Image source: The Motley Fool. DATEThursday, June 5, 2025 at 11 a.
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.
Total cost of goods sold rose to 30. 1% of revenue in Q3 FY2025, up from 30% in the prior year quarter, due to unfavorable mix and commodity inflation, partially offset by pricing.
Comparable store retail sales declined 3. 8% in Q3 FY2025, indicating continued consumer softness in the retail segment. TAKEAWAYSTotal Revenue: $821.
1 million in total revenue for Q3 FY2025 Restaurant Revenue: $679. 3 million in restaurant revenue for Q3 FY2025, a 1. 2% increase in restaurant revenue, while Retail Revenue: $141.
8 million in retail revenue for Q3 FY2025, a 2. 7% decrease in retail revenue.
Comparable Store Restaurant Sales: 1% growth in comparable store restaurant sales, with Comparable Store Retail Sales: Comparable store retail sales decreased 3. Pricing: 4.
9% pricing in Q3 FY2025, comprised of 1. 5% carryforward pricing from FY2024 and 3. 4% new pricing actions. Average Check Growth: 6. 6%, attributed to 4. 9% pricing and 1. Off-Premise Sales: 19.
1% of restaurant sales versus 18. 9% in the prior year. Commodity Inflation: 2. 9%, mainly higher beef, egg, and pork prices, partially offset by duce and poultry declines.
Restaurant Cost of Goods Sold: 26. 2% of restaurant sales, a 30 basis point increase compared to the prior year quarter, with Retail Cost of Goods Sold: 48.
9% of retail sales, a 10 basis point decline compared to the prior year quarterLabor and Related Expenses: 37.
1% of revenue, a 70 basis point imvement compared to the prior year quarter due to pricing and ductivity, offset by 1. 9% wage inflation. Adjusted EBITDA: Adjusted EBITDA was $48. 1 million, or 5.
9% of revenue, nearly flat to the prior year (adjusted EBITDA $47. 9 million, 5. 9% for Q3 FY2024). GAAP EPS: $0. Adjusted EPS: $0. 58 adjusted earnings per diluted. Q3 Capital Expenditures: $36.
6 million in capital expenditures; Quarter-End Inventories: $168. 7 million, down from $175. 3 million in the prior year. Total Debt: $489.
4 million at the end of Q3 FY2025, with debt capacity increasing to $800 million via new revolver and delayed draw term loan (DDTL). Dividend Declaration: $0.
25 per quarterly dividend, payable August 13, 2025, to holders as of July 18, 2025.
Cracker Barrel Rewards gram: Surpassed 8 million members; Over one-third of tracked sales are now attributed to loyalty members.
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.
Restaurant operating margins benefited from earlier labor initiatives, including the rollout of phase one back-of-house optimization, with further savings anticipated in Q4 FY2025 and into 2026.
Strategic pricing actions and a positive duct mix, particularly for premium items, continued to support sales and fitability in Q3 FY2025 despite traffic challenges.
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.
Back-of-house cost savings are included in a broader $50 million–$60 million transformation target, with further benefits expected from future cess and equipment phases.
Guidance for FY2025 was raised for adjusted EBITDA to $215 million–$225 million, incorporating the $5 million adjusted EBITDA impact from tariffs, while sales expectations remained at $3.
45 billion–$3. 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.
Good morning, and welcome to Cracker Barrel's Third Quarter Fiscal 2025 Conference Call and Webcast. This morning, we issued a press release announcing our third quarter results.
In this press release and on this call, we will refer to non-GAAP financial measures such as adjusted EBITDA for the third quarter May 2, 2025.
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. Let's talk Q4.
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.
An example of this is our partnership with Speedway Motorsports and the success of the Cracker Barrel 400. 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. The 400 is more than a race.
It marks the launch of a key partnership and throughout the summer, NASCAR fans can expect activations at Speedway Motorsports destinations across the country.
The Cracker Barrel 400 was a big moment in and of itself. 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 brought them back for the first time since 2018 and made them even better. We've elevated the flavors, imved the quality, and made them easier for the kitchen to execute.
In addition to the returning favorites of beef and chicken, we've added a new shrimp and andouille sausage offering starting at the great value price point of $10.
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.
We recently achieved our fiscal 2025 year target of acquiring 8 million 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.
The situation remains dynamic, we intend to vide more specifics in September when we report Q4 earnings and our fiscal year 2026 guidance, at which time we expect to have a higher degree of certainty on the net impacts related to tariffs and the timing of our mitigation efforts.
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.