higher tariff rates? What's going on with these measures?
Yes, John, the team has really done a great job. They are very proud of the work they have done. I'll give you a little bit more texture. In fiscal 26, we expect incremental year-over-year tariffs of about $25 million, so $25 million more in tariffs in 26 than we did in 25. And the vast majority of that, vast, vast majority of that is being mitigated by a few things. Number one is vendor negotiations, and the team has been working really hard on that and have had a lot of success. We've had multiple rounds of vendor negotiations. The other change is just in our assortment. We sell a lot of things. They're largely discretionary, and if we can't make a reasonable profit on it, then we don't need to sell it. So we've made those adjustments. There's also pricing, as you mentioned, and we've also made adjustments to the country of origin. That is an ongoing process that does take a little bit more time. And finally, we've taken the opportunity with the tariffs, but as part of our broader retail strategy, to adjust our SKU count. So when we end at 26, we expect our total SKU count in the retail set of the business to be down about 10%. that. So the team has really worked hard and accomplished a lot as it relates to working
through the tariff impacts. Our vendors have partnered nicely with us on a lot of that work,
too. Great. I appreciate all the color there, and thanks for answering the questions.
This will conclude our question and answer session. I would like to turn the conference back over to Julie Messina for any closing remarks. Thank you for joining us today.
We're moving ahead with a strong plan in place, and our teams are focused on getting back to a positive trajectory. We appreciate your interest and look forward to keeping you updated as we make progress throughout the fiscal year. Finally, I really want to express my sincere gratitude to our 70,000 plus team members for their dedication and hard work, particularly in these last few
weeks. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.