Earnings Call Transcript - CBRL Q1 2025

Operator, Operator

Good morning, and welcome to Cracker Barrel's First Quarter Fiscal 2025 Conference Call. All participants will be in a listen only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Adam Hanan, Director of Investor Relations. Please go ahead.

Adam Hanan, Director of Investor Relations

Thank you. Good morning, and welcome to Cracker Barrel's first quarter fiscal 2025 conference call and webcast. This morning, we issued a press release announcing our first quarter results. In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the first quarter ended November 1, 2024. Please refer to the footnotes in our press release for further details about these metrics. The Company believes these measures provide investors with an enhanced understanding of the Company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last page of the press release includes reconciliations from the non-GAAP information to the GAAP financials. On the call with me this morning are Cracker Barrel's President and CEO, Julie Masino; and Senior Vice President and CFO, Craig Pommells. Julie and Craig will provide a review of the business, financials and outlook. We will then open up the call for questions. On this call, statements may be made by management of their beliefs and expectations regarding the Company's future operating results or expected future events. These are known as forward-looking statements, which involve risks and uncertainties that, in many cases, are beyond management's control and may cause actual results to differ materially from expectations. We caution our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of the press release and are described in detail in our reports that we file with or furnish to the SEC. Finally, 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, Julie Masino. Julie?

Julie Masino, President and CEO

Good morning, and thank you for joining us. We were very pleased with our Q1 results, which underscore the fact that our entire organization is aligned and executing against our three imperatives: driving market share, delivering food and experiences guests love, and growing profitability. Let's review some highlights from the quarter. We delivered positive comparable store sales for the second consecutive quarter, driven by improved traffic and strong average check growth. And we're proud that comparable store sales performance also outperformed the Black Box Casual Dining Industry by 290 basis points. Digging deeper, we continue to see improved traffic trends in the important dinner day part. In fact, we've delivered sequential improvements in dinner traffic over the past four quarters. New menu items such as the Hashbrown Casserole Shepherd's Pie and Pot Roast are resonating with guests. Our optimized pricing initiative is delivering strong flow-through. We're driving improved value perception scores and improved key operational metrics. Notably, hourly turnover improved by 17 percentage points. Cracker Barrel Rewards is delivering incremental sales and traffic. And finally, our four pilot remodel stores are collectively experiencing a sales and traffic lift, and we are encouraged by the early results in our first remodel market in Indianapolis. This progress is evidence of strong operational execution by our team. I want to remind you all that this is really the first quarter of executing the new plan after months of evaluation and planning. Given that fact, we are excited about the quarters and years ahead, and I want to assure you that we are intensely focused on profitable growth and long-term value creation. Our transformation plan consists of five pillars, as many of you know. One, refining the brand; two, enhancing the menu; three, evolving the store and guest experience; four, winning in digital and off-premise; and five, elevating the employee experience. We're making progress on all of them. But today my remarks will largely focus on pillar two, enhancing the menu; and pillar three, evolving the store and guest experience. Pillar two is enhancing the menu, which is all about making it more craveable for guests and easier to execute for our team. This pillar also includes optimizing our pricing while maintaining our strong value proposition. Our Q1 menu promotion featured a new Hashbrown Casserole Shepherd's Pie, which was wildly popular, as well as our new Fried Apple French Toast Bake. Our November menu promotion featured our seasonal guest favorite, Country Fried Turkey, and a new Cinnamon Roll French Toast Breakfast. And we are excited about the additional innovation that's in our pipeline. We remain focused on strengthening our value proposition through our barbell pricing strategy and continue to highlight exceptional value offerings such as our Sunrise Pancake Special for $7.99 and our Early Dinner deals starting at $8.99. In Q1, we augmented our daily dish menu by adding several new daily specials, such as our sweet tangy Southern Barbecue Ribs; creamy and savory Chicken and Rice; and our delicious Low Braised Pot Roast. The Pot Roast has been particularly successful, and as a result, we listened to our guests and have now made it available every day. And on the premium end of our barbell, our New York Strip offerings continue to resonate. We've been pleased with the performance of our new menu items. In fact, in some cases, such as the Shepherd's Pie and Pot Roast, they've been so popular with guests we've had to source additional product to meet the high demand. This menu innovation has contributed to the improvement in our traffic trends, particularly at the dinner day part. In fact, our Q1 dinner traffic improved over 600 basis points compared to the prior year quarter and 200 basis points compared to Q4. Dinner will be a key driver for our overall success and, although early, we're making progress. Another way we're enhancing our menu is through our back-of-house optimization initiative to drive efficiencies that improve profitability while making jobs easier and more enjoyable. This is a multiyear initiative that will be completed in several phases. The first phase is focused on process improvement. And one way we are doing this is through a just-in-time approach for certain items to more efficiently use labor, reduce waste and, importantly, improve product quality. We are encouraged by the results of the test in approximately 20 stores in Q1 and are expanding it to a full region in the coming weeks. In Q3, we plan to launch the first phase to the system. We're also enhancing our menu through our price optimization initiative. As we've discussed, our refined pricing methodology is based on criteria, including consumer willingness to pay, competitor pricing and store operating costs. We've been pleased with the results as we continue to see strong flow-through while simultaneously driving improved value scores. Turning to pillar three, evolving the guest experience, encompasses several things. First, operational execution; second, store design and atmosphere; and third, retail. With regard to operational execution, we continue to see progress across key operating metrics, such as guest satisfaction, hourly turnover, average server and grill cooks skill level, speed metrics and off-premise missing item rate. I want to give a shout-out to our teams for their tireless work and strong execution during Thanksgiving week. Your efforts created a great holiday experience for millions of guests and helped deliver an important week for the business. Store design and atmosphere are critical to the guest experience and to position us to win in the near and long term. And our remodel program is an important way we are addressing these. To reiterate an important point I've made previously, fiscal year '25 is a test-and-learn year for remodels. We are working to understand which remodel packages resonate the most with guests and drive the strongest returns. These learnings will inform our plans and spend in the subsequent years. We continue to see a collective lift in sales and traffic in the four pilot stores that were updated in fiscal year '24. So far in fiscal year '25, we've remodeled another 19 stores and completed 12 refreshes. This includes the 12 stores we updated as part of our first market test in Indianapolis, the majority of which are refreshes. We're also incorporating other new elements, including new menu items and a new employee dress code. We're encouraged by the early results, and later this week, we will be turning on local marketing to further raise awareness. For the full year, we continue to expect 25 to 30 remodels with approximately half of these being the low version. We also continue to expect 25 to 30 refreshes in '25. In retail, we're leaning into our seasonal themes. Our Harvest collection performed well, and we're encouraged by the performance of our Christmas themes and are looking forward to perennial favorite collections that are about to hit the floor. As we've discussed, our retail business, as well as the broader retail industry, has faced headwinds. However, it remains a huge differentiator for our brand, and we believe there is meaningful opportunity to unlock profitable growth. To achieve this, we've been conducting extensive research and are in the process of revamping our retail strategy. We're in the early stages and look forward to sharing more in the future. In closing, our fiscal year is off to a very good start. Our initiatives are gaining traction and we're focused on sustaining this momentum. Before turning it over to Craig, I want to thank our shareholders for their constructive engagement over the past few months and for their support for our strategic transformation plan. We are grateful for the trust they have placed in our directors and management, and we remain accountable and are confident we are on the right path to return Cracker Barrel to growth and meaningful value creation for all shareholders.

Craig Pommells, Senior Vice President and CFO

Thank you, Julie, and good morning, everyone. As Julie noted, we are gaining momentum, and while still early, are on track for delivering our three-year strategic transformation plan. In Q1, there are a few moving pieces that I will touch on. But overall, we are pleased with our underlying operational performance, and results were in line with our expectations. We reported total revenue of $845.1 million, which was up 2.6% from the prior year quarter. Restaurant revenues increased 3.4% to $683.3 million, and retail revenues decreased 0.8% to $161.8 million. Comparable store restaurant sales increased 2.9% over the prior year. Pricing was approximately 4.7%. Our quarterly pricing consisted of approximately 2.8% carryforward pricing from fiscal 2024 and 1.9% new pricing from fiscal 2025. Additionally, our Q1 sales results also benefited from a timing shift related to gift card breakage of approximately $6 million. This timing favorability, which also benefits EBITDA by the same amount, will mostly be offset in Q2. Off-premise sales were approximately 18.4% of restaurant sales. Comparable store retail sales decreased 1.6% compared to the first quarter of the prior year. Our decor and toys categories saw the largest declines, partially offset by increases in our kitchen food and bed and bath categories. Although retail sales were soft, we were pleased with how the team effectively managed inventory levels, which were below prior year. Moving on to our first quarter expenses. Total cost of goods sold in the quarter was 30.6% of total revenue, versus 31% in the prior quarter. Restaurant cost of goods sold in the first quarter was 26.1% of restaurant sales, versus 26.2% in the prior year quarter. This 10 basis point decrease was primarily driven by menu pricing. Commodity inflation was approximately 1.9%, driven principally by higher dairy, beef and pork prices, partially offset by lower poultry, oil and produce prices. First quarter retail cost of goods sold was 49.7% of retail sales, versus 50.4% in the prior year quarter. This 70 basis point decrease was primarily driven by higher vendor allowances and higher initial margin. Our inventories at quarter-end were $201.9 million, compared to $207.3 million in the prior year. With regard to labor costs, our first quarter labor and related expenses were 36.4% of revenue. Compared to the prior quarter, labor and related expenses decreased 60 basis points, primarily driven by menu pricing and improved productivity, partially offset by wage inflation of approximately 3% and an approximately $2 million increase in our workers' compensation expense reserves following an update of the actuarial assumptions used to calculate these reserves. Other operating expenses were 25% of revenue. Compared to the prior quarter, other operating expenses increased 30 basis points, primarily driven by higher depreciation and approximately $2 million increase in general liability expenses following an update of the actuarial assumptions used to calculate these reserves and approximately $1 million in expenses related to our District Manager Conference, which we held in person for the first time since the pandemic. Additionally, I want to note that total store operating expenses also include an approximately $1 million unfavorable impact related to the hurricanes. Adjusted general and administrative expenses in the first quarter were 6.3% of revenue. Compared to the prior quarter, adjusted G&A increased 90 basis points, primarily due to investments related to our strategic transformation, more normalized incentive compensation and approximately $3.3 million in legal settlement expenses. As a reminder, our adjusted G&A expenses exclude professional fees related to our strategic transformation initiatives and expenses related to our proxy contest. Before moving on and given the moving pieces, I want to provide a quick recap of the atypical items I called out, all of which are included in both our GAAP and adjusted results. On the expense side, there were four of these items that I mentioned. First, we increased our workers' compensation and general liability reserves by approximately $2 million each, for a total of $4 million. These increases flowed from changes to actuarial calculations associated with these reserves. Second, we recognized a charge to G&A of $3.3 million in connection with an advantageous settlement of a series of wage and hour arbitrations that occurred in early November. Third, we saw a $1 million expense impact from the hurricanes. And finally, we incurred approximately $1 million in expenses related to our District Managers Conference. These negatives were partially offset by $6 million in favorability resulting from a timing shift of gift card breakage, although this breakage favorability will be largely offset in Q2. I hope that provides some clarity around what we believe was a successful operational quarter. Moving on to net interest expense for the quarter, which was $5.8 million, compared to net interest expense of $4.9 million in the prior quarter. This increase was primarily the result of higher debt levels. Our GAAP income taxes were a $3.6 million credit flowing from GAAP earnings before taxes. Adjusted taxes were a $2 million credit. First quarter GAAP earnings per diluted share were $0.22 and adjusted earnings per diluted share were $0.45. In the first quarter, adjusted EBITDA was $45.8 million or 5.4% of total revenue, compared to $43.9 million or 5.3% of total revenue in the prior year quarter. Now turning to our balance sheet. We continue to have a strong balance sheet that provides flexibility and allows us to invest in the business to drive profitable growth and long-term value creation. In the first quarter, we invested $38.9 million in capital expenditures. We ended the quarter with $527 million in total debt. Lastly, as announced in today's press release, the Board declared a quarterly dividend of $0.25 per share, payable on February 12, 2025 to shareholders of record on January 17, 2025. Before providing our outlook, I want to comment on Q2. First, we were pleased with our Thanksgiving week results, which were in line with our expectations. This is an important week given the high volume, and I am so proud of how our teams executed to deliver against our plans. Second, as noted earlier, we expect a headwind in Q2 related to the timing shift of gift card breakage, as the $6 million EBITDA favorability we experienced in Q1 will largely be offset by unfavorability in Q2. Now turning to our fiscal 2025 outlook. I want to remind everyone that we view fiscal '25 as an investment year as many of our initiatives are in the early stages. And we anticipate our financial results will significantly improve by the second half of FY '26 and further accelerate into FY '27. For FY '25, we reaffirm our outlook and continue to expect the following: total revenue of $3.4 billion to $3.5 billion; pricing of approximately 5%; the opening of two new Cracker Barrel stores and three to four new Maple Street units; commodity inflation of 2% to 3%; and hourly restaurant wage inflation of 3% to 4%. As a reminder, we expect our adjusted G&A expenses will be elevated in fiscal '25, both in dollars and as a percent of sales, primarily due to investments related to our strategic transformation initiatives as well as a more normalized incentive compensation. However, we expect that G&A as a percent of sales will begin to normalize as our financial performance improves in the second half of FY '26 and into FY '27. Taking all of the above into account, we continue to anticipate full year adjusted EBITDA of approximately $200 million to $250 million. I want to remind everyone that this excludes consulting fees related to our strategic transformation, which we expect will be approximately $5 million to $10 million, as well as approximately $8 million in expenses related to our proxy contest. Regarding interest expense, based on current market conditions, we expect that we will refinance our $300 million convertible debt later this fiscal year. Given the current rate environment, we expect that the coupon rates on our new debt instrument will be meaningfully higher than our existing coupon rates of 0.625%, and as a result, we expect our interest expense will increase following this transaction. We expect a full year GAAP effective tax rate of negative 7% to negative 11% and an adjusted effective tax rate of 0% to negative 4%. We anticipate capital expenditures of $160 million to $180 million. In closing, our fiscal year is off to a good start, and our transformation plan remains on track. Our teams are executing at a high level, and we are focused on sustaining this momentum to deliver on our commitments. With that, I'll now turn the call over to the operator for questions.

Operator, Operator

Thank you. We will now begin the question-and-answer session. Our first question today will come from Dennis Geiger of UBS. Please go ahead.

Dennis Geiger, Analyst

I appreciate the detailed insights regarding Thanksgiving. Craig, could you share more about the current second quarter so far and whether you're experiencing a continuation of that momentum? I understand Thanksgiving plays a significant role, but any additional insights regarding the recent quarter would be helpful.

Craig Pommells, Senior Vice President and CFO

Dennis, thank you. Yes, Thanksgiving, as you know, is a very important week for us. We have our big heat-and-serve business that we do during the Thanksgiving week. Overall, we are pleased with the way that Q2 has gone so far. As a little bit of a reminder, if you think back to last year in our Q2 call then, we actually set a number of records for the Thanksgiving week last year. But as we reflected in that and did the diagnostics, a couple of things came out of that. Number one, the guest experience wasn't exactly where we wanted it to be. Number two, the employee experience wasn't where we wanted it to be either. And the flow-through, the profitability of all of that wasn't where we wanted it to be. So, on the one hand, we're doing a tremendous amount of work to drive the top line record, but we didn't think that was a sustainable approach for the business. So, the team did a lot of work there and made some significant changes that we have implemented this year. And we're really happy with how that's played out. In fact, this year, we had a bit more of an emphasis on the dine-in occasion, and we're really happy with that. So, all in all, a lot of moving pieces there, but we're happy with how it all came together.

Dennis Geiger, Analyst

That's great. I have one more question. Regarding the strong performance in the first quarter, it seems like there has been progress on several strategic initiatives, including dine-in. I’d like to focus on the loyalty aspect—can you provide any additional information on that? It appears that you're encouraged by the incremental sales and traffic. Can you share more about the frequency or other benefits you've observed from the loyalty program so far?

Julie Masino, President and CEO

Dennis, thanks for the question. We shared a lot about the loyalty program on the last call. So, I'll just remind that we're at over 6 million members. We are really pleased with the progress of the program. These guests are coming more often, they're spending more with us, and they have a higher check than nonmembers. What I will say is we continue to test and learn with this group and really think about how we use them to power the business going forward. And that's really exciting for us, and for them, because they really love Cracker Barrel. One of the big things that we learned in Q1 is their propensity to spend in retail, and we did some testing around that with some offers with salt and pepper shakers and discounts on retail and different things like that to really drive their occasion in their basket, all of which were incremental and exciting, and we were able to flow them all through. So more to come there, Dennis. Continues to be a bright spot in our journey, that pillar four, about winning with digital and loyalty, and all of those experiences continues to be a focus for us. So, thanks for asking the question.

Operator, Operator

Our next question today will come from Brian Mullan of Piper Sandler. Please go ahead.

Brian Mullan, Analyst

Just a question on your efficiency efforts and the back-of-the-house work. As you continue with your test and then deploy some of the system-wide in Q3, can you give some examples or some specifics around what areas of the P&L do you think will start to see some benefits as we get this deployed?

Craig Pommells, Senior Vice President and CFO

Brian, it's Craig. I'll start, then Julie can jump in. The initial stages are primarily going to be about our own labor. We expect that we will see improvements in labor productivity coming out of the kitchen. But we also expect, from a job satisfaction perspective, we expect it to be a better experience for our employees because it will be easier. So primarily labor, maybe a little bit of waste and then an improved employee experience. It's a part of a multiyear journey. So, we laid out the three-year plan, $50 million to $60 million in kind of structural cost savings. And this is kind of the very, very early stages of that. So much more to come over the three years.

Brian Mullan, Analyst

Okay. And then just a question on the retail business. I guess one, just talk about your outlook for the upcoming holiday season. Anything you could offer on the consumer in a realistic way to think about the top line there would be helpful just given how important the 2Q is from a seasonal perspective? And separate from that, the gross margins looked really good in the first quarter. I'm just wondering how we should be thinking about retail gross margins from a full-year perspective.

Julie Masino, President and CEO

Sure. I'll start and then Craig can jump in. Look, we're really pleased with how the team is managing the retail business. As you know, the industry is facing a lot of headwinds. It's a tough business out there. It's super discretionary; when people are feeling pinched in their wallet, this is really a place that they do cut back. But for us at Cracker Barrel, it's such a key differentiator. It makes our experience so wonderful. You could just start and finish your Cracker Barrel journey in the retail shop. So again, real pleased with how the team's managed inventory levels. You probably heard from Craig's prepared remarks that inventory levels are down, margins are up. We feel good about where we are right now. We did a new promotion in stores. You may have seen it. It kicked off on Black Friday. We're calling it Seasons of Savings. Runs for 10 days, so into next week, where we're highlighting great gifts at key price points. Now we always have our great gift assortment this time of year, but this is even a plus up on that. We're really getting behind it with some social marketing and things like that. So, you're probably seeing a little bit more of it. Early stats, it's resonating with guests. We're excited about it. It gives the associates something to talk about as well in store. So, we're feeling good about the holidays. Now remember, there's fewer shopping days as a result of leap year and the late Thanksgiving. But given our inventory position and margin position, we feel like we are poised to really take advantage of that. Plus, we get that extra weekend before Christmas. So, we think we are poised well to capture the last-minute shoppers. We know all you men wait until the last minute. So, we're here for you at Cracker Barrel.

Craig Pommells, Senior Vice President and CFO

That's right, Julie. We do always for the last-minute shopping, yes. As it relates to retail margins, we were a bit ahead in Q1. However, the environment from a brick-and-mortar retail perspective does remain challenged. So, we expect across the full year that retail margins will be a bit unfavorable. It's a little bit unfavorable across the full year.

Operator, Operator

Our next question will come from Jake Bartlett of Truist Securities. Please go ahead.

Jake Bartlett, Analyst

Great. I wanted to explore some of these unusual items to ensure I understand what's happening. Regarding the gift card breakage, I quickly reviewed the last two first quarters, and it was positive. It seems like this generally has a positive impact in the first quarter. Could you confirm that? The $6 million, does that factor in? My calculations suggest it's slightly less than 1% of same-store sales for the restaurant segment. I just want to ensure that gift card breakage is included in same-store sales. I also have some follow-up questions on this topic.

Craig Pommells, Senior Vice President and CFO

Let's begin with the gift card discussion. The reported same-store sales are not affected by the $6 million. Instead, the same-store sales are driven mainly by store-level activities. The $6 million gift card breakage benefit is accounted for at the corporate level. Therefore, when considering what's influencing the run rate for the stores, this is not a factor. However, it does impact the overall total company sales and is relevant for EBITDA in the quarter. As mentioned, this is largely a timing issue, as most of it will be offset in the second quarter.

Jake Bartlett, Analyst

Understood. That makes sense and is helpful. On another note, you mentioned approximately $9 million in unusual costs. It appears that none of these costs are being factored back into the adjusted results, so they're fully reflected in those results. Therefore, the overall effect is a negative impact on EBITDA. While there's a $6 million benefit from the gift card breakage, there's a $9 million headwind. Is that the correct way to interpret it? Am I right that none of that $9 million was actually...

Craig Pommells, Senior Vice President and CFO

The headwind amounts to approximately $9.3 million, which is factored into our normal operating costs in the adjusted EBITDA and included in both the adjusted and GAAP numbers. There is a partial offset of $6 million for the quarter, resulting in a net negative impact on EBITDA of about $3 million to $3.3 million, and we have taken all of these figures into account.

Jake Bartlett, Analyst

Got it. And just to kind of close the loop on these typical items, in the second quarter, the $6 million should reverse from the benefit side. But anything reversing out on the cost side? Are there any offsets to what looks to be a $6 million drag in the second quarter for EBITDA?

Craig Pommells, Senior Vice President and CFO

We are not aware of anything at this time, no. So, at this point, the $6 million will be a drag to Q2, and we don't expect any other partial offsets, certainly nothing from any of the items that we mentioned earlier.

Jake Bartlett, Analyst

Okay. So, net-net, you kept your EBITDA guidance, but there's a $3 million headwind that you hadn't expected in the first quarter.

Craig Pommells, Senior Vice President and CFO

Exactly right. I think that's the right takeaway from all of that. Appreciate it.

Jake Bartlett, Analyst

Great. I have a question about your remodel program. I'm a bit confused with some of the terminology. I reviewed last quarter's earnings call, where you mentioned three options labeled high, medium, and low, and then you introduced a fourth option called a refresh. It seems like you're treating refreshes differently from the four tiers of remodels. I want to clarify the distinction between a refresh and the four tiers of remodels you are testing. Additionally, can you share more about the relative performance of each? From the last call, it seemed like the refresh or lighter remodel was yielding good results, potentially leading to lower overall program costs. My question is whether this is indeed true, and if lighter investments are showing the most appealing returns.

Craig Pommells, Senior Vice President and CFO

Well, let me talk about the number of stores, because I agree that it can get a little confusing. The high, medium and low or the traditional kind of remodels, there are about two to three of those in the plan for this fiscal year. That's our current projection. The refresh are an incremental, over and above, 25 to 30. So, both the high, medium, low as a group are 25 to 30, and refresh are an incremental over and above 25 to 30. And then in terms of performance, I think the key takeaway here is '25 for us really is a test-and-learn year. And we've structured a lot of this investment to really understand the economics and the highest level of efficacy of the spend around the program. And we really are not biased to an answer one way or another. The facts are what's going to drive the decision now. No one wants to spend more if you don't have to spend more and so on. We're excited about the performance from the initial four, but that's only four. We have 25 to 30 of high, medium, low and incremental 25 to 30 for the infills. When it's all said and done, it will likely be a combination of those, and we're working through understanding the math to determine what the right combination is. And if it ends up being lower, then we'll lean lower. But if it ends up being higher, we'll lean higher. Really the math is going to have to drive, the return on the investments exceeding the appropriate hurdle rate set by the Board, is going to drive what the final answer is there.

Operator, Operator

Our next question will come from Andrew Wolf of CL King. Please go ahead.

Andrew Wolf, Analyst

I have a follow-up regarding the $6 million in breakage. If you exclude that from sales and incorporate it, would you arrive at a margin that is roughly flat year-over-year at the restaurant level? Also, were any of the $9.3 million costs that you mentioned, Craig, included in the restaurant-level expenses, or were they all classified under G&A? I'm trying to clarify...

Craig Pommells, Senior Vice President and CFO

With the exception of $3.3 million, all of it was at the restaurant level. So effectively, $3.3 million was in G&A and $6 million was at restaurant level. So, those two restaurant-level pieces simply offset each other.

Andrew Wolf, Analyst

I want to discuss the restaurants. Regarding the menu, you mentioned new items, limited-time offers, and an LTO that could potentially become a regular menu item. It seems to be going well with positive feedback from guests. Is this due to the Company taking more risks with new offerings, or is there an improvement in the innovation process leading to better items that resonate more with customers?

Julie Masino, President and CEO

That's a great question, Andrew. I would say it's probably a little bit of both, in all honesty. So, in this last year, when we were building the plan, we spent a lot of time talking to our guests, talking to our team members and really digging into what will help Cracker Barrel regain its leadership position, and what do people love about Cracker Barrel, right? People love our scratch-made, home-style cooking. And so, things like the Hashbrown Casserole Shepherd's Pie are so in our sweet spot. It's something that only Cracker Barrel could make, right? It builds on our signature Hashbrown Casserole, it introduces something that's comforting, that's really warming and lush as like the Shepherd's Pie and similarly with our Pot Roast as well. I'm sorry, do you hear that feedback? I want to make sure I'm clear.

Andrew Wolf, Analyst

Just for your last sentence.

Julie Masino, President and CEO

These items are unique to Cracker Barrel, and our guests are really enjoying them. As I mentioned earlier, we didn't initially plan for Pot Roast to be a daily menu item. However, it was so popular that we actually ran out of it. Our team members suggested that we should offer it daily, and I believe we could easily sell it every day if it were available. We pay close attention to both our guests and team members regarding this item. In response to your second question, I can tell you that our pipeline is quite full. Our culinary team, led by a new leader, is diligently working to identify signature Cracker Barrel items that truly resonate with our guests. As we seek to attract more people to our brand, we are also expanding our appeal, ensuring that our loyal customers continue to love us while welcoming new guests. We're committed to being a great dining option for breakfast, lunch, or dinner every day.

Andrew Wolf, Analyst

I was going to address that second part. Some of the innovation aims to encourage trial, while other aspects may focus on increasing repeat business.

Julie Masino, President and CEO

Yes. All of the above, right? And we've got innovation across the day part. As I mentioned on the prepared remarks, we brought back our Country Fried Turkey for Q2, and that's actually sold so well that we're out of that early again. So, we're really driving some business in these LTOs. But then we introduced a new item, the Cinnamon Swirl French Toast, which has also been a great item. So, it's a little bit of both, Andrew, honestly, as we really try to drive the business with people who love us, invite new people in, and really just return Cracker Barrel to strength.

Operator, Operator

Our next question will come from Todd Brooks of the Benchmark Company. Please go ahead.

Todd Brooks, Analyst

Quick question, Julie. You mentioned in your comments that you saw strong average check growth in the quarter. Can you share the magnitude of check growth with us?

Julie Masino, President and CEO

Yes. I actually am going to let Craig take that one because he loves talking about check, Todd.

Craig Pommells, Senior Vice President and CFO

Yes, I'll start, Todd. Overall, check was up 5.8 for the quarter, so 4.7 of that was from price, and then we have favorable mix of 1.1. And let me kind of unpack that a little bit. Keep in mind, we've been taking the strategic pricing effort. So, one concern there is, how does that flow through? Well, the good news is the strategic pricing is flowing through really well. We're seeing that across a number of metrics, and we're getting this favorable mix. The favorable mix in a lot of ways is coming from this effort around the dinner. It's one of the first things that Julie did when she started, if you kind of diagnose what's going on with the business, why is the traffic been down so much, and we actually performed relatively well, fairly well, at breakfast, but we had lost a lot of share at dinner. And so that was the first stream of work. We kicked off this really big test. And then we have rolled out a number of those components. One of the benefits there is we're seeing favorable mix just as dinner as a whole improves because it's a higher check, higher margin occasion, and a number of the items that we've added have been on kind of the higher end of the barbell. And so that's helped to drive some favorable check mix as well.

Todd Brooks, Analyst

That's encouraging to hear. Could you tell us what the value mix is regarding how many customers are utilizing Sunrise at $7.99 and Early Dine at $8.99 to visit Cracker Barrel?

Craig Pommells, Senior Vice President and CFO

It's interesting that we assess this, but our perspective is different because much of our menu offers great value overall. The check average at Cracker Barrel is about $15, while casual dining averages around $27. Many competitors have a more pronounced disparity in their pricing, often emphasizing discounts, but our menu consistently provides a good price, making those metrics less relevant. I can say that our early line continues to grow. It has stabilized recently but has increased significantly over the quarters. The Sunrise item, although a breakfast offering, is available all day. Overall, we're very pleased, and we aren't seeing any significant negative impacts from the changes we've made regarding the check.

Julie Masino, President and CEO

I would like to emphasize two points regarding value. First, while price is certainly important, our guests have indicated that the absolute price is not their top priority. They truly value the abundance of our home-cooked food. This focus on generous portions is reflected in how well our Pot Roast and Hashbrown Casserole Shepherd's Pie are received. I encourage everyone on this call to try to finish an entire Hashbrown Casserole Shepherd's Pie—it's huge. Customers appreciate this and often take home leftovers for their next meal. For us, value encompasses both price and abundance. Secondly, we offer value through our loyalty program as well. As we bring in new members and increase traffic through this initiative, it enhances how we deliver value. At Cracker Barrel, we provide value in multiple ways. While Craig's point about our average check is important, we should also consider abundance and loyalty, which show our commitment to serving our guests effectively.

Todd Brooks, Analyst

Those are all very germane points. And I probably should have asked the question this way, it might be the way that you guys really do look at this. You talked about value scores improving with your customers. Would you share with us how much value scores have improved year-over-year? That might be the holistic way to look at all these efforts together.

Craig Pommells, Senior Vice President and CFO

Let us take that as a follow-up, Todd, because we've changed our value metric over the past year, but we're not ready to share the exact amount externally just yet. We use our Google Ratings to assess overall guest satisfaction, including value. We also have a great internal tool that sees a lot of participation, and we've noticed improvements in value scores as well. However, we haven’t disclosed that information publicly yet. We want to ensure we present it in a more comprehensive manner.

Operator, Operator

Our next question will come from Katherine Griffin of Bank of America. Please go ahead.

Katherine Griffin, Analyst

First, I wanted to ask about the quarter trends, in the first quarter, the outperformance versus the casual dining industry. Did you see that cost in each month of the quarter? And then were there any call outs as far as maybe where outperformance was strong by region? Or was it also consistent?

Craig Pommells, Senior Vice President and CFO

Katherine, I'll start. From a regional perspective, relatively steady. We were a bit stronger in kind of the Northeast, Midwest, and a bit softer in Texas. But other than that, relatively steady. In terms of trends, you did see general improving trends in the industry over the past quarter or so. Our performance got a little bit better from August, but September, October was relatively steady between the two. So, nothing dramatic there. What we are seeing is kind of a gradual, steady improving trend over time, particularly at dinner. And we're very pleased with that.

Katherine Griffin, Analyst

Okay. That's helpful. And then I wanted to ask, I guess, a follow-up to an earlier question just about the different, I guess, tiers of remodel and then refreshes. As you're a few months into the strategic turnaround, I'm curious if there are initiatives that are resonating better than you had expected or maybe better than others. And has that changed at all the way that you're thinking about the timing of or how you're allocating the investments into the turnaround?

Julie Masino, President and CEO

Thank you, Katherine. This marks our first quarter reporting on the transformation plan, which we discussed with our shareholders during previous proxy meetings. It's an exciting time, although still early in the process. We have made significant progress on several initiatives across the five pillars and the enabling strategies. We are particularly proud that some initiatives have transitioned from the transformation phase to becoming part of our regular operations. For example, the changes made to our Thanksgiving strategy and our overall catering business are now integrated into our day-to-day operations, as is our pricing strategy. These aspects are now ongoing practices rather than part of a transformation initiative. Loyalty is another area where we continue to embed it into our business model, focusing on driving traffic and enhancing guest interactions and value. While it's still early in this journey, we are excited about the progress we've made. Regarding your question on remodels, we are pleased with our current status. I understand the desire for specifics on the number of high, medium, and low remodels, but we want to be prudent with our investments. It's essential for us to understand both guest reactions to the remodels in terms of traffic and the experiences of our team members. This year is primarily about learning, and we are looking forward to that. It’s still early, Katherine, but we are seeing promising results.

Operator, Operator

This concludes our question-and-answer session. I'd like to turn the conference back over to Julie Masino for any closing remarks.

Julie Masino, President and CEO

Thank you all for joining us today. Before closing, I want to take this opportunity to wish everyone a happy holiday season and express my sincere appreciation to our 70,000-plus team members for their hard work and dedication day in and day out, particularly in these last few weeks over the Thanksgiving holiday. Your efforts and hard work are paying off and have supported a good start to our fiscal year. We look forward to providing updates on our progress on our next call. Thank you, and happy holidays.

Operator, Operator

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