Cracker Barrel Old Country Store, Inc. (CBRL) Earnings

Management highlights

### Strategic Initiatives - **Operational Excellence & Guest Experience**: Consistent execution drove three consecutive quarters of improving guest metrics. Year-over-year, Google star rating increased 4% to the highest level since 2018, food taste/service scores rose 5%, food temperature scores increased 7%, and managerial turnover improved 6% (outperforming the industry), with positive trends in hourly turnover. These metrics are viewed as leading indicators for future traffic growth. - **Menu Strategy**: The multi-pronged strategy combines returning guest favorites, introducing new offerings, enhancing quality, and leaning into value. The spring menu added new items including garden and farmhouse scrambles and smoky southern salmon, while bringing back core and limited-time guest favorites. The 2026 summer menu enhanced the popular Campfire platform, extending it to breakfast with a new campfire breakfast skillet. Value is a core brand proposition: the Q3 average check of $15.85 is well below casual dining ($27+) and family dining ($19+) peers, and a barbell pricing strategy delivers compelling entry price points alongside flexible premium upgrades that build margin. - **Loyalty Program**: Cracker Barrel Rewards has grown to nearly 12 million members, with member-tracked sales remaining above 40% of total sales. Loyalty member visits increased year-over-year, and retention among high-value guests matched historical norms. A summer exclusive "Fuel Your Summer Road Trip" sweepstakes for loyalty members (offering $250 thousand in total Cracker Barrel and gas gift card prizes) is designed to drive member acquisition, repeat visits, and reinforce the brand's summer travel positioning. - **Retail Optimization**: Under new leadership, initiatives including SKU rationalization, optimized markdowns, and improved in-store merchandising have delivered strong results. High-performing categories include trending sensory/fidget toys, collectible affordable salt and pepper shakers, and 250th U.S. birthday American heritage merchandise, which has sold out quickly. - **Profitability Improvement**: A Q2 corporate restructuring is expected to deliver $20 million to $25 million in annualized G&A savings, and advertising spend has been reduced in the second half of the fiscal year. Disciplined cost management was a key driver of Q3 adjusted EBITDA results that exceeded internal expectations. ### Technology and Digital Investments - A website upgrade launching in the coming weeks will create a more frictionless digital experience, better support online ordering and rewards, and lay the foundation for future personalized marketing to drive off-premise business, which accounts for ~20% of restaurant sales. - AI is being deployed enterprise-wide as a productivity force multiplier: machine learning traffic forecasting has improved accuracy for better labor deployment, AI streamlines guest support ticket resolution, and an internal AI tool mines guest feedback data to generate actionable operational insights.

Guidance

- Full fiscal 26 total revenue is guided to $3.27 billion to $3.3 billion, representing a $30 million upward expansion of the revenue range following Q3 upside. - Pricing is expected to be in the low 4% range for the full year, with commodity inflation and hourly wage inflation both expected in the low 2% range. - Full year adjusted EBITDA guidance was increased to between $120 million and $125 million, with the midpoint of the range rising more than 30% from prior guidance, driven by stronger-than-expected top-line performance and cost control. - Capital expenditures are expected to be between $105 million and $115 million for the full year, with the majority of spend allocated to maintenance; the large-scale store remodel program remains paused. - Guidance does not include any expected additional tariff refunds, as the remaining $12 million in applied-for refunds remains uncertain; the $5 million received in Q4 is expected to be fully reinvested during the quarter.

Segment performance

For the third quarter ended May 1, 2026, Cracker Barrel reported total revenue of $797.4 million: 1. **Restaurant Segment**: Revenue was $658.4 million, accounting for 82.6% of total revenue. Comparable store restaurant sales decreased 2.6% year-over-year, with a 6.7% traffic decline that was partially offset by a 4.3% increase in average check (including 4.4% pricing growth). Off-premise sales represented 19.6% of restaurant revenue, an increase of 50 basis points from the prior year, driven by catering and third-party delivery growth. Restaurant cost of goods sold was 26.1% of restaurant sales, a 10-basis-point decrease year-over-year. 2. **Retail Segment**: Revenue was $139 million, accounting for 17.4% of total revenue. Comparable store retail sales decreased 1.8% year-over-year, with lower traffic partially offset by increases in average unit retail and units per transaction. For the first time in over 4 years, retail comparable sales outperformed restaurant comparable sales. Retail cost of goods sold was 49.8% of retail sales, a 90-basis-point increase year-over-year primarily driven by higher tariffs.

Risks & headwinds

- Gradual traffic recovery continues, but overall comparable restaurant traffic remains negative year-over-year, and the lower-income consumer segment continues to face pressure that impacts demand. - Higher gas prices create a headwind to consumer discretionary income and increase distribution costs for both restaurant and retail segments, though all expected impacts are already incorporated into current guidance. - Commodity inflation (driven by higher beef, pork, produce, and seafood prices) and higher tariffs continue to pressure cost of goods sold for the restaurant and retail segments respectively. - Forward-looking results, including traffic and sales performance in Q4, are subject to inherent uncertainty that could cause actual outcomes to differ materially from management guidance.

Analyst Q&A

• Q: Todd Brooks (The Benchmark Company) asks why management increased Q4 and full-year guidance despite facing a tough year-over-year comparison and higher gas prices for the summer driving season. /

  A: Management notes that the underlying traffic trend has shown gradual improvement through Q3, and this positive trend continues into the first month of Q4. While higher gas prices are a potential headwind for consumer discretionary spending, Cracker Barrel's strong value positioning (with a far lower average check than peers) and barbell pricing strategy offset pressure on consumers. The sustained execution improvements across the business support confidence in the guided results.

• Q: Brooks asks why retail has held up so well despite a pressured consumer, and what holiday SKU strategy to expect. /

  A: New retail leadership has delivered results from SKU rationalization, optimized markdowns, and improved merchandising that have moved the business after years of underperformance. High-demand, affordable on-trend products (sensory toys, collectible salt and pepper shakers, 250th birthday American heritage merchandise) have resonated strongly with consumers, with strong enough sell-through that Halloween merchandise was rolled out early. SKU strategy will continue to focus on curated, on-trend product that aligns with the brand, with ongoing tests that will roll out more broadly in 2027.

• Q: Jeff Farmer (Gordon Haskett) asks what drove the large upward EBITDA guidance revision, specifically what role cost control played. /

  A: The upward revision reflects stronger-than-expected top-line performance from gradual traffic improvement, and better mix from new add-on and side menu strategies that boosted check. Team execution delivered meaningful cost savings from improved food waste management, better labor scheduling, more disciplined discounting, and lower supply expenses, alongside top-line gains. These operational improvements also coincided with material gains in guest satisfaction metrics, creating a positive cycle for future performance.

• Q: Jon Tower (Citi) asks about marketing spend plans for next year after the second half reduction this year. /

  A: The reduced marketing spend in the second half of fiscal 26 brings spend in line with long-term historical levels as a percentage of sales. The team has focused on improving efficiency, shifting to lower-cost direct outreach to the 12 million loyalty members, and prioritizing high-ROI activations like the Speedway Motorsports partnership and loyalty sweepstakes. Management will evaluate data from this year's testing to set next year's budget, and will increase spend only if there is a compelling business case to do so.