Cracker Barrel (CBRL) Q3 2025 Earnings Transcript

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ETCALL PARTICIPANTSPresident and Chief Executive Officer — Julie MasinoSenior Vice President and Chief Financial Officer — Craig PommellsDirector, Investor Relations — Adam HananNeed a quote from one of our analysts. [ tected] RISKSCraig Pommells stated, "We anticipate the net tariff impact on Q4 EBITDA will be apximately $5 million. " explicitly identifying tariffs as a near-term earnings headwind

AI Integration: Management cited mid-single-digit lift in average revenue per loyalty member from AI-driven personalization tests

SUMMARYManagement reported that the Campfire motion drove a strong start to Q4 FY2025 but did not disclose a specific figure for comparable sales trends

Store remodels and refreshed retail strategies were highlighted as test-and-learn initiatives, with results and future plans to be detailed in September

Pommells said, "our G&A level in Q4 will more closely resemble the G&A level that we had in Q1 and Q2. " implying less discretionary expense tightening after short-term Q3 controls

Masino explained that direct and indirect sourcing from China exposes apximately one-third of retail ducts to tariffs, and noted mitigation via vendor negotiations, SKU rationalization, and pricing adjustments to address tariff impacts

Masino emphasized, "we've dered four consecutive quarters of positive comparable store restaurant sales growth. " indicating sustained momentum despite macroeconomic headwinds

INDUSTRY GLOSSARYDelayed Draw Term Loan (DDTL): A credit facility permitting the borrower to draw funds as needed, subject to specified conditions, viding flexibility for refinancing or capital needs

Barbell Pricing Strategy: An apach mixing high-value premium offerings and accessible lower-priced items to appeal to a broad customer base and optimize margin mix

Campfire Meals: Cracker Barrel’s prietary foil-wrapped signature entrée line, cited as a significant motional driver

Full Conference Call TranscriptAdam Hanan: Thank you

This morning, we issued a press release announcing our third quarter results

Please refer to the footnotes in our press release for further details these metrics

The company believes these measures vide investors with an enhanced understanding of the company's financial performance

This information is not int to be considered in isolation or as a substitute for net income or earnings per information prepared in accordance with GAAP

Last pages of the press release include reconciliations from the non-GAAP information to the GAAP financial measures

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 vide a review of the, 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 d on this call is valid as of today's date

And the company undertakes no obligation to 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 Masino: Good morning, and thank you for joining us

We were pleased with our third quarter performance which included positive comparable store restaurant sales for the fourth consecutive quarter and adjusted EBITDA that exceeded our expectations

These results further underscore that our transformation plan is working

I'll do a quick recap of some Q3 highlights and then speak to the exciting ways our plan is coming together in Q4

As these initiatives exemplify how we're evolving the brand by leaning into what makes Cracker Barrel great and doing so in a refined way appeals to both existing and new guests a

We're excited our gress, and our teams are energized

Looking back at Q3, the quarter started soft

So we took actions to support the top line and tightly manage our expenses without limiting our ability to der our important fourth quarter initiatives

I'm ud of how the team responded to these challenges

Their agility, discipline, and strong ability to manage the helped der a solid quarter

From a culinary perspective, our spring motion two shrimp dishes

A bold Louisiana-style shrimp skillet and a comforting shrimp and grits skillet

We also expanded our pancake platform by introducing innovative new flavors and options across various price points as part of our broader barbell strategy

From an operational perspective, we remain focused on strong execution and the metrics that matter

For example, compared to the prior year quarter, hourly turnover imved by apximately 14 percentage points and our internal net sentiment scores increased 2

During the quarter, we implemented phase one of our back house optimization initiative to the full system

As a reminder, this phase is focused on cess simplification to imve quality and fitability while also making jobs easier and more enjoyable

We've been pleased with the results, and employee back has also been very positive as team members find the new cesses easier to execute

There's a lot going on that we are excited

Our Q4 work demonstrates the complementary nature of our strategic pillars and vides compelling examples of how we're bringing our strategy to life

A big focus in recent months has been our brand refinement work, which will continue to gather steam in Q4 before officially launching in August

Brand refinement means evolving our brand across all touchpoints and creating deeper, more meaningful engagement with our guests

In addition to the d look and feel that we've been incorporating into our advertising, we are showing up authentically in places where our existing and new guests are

The NASCAR race we sponsored this past Sunday just down the road from our office

There's strong overlap with Cracker Barrel guests and NASCAR fans, and our brands have much in common

Both are highly experiential and put country hospitality in people at the heart of everything we do

It marks the launch of a key partnership and throughout the summer, NASCAR fans can expect activations at Speedway Motorsports destinations across the country

But it is also a piece of our overall strategy and integrated marketing campaign to mote the much-anticipated return of Campfire Meals

We heard loud and from both guests and employees that they deeply missed these unique and delicious foil-wrapped meals that are packed with hearty teins, seasoned vegetables, and a rich broth

We've elevated the flavors, imved the quality, and made them easier for the kitchen to execute

To support Campfire, we've invested in advertising

And our integrated marketing campaign also reflects our brand refinements including a refreshed look and feel that showcases the quality and appeal of our delicious food

We're also evolving how we show up in social media and are working with creators to tap into conversations as part of our efforts to connect authentically with our guests

Cracker Barrel Rewards is another way we're deepening our engagement with guests and driving frequency

To jumpstart the Campfire motion and reward our loyalty members, we gave them early access to our new decadent S'mores Brownie Skillet and will continue to give early access to vide value to our members

And over one-third of tracked sales are now associated with loyalty members

Cracker Barrel Rewards continues to der incremental sales and traffic

And looking ahead, we're focused on enhancing our personalization capabilities to further drive incrementality

As a part of this, we've been testing advanced personalization for Cracker Barrel Rewards using an AI-driven learning model

We are encouraged by the results, as it's driven a mid-single-digit lift in average revenue per member compared to control

We're also using AI in other ways as part of our broader efforts to imve efficiency and effectiveness by leveraging nology

Our traffic forecasting utilizes machine learning, which has imved accuracy at the store level and enhanced our ability to manage labor

Our entry for guest relations, or kind of how we triage inbounds, is powered by AI, which speeds up time to resolution and more quickly puts guests in touch with a representative

And finally, we're using machine learning to bolster our cybersecurity

These are just a few examples, and we continue to evaluate opportunities to incorporate AI-based nology into our toolkit to positively impact the

Before turning it over to Craig, I'd to on the tariff situation

For context, apximately one-third of our retail ducts are sourced directly from vendors in China

In addition to this direct exposure, we also have indirect exposure related to duct that we purchased through domestic vendors that is also sourced from China

Our apach to mitigate the tariff impacts includes first, aggressively negotiating with vendors, second, alternate sourcing, and third, pricing

As we have mentioned, we have been in the cess of updating our retail strategy and we are also accelerating initiatives from this such as rationalizing SKUs, reducing the number of seasonal themes, adjusting our seasonal motional strategy, All of these will also help mitigate the impact of tariffs

I want to wrap up my prepared remarks with a few

First, we acknowledge that there's a lot going on in the macroeconomic environment but our teams are keenly focused on executing the today and transforming for the future

Second, we're leaning into what guests love Cracker Barrel, and we're evolving to drive our forward

Our Q4 initiatives are a great example of this

And there's much more to come

Third, guests are choosing us

And we've dered four consecutive quarters of positive comparable store restaurant sales growth

Because of this momentum, we were able again to raise our guidance and Q4 is off to a strong start

Finally, as a reminder, all of this work is anchored on our three imperatives of driving relevancy, which is market, dering food and experiences guests love, and growing fitability

We remain confident in our plan and our ability to execute

And achieving these imperatives will drive significant long-term value creation

I'll now turn it over to Crai.