Brian Mullan : Just a question on Maggiano’s. Kevin, can you talk — what are the key priorities are for this business over the next couple years? You’ve shared some aspirational targets on AUVs and margins, maybe what are some of the strategies the team will be focused on in order to progress there and then related what would you need to see to think some — growth might make sense at some point?
Kevin Hochman : We’re very bullish about where Maggiano’s can go. So Dominique Bertolone has come into the business. He’s been with us for about two months now. He spent a ton of time in the field just understanding what are opportunities for the business and just getting to know the people and building trust with our senior restaurant leaders, they are excited about what he’s bringing to the table so far. So, he sees a brand that could be much more elevated than where it is today. Starting with improved service levels. The foods amazing. So how do we continue to update the food, but the food is in a really good place. How do we elevate the service levels? And then how do we give guests more of what they want from Maggiano’s versus just being the lowest price thing out there.
And so, he’s really challenging the team on what was Maggiano’s built on and how can we be that amazing brand again? And I think they’re excited. They’re calling about bringing the magic back and it’s literally providing the organization right now. So I think the things that you’re going to see are, number one, there’s going to be some simplification of things that we don’t think add a ton of value so that the brand can reinvest in service areas that are going to make a much bigger impact on both traffic and guest check. Number two, I think you’re going to see some new and exciting innovation come out of that team. The type of innovation that’s chatable and shareable with guests to help build traffic over time. And then number three, I think you’re going to see with improved unit economics, I think you’re going to see us starting to identify areas to start expanding the brand beyond its current footprint.
But we don’t really have news to share on that last part yet because we’re so focused on improving, the operation, improving the service levels, and bringing that new innovation into the business. But next quarter, I know we’re going to have some updates to give you on where we’re headed based on the speed that that team is moving. And I’m very excited about talking about the growth prospects for Marciano’s in the future.
Brian Mullan: Then just a clarification on pricing. And Joe, you spoke to some of the work you were doing with consultants and your new capabilities. I interpreted what you said as perhaps pricing would be above that 2% to 3% in the first half of fiscal ‘25, and then maybe down towards that two to three in the second half. And understanding plans can change. Do we have that right? Is that kind of the current thinking for next year? Your early thinking?
Joe Taylor: Without getting into the quarterly pacing of F ‘25 quite yet, Brian, I think you’re thinking about it, right? Again, you carry price obviously for a year. Some of the bigger laps of pricing start to take place right at early in F ‘25. So again, I expect to, and we’re taking advantage of some opportunities all along. We told you we’d look at the pricing opportunities in the second half of this year. The menu we dropped yesterday included close to 2% of incremental price. Again, low level menu to menu. We’re moving a menu drop forward a month in later part of the fiscal year. You get a little bit you get a little benefit from that, but it’ll probably carry a similar amount of pricing. And then I think what you can try and see as you kind of go through a future menu drops, is that 2% to 3% kind of target range.
Not committing to that. There’s not — I’m not giving you any kind of F ‘25 guidance, but you’ll see some higher levels of pricing, as you move through roll-offs in the first part of F’25 and then start to normalize, I would suspect down into that kind of lower single-digit range as you move further into the year. Again, I think that’s still some good opportunities there.
Operator: Your next question for today is coming from Alex Slagle with Jefferies.
Alex Slagle: Any color on the margin impact on the 3Q related to the January weather hit and perhaps being more difficult to manage labor and other things albeit volatility and I know it’s a big ad spend quarter also. Just kind of curious if that makes it harder to hold this restaurant level margin flattish quarter-over-quarter or how you are thinking about that?
Kevin Hochman: Yes. I can’t give you a lot of detail. Again, I think there is some opportunity there in the margin. Year-over-year might be flattish to slightly up. I’d like to see the — I don’t have a lot of read through yet. Today is the last day of the period the close will start moving through some of those specifics. Shout out to our operators, as I watch kind of the progression of expense management. They have done a great job of managing through those cycles. It’s extremely difficult to manage through some of those kind of weather impacts. And they have done a good job in maintaining labor levels and some of what they can control during the process add levels you would hope to see them do. But don’t have a clear read through. Clearly, its one period. You got say two more periods to go that will have impact to those margin levels, too. It’s just nice to kind of look at and see the sun shining down here right now.
Alex Slagle: The cost of goods, again, you kind of talked about it, but sort of breaking records. I mean, is this a level you think you can hold in the fiscal ’25 or are there certain things about commodities and pricing and the merchandising work that would suggest the cost of goods sort of creeps back a bit higher suggest next year?
Kevin Hochman: Again, it will all depend on the evolution of those commodity markets. I would expect commodity markets to get back probably into a more normal pacing. That typically means you see say, a little bit of inflation that you definitely expect as you kind of go into fiscal year. But obviously, not a lot to share as to specifics on that. But I think long-term, we are expecting kind of more normalization of the commodity markets as we move forward from here.
Operator: Your next question is coming from Jeffrey Bernstein with Barclays.
Jeffrey Bernstein: Two questions. The first one, Kevin, I think you mentioned, you alluded to conservative more conservative consumer. I think you got that from early signs of maybe the mix of 3 for Me slipping a little bit. Just wondering what metrics do you watch from here to assess whether it’s more of a conservative consumer slowdown and how you’d respond? It does seem like we have seen an industry uptick in promotional activity. I wasn’t sure, if that’s just the normal January post-holiday or whether you see it as something more. Just any thoughts on how you would measure more consumer conservatism and thoughts on the competitive landscape?
Kevin Hochman: It’s a good question, Jeff. It’s a tough one to answer because the data that we track is all mixed. You guys probably see the same thing. On one hand, you see like low unemployment and continued wage growth and we saw some pretty big upticks in consumer sentiment in December On the flip side, you see increase in borrowing and credit card balances past due and significant percentage of households are resuming paying on the student debt. So there’s like all these mixed signals that would tell you it’s going one way, but it’s also going the other way. And our own data, we also see mixed messages, right? So we see healthy spending on higher end items. We don’t see a pullback in any of our consumer income demographics, right?
But on the flip side, we’re also seeing improved responsiveness to TV ads that that showcase really sharp value. And then those customers that are coming in incrementally are not — they’re not buying as much alcohol or dessert. So, what does it all mean? What we think it means is that there are different consumers. So we believe that those mixed messages mean there are some consumers that are going to be more conservative and there are some consumers that are not really going to change their behaviours one way or the other. And so we’ve got to make sure that we are prepared and ready to attract both. So from the consumer that is more price sensitive, we got to make sure we have industry leading value. We have to continue to make sure that we improve our experience because if they’re pullback trips, they’re going to choose the concepts that have a more consistent experience that they know they can count on.
