Cracker Barrel Old Country Store, Inc. (CBRL) Earnings Call Transcript & Summary

We're going to go ahead and get started. Welcome, everybody. I'm Anton Nicholas, managing partner at ICR, not particularly important, other than it affords me the opportunity to have really interesting conversations with companies, including today's discussion with Cracker Barrel. I'm not a lawyer, but I play 1 at night, and so I need to draw everyone's attention to this and make sure you read that separately. So I'm joined today by Julie Masino and Craig Pommells. Julie is President and CEO, been there just over a year now. She's got 30 years of experience in the restaurant and management space, companies like she was President of North America and then international at Taco Bell. She spent more than a decade at Starbucks. And Craig is CFO at Cracker Barrel. 20 years experience in the industry, 15 years with Darden in particular. So welcome, Julie. Welcome, Craig.

Thanks, Anton. Great to be here.

Glad to be here.

So a lot going on for you guys and we haven't seen you here at this conference in a while. So it's terrific to have you. I think it's a great place to start Julie just starting with what makes Cracker Barrel different? You joined just over a year ago. What drew you to this opportunity?

Yes. It is exciting to be here. So thanks for joining us this morning. Craig and I love talking about Cracker Barrel, so we'll get you started. Well, maybe you've been going already. But look, Cracker Barrel is an amazing brand. It has such a special place in people's hearts. When I was evaluating the opportunity and talking to people. What came back time and time and time again was just this emotional connection and that everybody has a Cracker Barrel origin story, whether they stopped by Cracker Barrel on their way to their grandmas years ago, after Christmas or holidays or whether they were on traveling soccer, like everybody has a connection and a story and they're always very emotional and heartfelt. So some place to be. So let me tell you a little bit about where we find ourselves today. So you can read the numbers on this next slide, but Cracker Barrel is actually a really big business. We're in 44 states, almost 660 restaurants. Some of the things you may not know or may not remember that we actually work across 3 dayparts. So we've got breakfast, lunch and dinner, which makes us really unique in the casual dining and family dining space. The thing that really probably differentiates us the most is that we actually have this big retail business. It's an almost $700 million retail business. If you may remember, if you haven't been in a Cracker Barrel in a while, you exit and enter through our retail business, which is really fun and a key differentiator for us. Last thing I'd probably mention is we are an outstanding value. When you think about the casual dining check that's out there today, it's a little over $26. Our average check is $1,405. So people know and love us for our abundance of our scratch-made high-quality food but also for a great, great value. And we're about 70,000 people strong. So it's an exciting business.

But to your point, it's amazing because I think certainly myself, but generally, people forget how big a business you guys are in this slide incredibly impressive that way. You guys made a big announcement this past year, and you've had a lot of changes going on. We're going to talk about that. But before we get there, foundation of any good company is the management team and you talk about your team and also some of the additions that you've added.

Sure. What a joy and pleasure it is to work with this team every single day. What you'll see is it's a mixture of industry veterans, some people that you may know, many of you may have worked with or heard from in the past and some new faces to the industry, and I love that because I think it helps us raise the bar every single day. We work really well together, really thinking about how we serve our 70,000 team members out there, but importantly, over 200 million guests who visit us every single year and how we're going to create long-term shareholder value together. It's a great team.

Awesome. That's great. And you've recently added a couple of important positions as you guys go through this transformation. Do you want to talk about Sarah and Chris a little bit?

I can do. So Chris joins us from really a consulting background. He's our new Head of Strategy, spent plenty of years at BCG and then led strategy at Constellation Brands, who many of you may know of some of their brands like Corona, Modelo, things like that. Excited to have him here really helping us lead the transformation. And then Sarah is here in the audience today, if you get a chance to say hi to her. We're super pumped to have her. She's been about 5 months on the job, 20 years of hospitality brand, digital marketing, loyalty marketing experience. So really excited about how she's helping us tell our stories and really focus how we communicate with our guests across all of our channels as well as drive this business. So super excited about this.

Yes. And both great examples of that broader industry experience that is really pushing you guys. So -- all right. Good. Let's get into the meat of the conversation.

Let's do it.

So transformation announced this year, revamping the strategy, give us an overview for those that may not be familiar with what you guys are doing?

Yes. Many of you have been along this journey with us. We announced this strategy back in May. We spent about 8 months putting it together, lots of research, talking to our guests, talking to our team members, talking to people who don't use the brand, looking at our competitors, seeing how people win, seeing how people have won and lost in their own transformations, really doing a lot of deep research to build the plan for Cracker Barrel. I'll tell you, it really starts with the 3 imperatives. Craig and I talked about these all the time. When you see driving relevancy, that's market share. That's making sure people choose us, that we are a relevant top of mind and really driving that every day. So really linked to food and experiences that guests love because that's what we do. So making sure that you love Cracker Barrel. And when you come in, it's great so you'll come back. And those together are linked to really growing our profitability. That is -- those are the 3 imperatives that underpin this plan. Next kind of tranche down, you'll see the 5 key pillars. These are the 5 areas of focus, and we have work streams under each of these that really drive these because combine these together is really how we'll achieve the transformation of Cracker Barrel. So it's not just 1 thing. There is -- many of you know, there is no silver bullet in this industry, right? You've got to bring a lot of things together to really create those great experiences. So we've got refining the brand. It's about how we show up, how we communicate with people. Two is a really big one, and Craig and I talk about this 1 a lot. It says enhance the menu, so it's about menu innovation, but it's really also about how we price things on the menu. We've got a really amazing strategic pricing initiative that we love talking about. And then finally, we've got some back-of-house optimization. So how do we make the handcrafted nature of making our food easier? How do we make it more enjoyable, how do we make those jobs easier to learn and do, that's all under that pillar. The third pillar is about making sure that the experience is great. So this is how do we show up executing well every single day, so operational executions in there. The true physicality of the store and the experience is under this pillar. And then finally, our retail business sits under this pillar. So that has -- they are all meaty. There's a lot going on. I always say we're busy. Fourth pillar is digital and off-premise. We've talked about this 1 a lot. Our loyalty program sits here as well as executing really well. 20% of our business is take away, right, or to go, so making sure that we do that really, really well. And then finally and maybe most importantly, making sure that Cracker Barrel is a place people want to work. As I mentioned, we're 70,000 people strong. They've got to love their jobs. We've got to keep and hire great talent, make it easy for them to be successful and to deliver that country hospitality that we're known for. So those are the 5 pillars. Those are underpinned by making sure that we're agile, that we're testing and learning our way through it, that we're really optimizing our margin. We've got to be more profitable, and we're really focused on that. Tech modernization and then transformation. So thinking differently, working differently, transforming the way that we work as a company. So we're busy.

I guess so. So I mean there's a lot going on there. And you've talked pretty extensively in the marketplace about what you guys are doing. Maybe the best way to contextualizing for people is I know things are happening at different time lines in different stages, but maybe we just talk about some of the green shoots you're seeing so far because you are seeing quite a bit of progress here.

I think this is the part that Craig and I get most excited to talk about because while it is very, very early days of this transformation, remember, in May, we laid out a 3-year road map, which is kind of that last slide I showed you. We've only reported 1 quarter against it. So that was our Q1 of the year that we're in right now. But gosh, we are so proud and so excited by the progress that we're making against this transformation journey. And that was really what we talked about in our Q1 earnings. And a lot of what you see here today. I won't read through all of these and we'll talk more about them in the breakout as well. But when you start with refining the brand, Sarah and the team have been so hard at work. I'll leave you, for those of you who kind of stick around until the end, we've got a little precursor of what's to come in this pillar because a lot of people ask us about this, so stick around at the end. But lots of work happening there. Things like actually mapping the customer journey that had never been done at Cracker Barrel. So really going in and a lot of these are using data as well as our instincts, learning from what we are great at, building upon that and really taking that into the future. So lots of good stuff on that one. Enhancing the menu, I love talking about this 1 and some amazing new shoots here. We've really accelerated menu innovation. We've got a new test that we just stood up in Texas in December, 20 more new items. Some of you got to taste a few of them last night. I'll talk about it in a minute. We've strengthened our value proposition. We've got early dine, we've got Sunrise Pancake special. We've got optimized pricing that is flowing and really fueling a lot of what we're doing here, really proud of that and then really improving our dinner business. This is an anchor for us and really a place that we've been losing a lot of market share, and we're really focused on driving that. Store and guest experience, I'll just start with the first one. We've talked a lot about this, the metrics that matter, really great improvement on our speed, retention metrics, accuracy for take home, really great progress, huge shot out to our ops team and all that they're doing there every day to show up well. Digital, we've got over 6 million people in our loyalty program. We're using that data to get smarter, to really figure out what they want from us and how to use that to really create experiences that they'll love so they come back more often. Finally, under employee experience, this is 1 of my favorite moments from our Q1 earnings. Our hourly turnover has improved by 17 points versus Q1 of prior year. That's incredible. So we are making progress in making this a place people want to be and really delivering that hospitality that we're known for. So I did talk about this all day, but I want -- Craig got some stuff to talk about too.

Before we get there, I just want to focus on something I care about, which is the food, right. So let's talk about the menu innovation. I mean, while staying true to yourselves, I think you guys have been doing a ton there that has been perhaps even more than traditionally for you. Talk about some of the new offerings and how they're doing.