Cracker Barrel Old Country Store Inc (CBRL) 2022 Q1 法說會逐字稿

Good day, and welcome to the Cracker Barrel Fiscal 2022 First Quarter Earnings Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Jessica Hazel, Head of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Cracker Barrel's First Quarter Fiscal 2022 Conference Call and Webcast. This morning, we issued a press release announcing our first quarter results. In this press release and on this call, we will refer to non-GAAP financial measures for the first quarter ended October 29, 2021. The first quarter non-GAAP financial measures are adjusted to exclude the noncash amortization of the asset recognized from the gains on our sale and leaseback transactions and the related tax impacts. The company believes that excluding these items from its financial results provides investors with an enhanced understanding of the company's financial performance. This information is not intended to be considered in isolation or as a substitute for net income or earnings per share information prepared in accordance with GAAP. The last pages of the press release include reconciliations from the non-GAAP information to the GAAP financials.

On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran; Senior Vice President and Interim CFO, Doug Couvillion; and Senior Vice President and CMO, Jennifer Tate. Sandy will begin with a review of the business, and Doug will review the financials and outlook. We will then open up the call for questions for Sandy, Doug and Jen.

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 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, Jessica, and good morning, everyone. This morning, we announced comparable store restaurant sales growth of 1.4% compared to the first quarter of fiscal 2019. I'm pleased with the work of our teams to accomplish this sales recovery in spite of the headwinds we faced from the Delta variant and difficult staffing environment as we began our fiscal year. We believe the improvements we made to staffing levels during the first quarter played a significant role in driving our sales recovery. Our recruitment efforts, including a new virtual orientation program that streamlines our onboarding process and reduces training hours, helped us to hire an average of more than 2,000 employees per week during the quarter.

And while we still have some challenges with COVID-related call-outs and pockets of understaffing, we feel confident that we have the appropriate staffing in place to handle the elevated holiday volumes we anticipate for Q2.

Pleased to share that we saw almost no year-over-year decline in off-premise sales even as first quarter dine-in volumes further recovered. And we continue to explore new channels for growth and expansion for our off-premise business. In the last week of the quarter, we expanded our virtual brand, Chicken n' Biscuits by Cracker Barrel, to approximately 500 locations total. We launched a second virtual brand, the Pancake Kitchen By Cracker Barrel, and we opened our first-ever ghost kitchen location, all of which I'll speak to shortly.

First quarter retail sales maintained their strong growth over pre-COVID levels with comparable store retail sales up 17.6% compared to the first quarter of 2019. We continue to see strength from everyday categories, particularly toys, food and home decor. Additionally, our holiday themes have resonated strongly with guests this year, and our Christmas teams are delivering solid double-digit growth over fiscal 2019 to date despite some headwinds from shipping delays.

Our retail teams have done an excellent job of managing the ongoing supply chain challenges, and we brought in the majority of our containers at contracted rates during the quarter. By pushing forward ordering time lines for seasonal merchandise and leaning into our everyday assortments, we are successfully navigating the impact of sea shipping delays while providing guests with a unique and appealing retail experience.

Maple Street maintained its run of strong sales performance during the quarter. Average weekly sales for the brand were up by more than 50% compared to pre-COVID levels, which includes the benefit of being open on Sundays. We hope to open 15 new units this year, the first of which opens next week. Our real estate team has done an excellent job of building a strong pipeline to support new unit openings through the remainder of this fiscal year and beyond. And given the strong unit economics that have exceeded our expectations, I'm optimistic about the long-term growth potential for the brand.

Doug will take you through additional financial details for the first quarter and provide current thinking on our outlook. Before he does, I'd like to share with you a little more detail on our second quarter expectations and progress on a few key strategic initiatives.

Many of you know the Cracker Barrel brand has a deep connection to the holiday season, and our stores typically run higher volumes during the second quarter. This year especially, I believe our guests are embracing Cracker Barrel's unique holiday offerings as they look forward to a more traditional season, complete with family gatherings and holiday celebrations with friends. While we expect the Q2 dine-in traffic will remain below pre-COVID levels, we're optimistic that the recent improvements in our restaurant and retail sales trends will continue through the holidays.

We've seen strong demand from our off-premise Thanksgiving offerings. Preorders for our traditional Heat n' Serve feast that serves 8 to 10 guests have remained high compared to pre-COVID levels, which is impressive considering our guests now have the additional option of our smaller Heat n' Serve family dinner that serves 4 to 6 guests. Not only is off-premise a key driver in our second quarter, but the week of Thanksgiving is typically our largest sales week of the fiscal year.

While we cannot fully predict what the dine-in consumer behavior will look like over the next few days, we expect a strong Thanksgiving sales week that should exceed pre-pandemic levels. While the operating environment remains challenging, I'm confident that our stores will deliver on our mission of pleasing people this entire holiday season.

Looking longer-term, I remain excited about the strategic initiatives we have in place to deliver sales growth and strengthen our business model. That starts with the launch of our ghost kitchen and the expansion of our virtual brands that I spoke to earlier.

Our ghost kitchen concept, Cracker Barrel Kitchen, opened in Los Angeles at the end of October. Cracker Barrel Kitchen offers a streamlined version of the Cracker Barrel menu of our traditional favorites as well as Chicken n' Biscuits and the Pancake Kitchen offerings. We've seen positive guest response so far, and we believe this format can be a meaningful revenue driver for us. We plan to open additional ghost kitchen locations in Los Angeles in the near future. And long term, I'm very excited about the potential to bring homestyle food of Cracker Barrel into additional urban areas.

We've also expanded the rollout of virtual brands as an added sales layer to our existing stores. Our second virtual brand, the Pancake Kitchen, launched in the last week of the quarter and initial sales results are promising. We believe this brand helps us address unmet demand for breakfast offerings via third-party delivery in many geographies. Additionally, we remain optimistic about the sales potential for the Chicken n' Biscuits brand, which helps us to leverage excess kitchen capacity during underutilized dayparts and to target additional users of the brand who might not otherwise visit a Cracker Barrel restaurant.

The first quarter also marked the 1-year anniversary of the launch of our digital store. As a reminder, this was a new digital platform that integrated restaurant, retail and catering offerings into a unified and convenient user experience. In its first year of existence, the digital store registered over 43 million [sessions] and handled over 3.4 million orders. In- addition to supporting the growth in our off-premise business, it enhances the dine-in guest experience through features such as online waitlist and mobile pay.

Our digital investments have created a platform for us to build direct digital relationships with our guests, including e-mail and SMS text marketing, personalization through our website and app and the introduction of a loyalty program. Additionally, we've seen positive results from the shift in our paid media towards digital channels, which allows us to better target our messaging to specific audiences. We expect to continue to shift more advertising dollars to these channels as we find new ways to leverage our expanding digital capabilities.

Lastly, I'd like to provide an update on our leadership team. As we previously announced, Craig Pommells will be joining us as our new Senior Vice President and Chief Financial Officer starting next month. Craig brings with him over 20 years of experience in the restaurant industry, most recently as CFO of Red Lobster. Prior to that, Craig served as Senior Vice President at Red Lobster for 5 years and served in various financial and data analytics roles at Darden for over a decade. Craig's track record of financial leadership and strategic planning will be a great asset to our leadership team as we continue to explore ways to drive sales growth and strengthen our business model in a post-COVID world.

Before I turn the call over to Doug, I want to thank him for his outstanding contributions to the company, particularly over the last year. During his time as interim CFO, he's been extraordinarily helpful to us, an organization and a wonderful partner to me. Doug's a 20-year Cracker Barrel veteran, and he'll remain a valuable part of the Cracker Barrel senior leadership team as he continues his responsibility as Senior Vice President of Sourcing and Supply Chain and helps Craig familiarize himself with our company and our people.

Thank you, Doug. And with that, I'll turn the call over to you.

Thank you, Sandy, and good morning, everyone. For the first quarter, we reported total revenue of $784.9 million. Our restaurant revenue increased 19.4% to $615.4 million, and our retail revenue increased 29.2% to $169.5 million versus the prior year first quarter. Compared to the first quarter of fiscal 2019, comparable store restaurant sales increased 1.4%. We're providing our comparable sales results back to fiscal '19, our most recent clean full fiscal year, which provides a better indication of sales growth than prior year comparisons.

Restaurant sales performance improved sequentially each month of the quarter, and breakfast continued to be our strongest growth daypart, particularly during the week. We also saw a significant recovery in the weekend breakfast and lunch dayparts during the quarter, which we believe is primarily due to the improvements to our staffing levels.

Our comparable store off-premise sales were up 168% compared to the first quarter of fiscal 2019. More impressively, we retained almost all of our off-premise sales from last year, when we had a large number of stores operating either off-premise only or with significant capacity restrictions. Our third-party delivery channel delivered strong year-over-year growth during the quarter, which helped to offset the modest decline in our individual To-Go channel.

Comparable store retail sales were again above our expectations in the first quarter and increased 17.6% over 2019. While the supply chain environment remains volatile, our retail team has done an excellent job of managing inventory and leaning on our everyday assortment to minimize the disruption to our retail shops.

Moving on to expenses. Our total cost of goods sold in the quarter was 30.9% of total revenue versus 30.8% in the prior-year quarter. Our restaurant cost of goods sold was 26% of restaurant sales versus 25.7% in the prior-year quarter. Significant increases in pork, beef, and oil costs drove commodity inflation of 7.3%, which was above our expectations, which largely offset the impact of this inflation through 5.5% pricing and mix favorability during the quarter.

Retail cost of goods sold was 48.7% of retail sales versus 50.6% in the prior-year quarter. This 190 basis point decrease was primarily driven by lower markdowns as we continue to sell through inventory at full price at higher levels than we have historically.

First quarter labor and related expenses were 35% of revenue versus 35.1% from the prior-year quarter. Our labor costs were pressured by wage inflation on a constant mix basis of 9.1%, which increased throughout the first quarter and came in above our expectations, as well as elevated overtime use. These pressures were primarily offset by sales leverage as well as lower manager staffing levels and related incentive compensation.

Adjusted other operating expenses were 23% of revenue versus 24.5% in the prior-year quarter. This 150 basis point decrease was primarily driven by sales leverage and somewhat lower depreciation as a result of reduced capital expenditures throughout the pandemic. This favorability was partially offset by a number of factors, including increased maintenance expense as we spent more on repairs for property and equipment that we weren't able to secure replacements for due to supply chain issues; increased fees as a result of the growth of our third-party business; and higher supplies expenses due to inflation. We expect this last factor to be a significant impact on our second quarter other operating expense as well due to our elevated off-premise business in addition to the outside costs associated with our Heat n' Serve offerings.

Next, moving beyond store-level margins. Our general and administrative expenses in the first quarter were $40.9 million, which is unfavorable to the prior year first quarter adjusted G&A by $6.5 million. This increase is driven in large part by expenses related to staffing increases and recruitment, including managers and training and home office support as well as higher travel expense. Net interest expense for the quarter was $2.6 million compared to $10.7 million in the prior-year quarter. This $8.1 million decrease is a result of lower debt levels as well as a lower weighted average interest rate due to the convertible debt offering we completed in the fourth quarter.

Our effective tax rate for the first quarter was 17.1% compared to an effective tax rate of 24.6% in the prior-year quarter. As a reminder, our prior year tax rate was elevated as a result of a reduction in tax credits and taxes on the sale and leaseback transaction that took place during the prior year first quarter.

These first quarter results culminated in GAAP earnings per diluted share of $1.41 and adjusted earnings per diluted share of $1.52. When adjusting for the noncash amortization of the asset recognized from the gains on the sale-leaseback transactions, in the first quarter, adjusted EBITDA was $71.9 million, a 32.9% increase over our prior year first quarter adjusted EBITDA results.

Turning to our balance sheet. We ended the fiscal quarter with $377 million in total debt compared to $949 million at the end of the first quarter of last year. Our strong balance sheet and cash flow puts us in a position to continue to invest in the business while returning capital to shareholders. In this regard, we are pleased to announce a quarterly dividend of $1.30 per share, which matches our pre-pandemic dividend level but on a lower base of earnings and reflects our confidence in the business as we progress through '22 despite the uncertain and challenging business environment.

With respect to our fiscal '22 outlook, everyone should be mindful of risks and uncertainties associated with this outlook as described in today's earnings release and our reports filed with the SEC. Given the continued uncertainty around the current inflationary environment, we will be providing only the following updates to our full-year expectations. Both commodity and wage inflation exceeded our expectations in the first quarter, and we now expect full-year commodity inflation and constant mix wage inflation in the high single digits. We continue to expect full-year capital expenditures of $120 million, including the opening of 3 new Cracker Barrel locations and 15 new Maple Street Biscuit Company locations.

Our capital expenditures are subject to supply chain disruptions, which could delay the delivery of equipment and new unit development time lines. We now expect an effective tax rate of approximately 17%.

Based on our sales trends, we believe November comparable store restaurant sales growth compared to fiscal 2019 will improve versus the first quarter, and we're optimistic that these sales results will continue through the remainder of the second quarter.

Turning to our margin expectations. We currently expect second quarter adjusted operating margin to be approximately 5.5% to 6% of revenue. This expectation includes the impact of more significant wage, commodity and other operating expense inflation in the second quarter compared to the first quarter as well as higher expenses associated with the second quarter off-premise occasion business.

And with that, I will turn the call over to the operator for questions.

(Operator Instructions) Our first question comes from Alton Stump with Loop Capital.

Just wanted to ask on the commodity front. I know it's obviously very, very difficult on a quarter-by-quarter basis to predict in this unprecedented environment. But any color as just as far as a high single-digit number for the full year? Should that be kind of in a similar range over the next 3 quarters? Or is it going to be higher than that, do you think in 2Q specifically? Or just any color that you can provide on that would be very helpful.

Alton, what I would say is that when we look at the elements of the inflation, you're correct, there -- it's certainly difficult to predict from quarter-to-quarter. I think from a commodity perspective, that will be slightly higher in the second half compared to the first half. And I see that the wage inflation, as we're looking at it, to be relatively stable, consistent with the guidance we gave this quarter.

Okay. Great. And then just my follow-up, and I'll hop back in the queue. But just on the labor front, certainly, there has been many, of course, your peers that were not able to properly staff in the most recent quarter. Obviously, you guys certainly seem to have done a good job with that. Can you just kind of walk through like what were the key factors you think as to why you were able to keep your stores, for the most part, properly staffed during the first quarter?

Well, Alton, this is Sandy. I'll kind of -- to that, I think, first of all, our field teams and our HR teams have done, I think, a phenomenal job of addressing the staffing concerns that everyone's been dealing with, but certainly in our industry. And they've tried all sorts of different programs and tactics to, not just to recruit new employees, but they've also been very focused on retaining the ones that we have.

So we commented in the prepared remarks, I think this new virtual orientation is an example of a program that got quickly put into place, where if we hire an employee, they can really do the orientation on their own later that day and then come to the restaurant, ready to work really the next day almost. And we've been able to put that whole program into place really recently and roll it out through the chain. And that has really helped, I think, make us an employer of choice for a lot of potential workers.

Our next question comes from Jake Bartlett with Truist Securities.

This is actually Jack on for Jake. I just want to quickly, like, follow up on the staffing environment. And maybe you can give some more metrics around where you think your staffing is currently against pre-COVID and if there's -- if you see any more upside to, if your staff, even better, if that can be a further driver to sales going forward?

Yes. So we -- as we mentioned, we've made significant progress since the last time we talked and over the course of the first quarter, I believe we've largely, if not completely, closed the gap in the back of the house. So we're feeling really good about where we are in [group cooks].

I think in the front of the house, specifically with servers, we would love to have, and we're working hard to hire even more. But we do feel good about where we're positioned going into the busy season. And we think that those improvements in staffing is certainly a meaningful part of how we've been able to achieve the sales recovery that we've seen.

It's -- in addition to just having the employees, I think there's still pockets of COVID call-outs that are impacting our business. And once -- the more that, that settles down across the country and in our restaurants, I think that'll be another benefit to our field leaders to know that we can fill the dining rooms completely and take care of the guests that want to come and dine with us.

Great. That's really helpful. And it sounds like there's still some more room for dine-in sales to improve at that staffing levels. But I guess my next question, I want to ask, Doug, kind of the operating margin guidance that you gave for the second quarter and how to think about that as we move forward. Is there anything temporary in there? You mentioned recruiting and training costs and then maybe anything in G&A or how you think commodity pressures are going to go throughout the year that might make the second quarter margin a little lower than maybe the rest of the year? Or any way I can think about that as we model it out.

Yes. Jack, in terms of the question about temporary, I think earlier, 3 to 6 months ago, we thought some of these inflationary pressures were a little bit more transitory. But as we -- you've seen from our guidance and what you're hearing across the industry, I think that's kind of going to stick around a bit longer. And I think we will -- we'll continue to kind of monitor the situation. But I think that until we get through the fiscal year and start to have a little more visibility in the '23, I think you'll continue to see the pressure.

I think also when you start looking at our business in the second quarter, remind you of a couple of things that that's a period of time when we have a higher mix of retail sales relative to other quarters in the year. So that gives us a little bit of cost pressure from cost of goods. And then the special occasion business and all of our catering business that we've talked about is really strong in the third -- in the second quarter, especially relative to some prior years, and that also puts a little bit of pressure on our margins.

Specifically, our feast and those large deals that we've talked about have lower margins. We're really pleased with the dollar margins those deliver for us, but they don't deliver the same level of percent margins. So those are kind of a couple of touchpoints on how we see things developing in the second quarter and why they -- or where they are and comparable to Q1.

That's really helpful. And then just one last one. You mentioned the price increase you took recently to get to 5.5%. Would you think about another price increase in the rest of the year or coming up soon to kind of offset the elevated costs that you're seeing?

It's Jen. As we think about the price increase that we took in August, we're continuing to monitor for any effects that may have had on our traffic. And so far, with about 3.5 months' worth of data on that, we really aren't seeing any negative impact on our guest traffic or our menu mix. So while that increase was a little bit above typical years where we've taken less than 3%, we're just looking at this unprecedented inflation and the softening of consumer sensitivity to price. And we think we still have an increased pricing power right now in the near term. So we are planning to take another increase in Q3 that will probably also be above that typical range of 3%. So it will be higher than our normal price increase in Q3.

And we feel okay about that. We've always had a really strong equity in the area of everyday value we've built out over lots of years of having quality, homestyle, scratch-made food at a fair price. We don't do LTO coupon dealing. It's everyday value all the time. And so we've still got a lot of great, great offers every day. Lunch features at $6.99, dinner meals starting at $7.99, so we think we've got plenty of room to take more pricing in Q3.

Our next question comes from Sara Senatore with Bank of America.

I had a couple of questions about your digital business, if I may. The first is on just thinking about the -- if you could disaggregate maybe the growth between the core off-premise and then the virtual brand. I know you said you added Chicken n' Biscuits, 500 restaurants, and you've launched a new brand as well. But where are you seeing the growth? And how should I think about that going forward?

And the related question is on margins. I understand that there's some higher costs associated with the third-party delivery. But I guess to the extent that the idea is to leverage existing spare capacity with these virtual brands, should they be net positive to margins over time? As overall volumes recover, should they be a bit of a net headwind on a go-forward business, but obviously, with profit dollars growing? So just anything -- color you can give me on that.

Okay. So Sara, there's a lot in there. So it may take all 3 of us to address that question. And if we don't, you -- stay in the queue, we'll try more.

So first of all, the virtual brand, I think you understand the strategic intent behind it, which was to appeal to guests who would otherwise not be coming into a restaurant who might be shopping for a certain type of food instead of a brand and who we believe would be a completely incremental piece of business. So in terms of our margin expectation, I don't think we're targeting it as a percentage to be better because these are certainly value offerings or we want to ensure that we're delivering the value. But again, we think that it's incremental to the profits of the store.

We rolled that out significantly over the quarter, 500 stores in Chicken n' Biscuits and now 100, but it was late in the quarter. So we are really just getting the learnings. In addition, we had some supply chain issues. It was hard to get chicken tenders during a lot of the quarter and some technology integration issues as we were bringing them up. So I don't think we have a great clear read to disaggregate.

I think I understood your question yet, except to say that we're pleased with it at the outset, both of the brands. We'll look to see whether there's additional stores that we can open it and which stores that were already open have strong sales and why. And we'll continue to look at the offer and the pricing as we go.

And I know, Jen, and I'll let -- you may want to add to this, Jen, has got some marketing planned. Once we're sure, we've got the execution down, I think we can think about how to market this on those channels. And so I don't know what I didn't answer, Jen. Why don't you -- do you want to add anything on the brands?

Yes. I think Sandy said it well in that we're only about 3 weeks into having expanded Chicken n' Biscuits to the 500 and the Pancake Kitchen by Cracker Barrel in 100, but again, just for a couple of weeks. So our focus right now is on optimizing the menu. We started those with very streamlined menus, very -- just sort of the smallest. And we'll be adding items with a big focus on adding beverages to make sure we can maximize sales, maximize margin on those, looking at additional stores to add. So a lot more growth to come from the virtual brands.

We're also really excited about what we're seeing just in the initial few weeks with our first-ever ghost kitchen. So we've opened a ghost kitchen out in the Los Angeles area and have plans to open a couple more. So that, again, is 100% incremental for us because it gives us a chance to reach guests in urban areas like Los Angeles where we have no Cracker Barrels nearby. So excited to see what that type of business channel can do for us as well. And we'll market primarily through the third-party apps because that's where those guests are. So we'll do some marketing there.

Our next question comes from Brett Levy with MKM Partners.

Doug, don't worry, I do have some supply chain questions, so you aren't entirely left out.

Okay. Thank you.

I guess if we could start, is there anything more you can share in terms of the sales cadence? I know you gave some language around what you're seeing for November for the holiday week. If you could share a little bit more incrementality, just for October's exit velocity and what you've seen so far in November.

And then just, as you think about supply chain, I'll ask it 2 ways: where are you right now in terms of what's locked in on your contracted goods for your basket? And then also, with the tech investments that you've been making of late, not just the digital ones you were talking about, but also the equipment-related ones for -- and software-related ones for in-store, are you running into any issues? Do you see any challenges with that? And then also, how confident are you now in terms of getting the 3 CBs and the 15 Maple Streets opened for the year?

Okay. Let me start...

I tried to keep up with all those questions, but -- yes.

I think I've gotten all the separate parts of that, Brett. So first off, I would comment that during the first quarter, we saw sequential improvement across all dayparts throughout the quarter, and we have been pleased with how things are shaping up thus far in the month of November and commented that we thought we would be in a better place versus '19 compared to the first quarter. So looking good so far in Q2.

In terms of the locked commodities, we have about 30% of our commodities locked for the balance of fiscal '22. In the typical year, we're usually at this point of the year around 40% to 50%. Given the high prices across a number of fronts, we've made conscious decisions not to lock in. We're monitoring markets and we'll take positions as we see appropriate and we move through the year.

In terms of the point-of-sale rollout, we have faced some challenges with delays of -- relating to chips and some other components. And we have -- we're in approximately 500 stores so far with the POS, and we're -- I heard recently from the -- our CIO that the supply chain is kind of breaking loose a little bit, and we think that will be complete by March. Clearly dependent on getting those installed, but we're feeling pretty good about that, which will lead us to some other additions to our cost -- our food cost system we talked about in the previous quarter. We will complete that as well.

And then in terms of our confidence relating to the development schedule, I think things have been interesting on that front, and I'll kind of back up a little bit. We have seen in our maintenance expense area that we're spending a little more maintenance expense because we've been having difficulty getting equipment, and that kind of flows into the development time lines for both the Cracker Barrel and the Maple Street brands and have had suppliers that haven't been as willing to commit to delivery schedules in terms of equipment. So we've been thinking about how to manage that.

And similarly, with some of our contractors that are looking for a little bit different expectations in terms of their commitments to time line. So we feel pretty good about it, and we'll keep you posted as that develops over the next couple of quarters.

(Operator Instructions) Our next question comes from Brian Mullan with Deutsche Bank.

Can you just talk about the capital allocation priorities for the balance of this year and beyond? In the past, the company has a history of special dividends. You've also repurchased stock in the past. So as you sit here today, just wondering if you might favor one form of shareholder return over the other? And can you discuss how the uncertain operating environment or perhaps even the price of the stock might inform those decisions as you move forward?

Yes, Brian. So I think the Board continues to take, as they have for years, a balanced approach. We first want to ensure that we make the investments in our existing assets that we fund our growth initiatives that -- both the technology and the new units we've thought about or that we've planned to take that Doug's about.

I think then relative to both the dividend strategy and the share repurchase strategy, both of those are considered by the Board. As we said, we announced a dividend at $1.30 for this quarter, which is -- reflects a very attractive yield, we believe, and a payout ratio that although high, I think, reflects the confidence that the Board continues to have in the recovery that we've had and the [recovery] we'll continue to have with the brand and the company.

This concludes our question-and-answer session. I would like to turn the conference back over to Sandy Cochran for any closing remarks.

Well, thank you all for joining us today. I'm encouraged by our start to the year and remain confident in our plans to further strengthen our performance as the industry continues to recover. We appreciate your interest and support and wish you all a safe and happy holidays season.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.