Alexander Slagle: Got it. Thank you.
Operator: The next question comes from John Ivankoe with JPMorgan. Please go ahead.
John Ivankoe: Hi. Thank you very much, Dave. It was great to have you in the industry for so long, but most importantly, I hope the next chapter is a great and fulfilling and fun one for you.
David Deno: Thank you, John.
John Ivankoe: The question is Outback outperformance relative to the casual dining category, but I’d like to kind of drill in a little bit about your performance relative to your near and state competition. I know, sometimes hard data to kind of get, but like listen, I mean, there are public companies that are out there and you see their traffic. And, when you survey consumers of why you’re choosing brand X or Y over Outback, what is commonly coming back to you in terms of that consumer preference? And, are there any learnings from competition? I know it’s not always ideal to talk about, but are there any learnings from competition that you can directly apply to the brand to maybe allow your Outback brand to perhaps perform in line with some of your near end peers? Thanks for that.
David Deno: Yeah, absolutely, John. I won’t speak to any specific numbers, but I think Outback is closing the gap versus some of the competition, but I’ll leave it at that. Everybody sees the numbers. First of all, what do we see that we can make sure that we learn from, right? And also what we have with our Outback heritage and what we control. But it’s the best-in-class operations, right? It’s the value that we provide our guests. And there are things that we can do, the things that we can do to on the menu to provide even more value for our guests at some great price points. Making sure that we have a great experience, consistent execution in our operations day to day to day. And we’ve been talking about, in my remarks, John, some of the products that we’re making against the industry in our operations.
And then finally, continuing to upgrade our assets. So consistent execution with a great experience, with value coming in great service, but also some products that are really terrific that offer great value and continue to upgrade our assets. That’s what we’re trying to do. And I think we’re going to be continuing to close the gap.
John Ivankoe: Could you remind us where we are in terms of editing down the menu, simplifying the menu, making the menu maybe a little bit more focused? Has that begun to go into the system overall on a test basis? And just give us a sense of how much actual opportunity you may have, I guess, use a simple phrase, being better at doing fewer things?
David Deno: Yeah, before COVID we – I can’t remember the exact number of menu items, John, but I think before COVID we – at after COVID, we were down probably 15%-ish in the number of menu items. We’re looking at that right now to see if we can make things simpler for our guests. I’m not going to get into, for competitive reasons, some specifics as far as the number of items that we may be looking at things. But I think if we continue to look at what really drives the business and at the menu items that we can edit. Now, having said that, you probably will see from us some new menu items that are really terrific that offer tremendous value and abundance to the customer. Again, I don’t want to get into that, but you’ll see potentially some more edits to help with operations, but also potentially some add-backs to really address some value and abundance opportunities that we have.
John Ivankoe: Thank you so much.
David Deno: You’re welcome.
Operator: The next question comes from Sharon Zackfia with William Blair. Please go ahead.
Sharon Zackfia: Hi, good morning. Going back to kind of what we’re hearing throughout the industry on the lower income consumer, are you seeing the consumer that’s more mid- to high-income actually increase traffic year-over-year? Or is it just kind of better than what we’re seeing at the lower end? And are you also seeing – it sounds like you’re seeing the more affluent customer kind of hold check and not kind of mix around on their ticket. I just want to confirm if that’s the case, because we’re also hearing talks of kind of more normalized alcohol consumption across the industry.
David Deno: Yeah, I think, Sharon, I guess the best way to describe our middle and higher end customer and casual dining is the words hanging in there. I think the trends are pretty consistent from what we see. As I mentioned, it’s more the lower end that’s experiencing some difficulties. On menu mix and alcohol, I haven’t really seen anything really change that much in it. In our mix there, as Michael alluded to, we don’t really see much mix and decreases in our alcohol mix.
Michael Healy: Yeah, our mix is relatively stable across all the other basket items, so that piece is encouraging.
Sharon Zackfia: Great. And then, on Brazil, and I apologize if you addressed this, Mike, cell cut out for about two minutes. If you do sell it or re-franchise it, what would you use those proceeds for? Are there any strategic initiatives that you’d like to accelerate and use that cash for? Or would this primarily be something where you would look to return value to shareholders in terms of dividends or share repurchases or what have you?
Michael Healy: Yeah, I think that’s for another day when we decide, and if we have an offer that makes it interesting to us, but needless to say, we’ll provide significant cash allocation opportunities for the company going forward, whether it’s some debt, buy down, pay down, whether it’s some share repurchases, whether it’s anything we want due to address some of the things in our U.S. business. Those are all great options for us, and I think that’s to be addressed when we see what comes together.
Sharon Zackfia: Fair enough. Thank you.
David Deno: Thank you.
Operator: The next question comes from Brian Harbour with Morgan Stanley. Please go ahead.
Brian Harbour: Yeah, thanks. Good morning. Congratulations to both of you. I want to echo those sentiments. I had a question more on the margin side as you think about 2Q. And I guess as we kind of think about putting the pieces together for the full year, is this more of – would you expect kind of still a significant change in labor and kind of marketing cost or are those some of the pressures that you would still expect on a year-over-year basis in 2Q? Or anything else we should keep in mind just as we think about margin progression this year?
