Earnings Call: Q4 2019

Sep 17, 2019

Good day, and welcome to the Cracker Barrel Fiscal 2019 4th Quarter Earnings Conference Call. After today's presentation, there will be an opportunity Please note that this event is being recorded. I would now like to turn the conference over to Adam Hannon. Please go ahead, sir. Thank you, and good morning, and welcome to Cracker Barrel's fourth quarter fiscal 2019 conference call and webcast. This morning, we issued a press release announcing our 4th quarter results and our outlook for the 2020 fiscal year. This press release and on this call we will refer to non GAAP financial measures for fiscal 2018 adjusted to exclude the impact of the 53rd week that occurred in our fourth quarter and a one time non cash revaluation of the company's net deferred tax liability that occurred in our 2nd quarter. The company believes that excluding these tax effects from its financial results provides information that may be more indicative of the company's ongoing operating performance while improving comparability to prior periods. This information is the last page of the press release includes a reconciliation from the non GAAP information to the GAAP financials. The call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran Senior Vice President and CFO, Jill Golder and Vice President and Principal Accounting Officer, Jeff Wilson. Sandy will begin with a review of the business and Jill will review the financials and outlook. We will then open up the call for questions for Sandy, Jill, and Jeff. On this call, statements may be made by management of their beliefs and expectations regarding 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 or summarize in the cautionary description of risks and uncertainties found at the end of the press release are described in detail in our reports that we file with or furnished 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, Sandy Cochran. Sandy? Thank you, Adam and good morning. This week marks Cracker Barrel's 50th anniversary and we're pleased to celebrate this milestone by sharing some highlights from our As you can see from today's press release, we had a strong 4th quarter as we achieved positive comparable store restaurant sales and traffic growth significantly outperformed the casual dining industry $2.70. I'm pleased with the progress we made in fiscal 2019 as we drove performance an increased focus on our menu, the employee experience and the continued expansion of our off premise business. I believe our performance this year also reflects and of our ability industry for over adjusted EPS in the prior Jill will discuss the financial results from the fourth quarter and our expectations for fiscal 2020, and I'll speak to you about our business priorities for Our 4th quarter menu promotion featured Southern Fried Chicken, which is a reminder, is the initial offering of signature fried chicken platform. This offering includes a generous portion of four pieces of ham breaded bone in chicken with honey for drizzling, two sides and a choice of homemade biscuits or cornbread. The promotion also featured summer sides, which included corn and the cob, bacon baked beans, and banana pudding for dessert. This promotion was supported by 12 weeks of national TV with the ad emphasizing the handmade preparation and abundance of the offering. Additionally, a significant portion of our billboards featured fried chicken messaging, I was very pleased with We continue to be key feature of our menu and we're looking forward to further leveraging Moving to off premise, we again saw solid growth in this business. It was a meaningful contributor to the top line results for the quarter. In the fourth quarter, we expanded our 3rd party delivery coverage. This service was available in over 450 stores at the end of the fiscal year. And in conjunction with our Southern Fried Chicken menu promotion, we also featured a family size offering. Available for both in store pickup For the full year off premise accounted for 9% of sales, an increase of 150 basis points over the prior year and we believe we're on track to achieve our target of growing it to 10% of sales by fiscal 2020. I was pleased with across most of our merchandise categories, kitchen, dining and home decor performing particularly well. Additionally, we once again grew our gross margin rate for the quarter. I think our retail teams did a great job this year in navigating through an ongoing challenging industry to deliver full year growth in both comparable retail sales and gross margin rate. In the fourth quarter, we remain focused on our employee and guest experience, and we continue to implement several initiatives in our efforts to drive Improving the employee and guest experience was a priority in fiscal 2019, and I'm proud of the efforts of our field leadership teams and store employees especially our par fours. While we still have work to do, I believe we took meaningful steps this year that will help us achieve targeted improvements in the coming year. In fiscal 2020, we will continue to leverage our long term roadmap enhance the core, expand the footprint and extend the brand. We believe has helped drive our success and will continue to drive perform amid challenged industry traffic and inflationary headwinds. As we enhanced the core, we will continue to accelerate and invest in growth drivers such as off premise. From a menu perspective, we plan to drive top line growth by introducing craveable signature food and evolving our menu to strengthen our dinner daypart. We're also focused on further enhancing the employee and guest experience and ensuring that we continue to deliver on our brand promise pleasing people. And in retail, our teams are focused on driving growth by providing unique product and driving conversion of dine in and off premise guests to retail We will expand our We've been pleased with the guest response in California and we continue to work on adjusting our operating procedures to improve profitability long term value creation through other growth drivers such as punchful social. We're very excited about this strategic relationship and we believe our investment is yet another way we can drive shareholder returns. We continue to work on the Holler and Dash business model and we believe there is great opportunity in the breakfast and lunch focus Fash Casual segment. Now I want to speak to some of the highlights of our fiscal 2020 business plans and priorities. Features are homestyle chicken. This popular offering of two pieces of boneless chicken breast was previously only available on Sundays, but we are now making it available every day as part of our signature fried chicken platform. Additionally, we introduced a new Homestyle Chicken BLT that is also a part of the promotion and features our homestyle chicken with a maple glaze topped with bacon, sweet and smoky mayo, lettuce, and tomato on a bun. The menu promotion is being supported by national TV with the ad continuing our strategy of more explicitly highlighting our food and value. As we look to build on recent menu successes such as the rollout of our Signature Fried Chicken platform. 1 of our culinary initiatives in fiscal 2020 is the evolution of our menu. Dinner has been our most challenged daypart. And while the planned enhancements impact both lunch and dinner, This initiative is targeted at strengthening while also simplifying our menu better highlights our abundance, value, and variety. Support the successful incorporation of the Enhance menu into our daily operations. I'm excited about this initiative and we plan to have this test in a substantial portion of our stores in the second half of the fiscal year. Our next priority is to accelerate off premise growth through further expansion of 3rd party delivery and improving off premise customer journey. We've been pleased stores by the end of the fiscal year. Key focus in fiscal 2020 is improving the off premise customer journey to sure we're executing at a high level as we see continued growth in this business and that we're consistently delivering on guest expectations. To this, we have several initiatives planned that are designed to strengthen our execution and create a better, more seamless guest experience. The heightened focus on our employee and guest experience will remain a priority in fiscal 2020. We will continue to leverage our par fours who are in and our organization is keenly focused on consistently delivering high levels of hospitality and service which we believe is both a key part our teams remain diligent in their commitment to improving retail sales through unique product offerings and by converting both dine in and off premise guests to a retail purchase. We plan to improve our conversion rates through a number of tactics such as developing floor sets that quickly capture guest attention and by providing additional merchandise offerings that are easy to grab and often priced around the $5 mark. Additionally, we'll continue to support sales growth through products that are both stylish and functional. I'm excited about our Christmas assortments, which include both traditional and whimsical merchandise, where guests can find unique offerings at price points that easily fit within any budget. Lastly, I want to speak to the strategic relationship with punchful social that we announced in July. We believe this investment provides through our non controlling interest in this award winning highly differentiated brand with strong growth potential. We're excited about the relationship and we believe we can help punchful social scale and reach its potential through this partnership. The punchful social management team continues to operate its business from its Denver headquarters We will provide Closing, I'm pleased with the progress we made in fiscal 2019 and in particular with our 4th quarter results. I believe our fiscal 2020 business priorities, along with the continued strength and differentiation of the fifty year old Cracker Barrel brand will continue to drive shareholder returns in the current fiscal year. Good morning, everyone, and thank you, Sandy. I would like to begin by discussing our financial performance for the fourth quarter of fiscal 2019 and then our outlook for the 2020 fiscal year. In this morning's release, we reported fourth quarter net income of $65,000,000 or $2.70 per diluted share compared to prior year adjusted earnings per diluted share of $2.19, which excludes the impact of the 53rd week in the prior year quarter. For the full fiscal year, we reported net income of $223,400,000 or $9.27 per diluted share, representing a 4.5% increase over the prior year adjusted EPS of $8.87 We reported EBITDA of $390,400,000 for the fiscal year compared to $376,000,000 in the prior year We generated nearly $363,000,000 in cash from operations, which allowed us to invest in our business and return capital to shareholders in the form of declared dividends For the quarter, we reported total revenue of $787,100,000, an increase of 4.6% when compared to prior year revenue of $752,500,000 adjusted for the 53rd week impact On an adjusted basis, our restaurant revenue increased 5.4 percent to $650,100,000 and our retail the perable store restaurant sales in the quarter increased 3.8% as average check increased 3.6% and traffic increased 0.2%. The increase in average check reflected menu price increases of approximately 2.3% and a favorable menu mix impact of 1.3%. The 4th quarter mix favorability was driven primarily by our Southern Fried Chicken offering and the growth of 4th quarter comparable store retail sales increased 0.4% with increases coming primarily within our decor Kitchen and dining categories. Moving on to expenses. Total cost of goods sold in the quarter was 28.8 percent of total revenue versus 30.3% in the prior year quarter. Our restaurant cost of goods sold was 24.6% of restaurant sales a 140 basis point decrease versus the prior year. This decrease was primarily due to lower levels of commodity inflation and leverage from menu price increases. On a constant mix basis, our food commodity costs were approximately 0 point 2 percent higher in the quarter than in Our retail cost of goods sold was 48.7 percent of retail sales compared to 50.1% in the prior year quarter. This decrease was primarily $200,000 or 35.1 percent of revenue compared to $286,700,000 or 35.4 percent of revenue in the prior year quarter. This 30 basis point decrease was primarily driven by cost savings initiatives and improved productivity. Other store operating expenses in the quarter were $164,500,000, or 20.9 percent of revenue compared to other store operating expenses of $160,000,000 or 19.7 percent of revenue in the prior year quarter. This 120 basis point increase was primarily the result of planned depreciation increases related to investments in our strategic initiatives and our decision to reallocate advertising dollars to the 4th quarter to support our summer menu promotions. Store operating income was $119,900,000 in the fourth quarter or 15.2 percent of revenue compared to store operating income of $118,200,000 or 14.6 percent of revenue in the prior year quarter. General and administrative expenses in the quarter were $40,500,000, or 5.1 percent of revenue compared to $35,400,000 or 4.4 percent of revenue in the prior year quarter. This increase was primarily driven percent of revenue, an increase of 11% over prior year quarter operating income adjusted for the impact of the 53rd week, of $71,500,000 or 9.5 percent of sales. Net interest expense for the quarter $1,000,000 compared to $4,300,000 in the prior year quarter. Our effective tax rate for the fourth quarter was 13.9% compared to statutory rate from the enactment of prior year tax reform. Turning to our balance We ended the prior year quarter end. This decrease was primarily driven by our investment in Punchful Social. Our total debt was $400,000,000 at quarter end. Before providing our fiscal 2020 outlook I would like to speak initial non controlling stake and to provide growth capital for future development for punch both social. Hunchful Social is a highly differentiated brand with strong growth potential. Its units have targeted AUVs of $7,000,000 to $8,000,000 and targeted new unit store level EBITDA excluding preopening of 17% or higher. It currently has 18 units open and expects to open an additional 6 units by the end of fiscal 2020. While Punchville's social expects to have positive store level and company level EBITDA before pre opening expenses in fiscal 2020, we anticipate their operating income will be negative approximately 58.6 percent of the economic interest and approximately 49.7 percent of the voting interest of the company. Our initial controlling stake was purchased for approximately $89,000,000. Provide growth capital in the form of an interest bearing loans. In addition to the third party financing that punch bowl is arranging, we've agreed to provide capital of up to $140,000,000, inclusive of the $89,000,000 for the initial non controlling stake. As we believe these unit economics combined with the potential for over 100 domestic units are highly attractive and we believe this investment scale and achieve its potential. That lead to variations in near term financial performance. With respect to our fiscal 2020 outlook, Everyone should be mindful of the risks and uncertainties associated with this outlook as described in today's earnings release and in our reports filed with the SEC. For fiscal 2020, we expect to report earnings per share, excluding any impact from punch bowl social, between $9.30 to $9.45. We anticipate that our investment in punchbowl social will have an unfavorable impact Taking these impacts into account, we expect to report earnings per share between $8.80 $8.95. Although our guidance for Cracker Barrel assumes industry performance for the full year similar to what we saw in fiscal 2019, Our near term outlook is cautious due to the softening trend in the industry traffic and comparable sales in recent months. Dollars comparable store restaurant sales growth in the range of 2% to 3% and comparable store retail sales growth of approximately 1%. We expect to open 6 will be approximately 2%. In the range of 2 We have locked in our pricing at approximately 45 percent of our commodity requirements for fiscal 2020 compared to impact of tariffs and while we expect tariffs to be a headwind, we anticipate that our retail margins as a percent of sales for the full fiscal year will be approximately flat compared to the prior of approximately 4%. We anticipate This decrease compared to the prior year is driven by the benefit of interest income resulting from our lending to punch bowl social. We expect an effective tax Taking these assumptions into account, we expect full year operating income margin of approximately 9% of total revenue This guidance includes a target of $11,000,000 to $13,000,000 in business model improvements resulting from sustainable cost savings. We anticipate that capital expenditures for and that depreciation will be Our guidance implies an increase in fiscal 2020 And with that, I will turn the call over We will now begin the question session. The first question will come from Alton Stump with Longbow Research. Please go ahead, sir. Yes, thank you. Hey, good morning. Good morning. Question on the quarter. I was wondering if you could just give us maybe a bit more color, if you can, on how much of an impact, you know, at the new fried chicken product, had either mix and or comps in general and kind of what we should expect or potentially should expect over the course of full year? So, good morning, Alton. This is Jill. So as I said in my prepared remarks, in the fourth quarter, we had positive check growth approximately 2.3% was from pricing and then additional check growth, both from the, Southern Fried Chicken and their growth in off premise. So they were, those 2 were split approximately evenly about 60 to 70 basis points each in growth. So we would expect some favorable mix into fiscal 2020 from both of those drivers but probably not to that level. And then just one quick follow-up and I'll hop back in the queue. Just far as your commodity guidance, 2.5% for the full year, should we expect a sort of major volatility on a quarter to quarter basis or should be in that range for the bulk of the year? That's a great question. So as we look at the quarters for Next fiscal year, we've got commodity inflation in the range of 2% to 2.5%. The increase is come primarily from two primarily driven by bacon. Then we also have dairy increases, which is driven by butter and cheese. We do expect some deflation on eggs, and that's primarily in the first half of the fiscal year. From a favorable locked position that we have on shell eggs. So what I would say is you'll see some slightly lower, commodity inflation in the first half of the year versus the back half. Great. That's very helpful. Thank you, Jill. You're welcome. The next question will come from Jake Barlett with SunTrust. Please go ahead. Great. Thanks for taking the question. My first question is about your guidance for same store sales in 2020. I know your compares get significantly more difficult, as 2019 progresses. Just trying to gauge your level of confidence and maybe as part of answering that, if you could help us with the cadence of same store sales throughout the quarter, in the fourth quarter, noting that kind of the differences in marketing spend, versus the prior quarter. And then any commentary on current trends would be helpful. Okay. So, as we look at our guidance for fiscal 2020 on same restaurant sales, I want to go back to the fact that what I said in the script is for the year, we were expecting the, the industry performance to be similar to last year, but in the near term, we're more cautious especially given some of the consumer trends that have been published in, SnapTrack through August, where we've seen some softening. And so if you think about some of the impacts that might be impacting the consumers, the tariff impact the recent oil price impact represents a risk to us. So I would say is as we think about cadence in the near term, we're more cautious. And then on the the current the fourth quarter, we're not going to talk about our monthly trends. Okay. But that commentary about the industry trends, we could reasonably assume that you imply your current trend would follow that sort of trend? We're just making a comment about the industry, Jade. Got it. Got it. Okay. And then I also had questions about, the implications of the punch bowl, social investment on your capital allocation strategy. And just you ended the quarter at a much lower cash level than you typically would have Did you expect to take up your debt levels throughout the year? And then as also part of answering that, any changes or impact it would have on your planned, share buybacks? I know that your current authorization is about $50,000,000. And any plans that the impact that could have on your dividend strategy? I'll start, Jake, and then turn it over to Jill. If there's anything additional she wants to add, and I'll start by stepping back and just kind of summarizing that the, position that the board, the longstanding position that the board has had relative to capital allocation, which is that we first invest in our business. And, then we look to have a sustainable competitive regular dividend, a share repurchase plan as appropriate, we've just recently been able to, to do, more volume and share repurchases. I mean, we've announced expanded share repurchase plan. And then as part of our strategic initiative to extending the brand, we've looked at ways to make investments in a business that we thought would drive long term shareholder value, which is what you see with the punchful social investment. So when you take all of that into clay, additionally, our targeted debt levels have been in the 1.5 to 2 times for quite some time, and we're currently below that. So I think the investment in punchful social was a use of cash, which we are, optimistic that it will be a long term value driver. And so I think that the board will continue to operate within that framework as it sees opportunities. And we'll continue to navigate through an environment where we're trying to sort of balance all of those different demands on capital. We do talk about it at every board meeting. So, Jill, I don't know if you want to add anything else to that. So, Jake, I think what I would add is around color was punchful. So, Shaul, just to kind of walk you through the investment that has already been made and then kind of how that $140,000,000 that we talked about in our July press release and then we reiterated on the call. So as a reminder of the $140,000,000 investment commitment that we talked about $89,000,000 was for our initial non controlling stake, then that remains there's $51,000,000 is for growth capital. And of that, we provided approximately $15,000,000 in 2019. So that leaves approximately 36 $1,000,000 remaining on that. The next question will come from Gregory Francfort with Bank of America. Please go ahead. Hey guys, thanks for the question. I just had a couple. The first is maybe going back to the capital allocation. I think your CapEx is coming down a little bit next year. Can you talk about the POS system, and the rollout of that and how you're thinking about timing and I think there's an opportunity to am I maybe wrong, but to consolidate more of the operations across restaurant and retail when that gets done. I guess I'm just curious with the current timing plans on that. Thank you. Sure. I'll start and then Sandy can add. So currently, we have 110 restaurants have our new POS system. In fiscal 2020, we plan to roll approximately 50 more out to the system. You know, we continue to be pleased with the new POS system. It's easier for our team members use, it's easier to train them on. We believe that this technology will enhance both the employee experience as well as the guest experience given the other enablers like tablets. So for example, what we've been doing as we've looked at the rollout of our POS we've been trying to pace it appropriately with other initiatives. I know we talked about that in fiscal 2019 where we purposely slowed it down with the chicken initiative. And so as we look to fiscal 2020, we're trying to appropriately pace it. Got it. That makes sense. And then maybe just on punchbowl, I guess you're just under 50%. In your guidance, with the $0.50, does that assume it stays as an unconsolidated affiliate or as you provide growth capital that pushes you over 50%? And then And then it consolidates on your books and you're assuming you kind of fully bear the cost. I guess I'm trying to figure out like how you're thinking about that impact. And then just I guess as a follow-up to that, I would imagine the pre opening on some of these boxes high. I think normally pre opening comes in a little bit south of a $1,000,000. Should we think of it in the kind of $1,000,000 to $2,000,000 range? Is that kind of a rough approximate range thinking about pre opening per store? So, Greg, this is Jill. Let me I think there's kind of two questions in there. Let me start with the accounting treatment. So, we are accounting for punchful social using the equity method. So the way you will see that on our P and L is we'll have an it'll be aggregated on a net income line. Which will say income or loss from unconsolidated investments. You didn't see this in fiscal 'nineteen given the fact that we closed on the deal right at the end of the fiscal year. So there was really no material impact on the P and L there. And that is our expectation of how it will be reported in fiscal 2020. So as we look at our guidance for fiscal 2020, and we were trying to provide clarity for y'all, in 'twenty, we expect Cracker Barrel to report EPS of $9.30 to 9.45 dollars. That excludes the estimated impact or investment of punchable social of approximately $0.50. So then when you combine punch both social, the implied EPS the GAAP EPS then would be in the range of $8.80 to $8.95. To your point on punchbowl's openings given the fact that it's a growth brand that adds, pre opening expense. It also adds some uncertainty around the timing of pre opening. There can be shifts that impacted. So given those uncertainties, as we look to guidance, we recommended that we recommend that investors really focus on the guidance for our core brand of $9.30 to $9.45. I'll jump back in the queue. Thank you for the thoughts. Appreciate it. The next question will come from Jeff Farmer with Gordon Haskett. Please go ahead. Great. Just following up on punch bowl and appreciate what you just said about potentially how to to model this moving forward. But, so concept is expected see that $0.50 per share headwind. I think that's roughly $12,000,000 in net income in 20. So the question is based on the pace of punchable unit development, and theoretically increasing pre opening as you get to 21, 22, and beyond. Could that dilution number, get bigger as you move past 2020 or I'm sorry, FY20 or is there some other offset that that could show up to reduce that percent headwind? Yes. So as we said in our comments, Punchco Social is a high growth brand. And so we would expect to see pre opening expense, for some coming years. But beyond what we provided for fiscal 2020, we're not going to disclose anything else beyond 2020. Okay. And then I heard you mention that the the DNA dollars you guided to the DNA dollars, but g and a, I might have missed it. Looks like g and a dollars were up 5 to percent in 2019. I think that was materially higher than the revenue growth rate for the year. As you think about G And A growth in FY 'twenty, any color you can provide there? So, G And A in the fourth quarter was up primarily from incentive comp. And so we expect it in FY 2020 to be approximately flat as a percent of sales Okay. And then last one again, I apologize if you touched on this, but fairly large in the fiscal 4th quarter. And port of the fried chicken. As you moved into the fiscal first quarter, in terms of media wait TV weeks, however you wanna, provide the information what can we expect in the fiscal first quarter versus what you just saw in the fiscal fourth quarter? So in the first quarter for marketing spending. We've added a couple of media weeks versus prior year, but nothing significant. Okay. Thank you. The next question will come from Bob Derrington with Telsey. Please go ahead. Yes, thank you. Sandy, we're probably spending too much time on punch bowl given so much we don't know about it. But I'm just curious. The fact sheet you all originally provided us around the brand basically called for, I think it expected new openings of 11 by the end of calendar 2020. The company's guidance, I think, is now for 6 new units in the fiscal year. So how do we reconcile the 2? Does that mean there's 4 more or 5 more planned for between the end of July the end of the calendar year next year? Yes. Yes, it's the difference between our fiscal years. Okay, all right. And I'm curious, are you comfortable with unit economics of the brand. And the reason I asked that question is the, I guess, for the 17 units that are open currently, think that your the fact sheet calls for an average about 23,000 square feet, which I guess at the estimated, sales per store, that implies only a sales per foot of roughly about $3.30 per foot, compared to Cracker Barrel, which is well over $500. So I'm just curious, your perspective on this. Hey, Bob. This is Jill. So as we look at the punch bowl, we believe they have solid unit economics. They're targeting AUVs of $7,000,000 to $8,000,000. They have, you know, some stores will certainly exceed that. Their targeted store level percent or north of that. They're also we just opened, are they just open their first, 10,000 square foot, box or their smaller box? And they're testing. So, we like the unit economics. Can you give us some perspective on the capitalized cost per new store? No, we're just we're not going to get into a lot more detail that will We'll leave that to, some future discussions and maybe we'll get into it in an Analyst Day. But we also think to add to Jill's point that there are some opportunities to improve the economics. First of all, with the learnings that we're having, about the geographic differences in the models, how to improve the efficiency of models, So in their current portfolio where we, are pleased that the newest boxes are performing as strongly as they are. And we believe we can add value, in terms of purchasing and some other cost structures to even further improve the business model going forward and, as we under stand more. And as we get further into this investment, we will update y'all and give you a lot more detail about the company and its economics. Got you. And if I could follow-up real quickly on the, Jill, your comments about the near term outlook based on things like snap track, etcetera. Was there any impact, in any way from the hurricane that recently went up the Eastern seaboard either through loss of power or, you know, store closures, customers transitioning, any kind of commentary there? Was that a drag on business? Yes, Bob, thanks for your questions. You know, we felt very fortunate that damage to our stores and our employees' homes was minimal from the, hurricane. The impact was mostly to sales and we believe that was immaterial, but all of that is comped in our guidance. Got it. I think what makes an event like that difficult for us is that if you look at how many stores were closed and for how long it's one thing, but what we can't quantify it, but we know we were impacted by are the people who changed their travel plans and then didn't make the trip down to Orlando, for example. So we didn't get the opportunity to, you know, have a meet with us along the route. And, So I do think that the storm it went on for quite a long period of, you know, couple of weeks, and it was over labor day. It didn't help the trends in the industry. Great. That's helpful. Thank you. John Tower with Wells Fargo. Please go ahead. Great. I just have a few, if I may. First, when thinking about the marketing cadence for the year, I know Jeff had asked something earlier on the first quarter, but given the fact that last year was so fourth quarter heavy, with respect to marketing spend, how should we think about it rolling out through the balance or for the full year of 2020? Should it be evenly split or will there be certain quarters where there might be much higher weightings? Well, we always tend to put higher weightings in the second and 4th quarter because those are just so much more important to us from a traffic standpoint, you know, supporting the holiday period and then the summer summer travel period. Relative to those comparisons to prior year, I guess in general, in FY 2020, we expect our advertising expense to be relatively flat, with prior year. Mhmm. One of the things we do do is as the year progresses, we do kind of think about shifting some of the dollars around. Okay. And then just going back to dinner, it's been a sore spot for the business, over time. And it sounds like you're attacking this with some new product in 2020 and in the back half of the year, some menu simplification, but I think you've also said in the past that, at least in previous calls that greater competitive discounting has also been an issue for some of your dinner traffic. So when thinking about either product evolution or how this menu is going to be framed in the latter half of twenty twenty. Should we expect these products to kind of address that value category more aggressively. And same thing with, either the menu featuring value or advertising perhaps supporting value more so than in the past? You were absolutely right, John, that the amount of discounting historically in the industry has certainly been a a pressure, and for our competitors, they're they're only operating in the dinner day part So that's where we probably feel it the most. Our work on the dinner menu is is that we're attempting to do a variety of things. First, we plan to add new craveable signature items. The the signature fried chicken platform is the first and maybe the best example of the kind of thing we're trying to do there, planning to delete some items so that we're not adding additional complexity to the menu. And to allow our operators to execution of the menu. But as we've redesigned it, we want to we wanna highlight the value that is on our menu every day. So they're, we're looking at a new category called 899 home cooked classics. It will, we believe, deliver a lot of value to our guests, and it'll be available, every day. We will highlight some of our Cracker Barrel favorites section in a way that we believe is easier for our guests to understand and to be honest, easier for our, teams to deliver on the grill side and on the server side. And then we're looking at things like we're gonna go ahead and put the brick a component of our breakfast menu on the dinner menu to reinforce our breakfast all day category. Some people because it's 2 different menus, don't necessarily understand that breakfast all day and it's a little bit complicated for our host to provide 2 menus. So we're we're trying to accomplish a lot in the dinner refresh, but absolutely have in mind that we reinforce, and highlight the value that we believe is so important to the brand and to our guests. Great. Thank you for the color. And the last piece I have is more on the clarification. The growth capital that you're providing for punch bowl social. Is that included in the CapEx guidance for the year of 100 and $10,000,000 to $125,000,000? No. It is not. Okay. Thank you. The next question is a follow-up from Gregory Francfort with Bank of America. Please go ahead. Hey, guys. I just had 2 quick other ones. The first is, just on the retail business and margins, can you maybe frame up what the magnitude is of the tariff impact you're assuming? And then I think you talked about retail margins being roughly flat next year. Kind of where the offsets are and what are the key initiatives that are driving that as an offset? Thank you. We won't quantify the specific tariff impact. I can tell you that the teams have been working hard to, identify ways to mitigate the impact of the tariffs. And when I say mitigation, first, you were evaluating whether we could source from different countries. We're working with vendors to identify ways to reduce the cost. In some cases, we are working to, in some cases, no longer stock a particular item. If we think that the price increase necessary would make it not sort of interesting to our guests, And then lastly, we're looking at where and how to increase prices, on floor. So there's a lot of work being going on. I think the broader concern about tariffs is weather in general costs, across the board go up for our guests and it results in them having less discretionary income, which could affect, you know, the frequency and the way they think about eating out. Yes, got it. That makes sense. The other last question I had was just on the to go business, you you've had a couple of years of an added push on to go. Can you give any thoughts or extra clarification on how consumer is using the brand differently than your in store consumer, either frequency of that, of that, visit per year, quarter, month, or whatever you want to describe it. And drink attach or any other sort of ways that they're using the brand differences or similarity that you're seeing would be helpful to just give us a broader picture. Thank you. Well, that's a good question. I'm trying to, I I don't think we've yet understand how the frequency changes. I'll make a couple of comments. And, Jill, you can add to it. Individual to go continues to be the biggest component of our off premise business. And within that, 3rd party delivery has been a surprising surprisingly big part of that business. And we do believe that that is largely incremental. We've been pleased with the growth that we're having in the catering and the celebration meals. We've made a big investment in that with our catering vans and our catering service managers. And we hope that in fiscal 2020, we can continue to build on that. I know our retail team is working hard to try to find ways that we can get retail attachment with off prem. When they come in. And because we don't see right now the same level of retail attachment, And I know the off premise team is working hard to try to drive things like, beverage or, a dessert or a selling and adding sides and how we can do that through either the digital app to do a better job of demanding or through the scripting on the phone when we're taking the call. I would say in general, we don't see the beverage attachment with the to go sale that we do with dine in, just in general. Chill, do you want to add anything to it? No, I think you covered it, Sandy. Thank you. Thank you guys for the thoughts. Appreciate it. The next question is a follow-up from Bob Derrington with Telsey. Please go ahead. Yeah. Hi. Just a quick accounting 1, Jill, as we're looking at, depreciation, that line I guess last year in fiscal 2019 was up almost 15% at about 107,500,000 fiscal 2020s guidance is far only about a, I guess, the range you're providing implies a 2% to 7% growth on DNA. What's going on within that line? Are you running off some things? Is there much in the way not coming on? Would have thought some of the technology initiatives would be, and the POS would be adding to that. That's a great question, Bob. So And, you know, as you know, our depreciation had been stepping up as our capital stepped up from our planned investments to support our growth initiatives like, the platform for the chicken, as well as the coffee makers, some of the POS. So a number of areas where we've been investing, you can see that our guidance for overall capital steps down next fiscal year versus this fiscal year. So some of the slower rate in growth and depreciation is due to the fact that we've plan to spend less in capital. Got you. And Sandy, as it relates to the dinner refresh, are those things some of the changes within the, alterations within the menu designed to use some of the equipment that you invested in this past year, supporting the, rollout of your chicken platform? Absolutely with the chicken platform, you know, just to the question, you just asked the investment last year in equipment and installation of the fryers, the breading stations, the hot hole, the bulk out. That was significant, and it was always intended to be a flat form that we over a period of time multiple years, added to. So we started with this the the southern fried chicken, the bone in. We've just gone to home see every day and this, chicken BLT sandwich, which is awesome. We'll be doing fried turkey again this holiday, which was very successful last year in our new platform, I think, will allow us to do it even at higher volume and with more consistency and easier on the on the back of the house, then we plan in, probably actually the next fiscal year to be adding hand battered breaded tenders. Which we can use in in themselves and on salads. So we have a variety of initiatives planned by the culinary team over a period of time to leverage of fried chicken. Can you fry an entire turkey in one of those? No. It's not in what we want. I know people do that. No. It's the it's the turkey breast that we offered last year over the holidays. Absolutely delicious. Down in the south, that's a pretty popular item. Thanks, Andy. Thank you, Bob. Well, This concludes my question. For joining us today. As we look forward to 2020, we plan to build on our brand strength. And execute our business initiatives The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.