In the prior year, our OI was the lowest it had been for the year, in Q1 as well. So, as we look back to Q4 and why it was so low, a part of that incentive comp and that’s effectively one time, but a part of that was also we were managing the spending. So to some degree, we’re managing the spending based on how the Company is performing. But we do expect a higher level of G&A in Q1, especially as we ramp up for Q2 and get the loyalty program rolled out.
Jake Bartlett: Great. And then my next question is about the balance sheet and about the dividends. Given the margin guidance in the first quarter, it’s very clear that EPS is going to be much less than the $1.30 that you just declared for the dividend. So, how should investors be thinking about that dividend as your payout kind of lose at least early year to over 100%? Are you comfortable increasing the leverage? I know you’ve talked about the target of 1.3 to 1.7. Are you comfortable having that go above that range to sustain the dividend? Other questions I’m getting is about your — the balance sheet and kind of your ability to do more sale leasebacks, if that is appropriate. What — how many stores are unencumbered, for instance, just what’s — as you look at the balance sheet, how comfortable are you focusing on that, maintaining that dividend, even as EPS is somewhat challenged near term?
Craig Pommells: The capital allocation topic, which I think is broadly, the — your question is — a very big one for the Board, and they’ve continued to take a consistent approach there, which is the primary purpose — primary objective is to grow Cracker Barrel and Maple Street. And then beyond that, we’ll return capital to shareholders in the form of a dividend or share repurchase. For the last year or so, that dividend has been really compelling. And you combine that with our kind of stated desire to maintain some flexibility in the balance sheet, maintain a reasonable leverage ratio and so on. So, I think it’s a part of a broader — the dividend is a part of a broader capital allocation decision. It’s a very big topic.
It’s one that’s at the top of the list for the Board, and they will continue to be incredibly thoughtful about it. But I think the takeaway there is there has not been a shift. That’s probably the most important thing. There has not been a shift in our capital allocation framework.
Jake Bartlett: Okay. Okay. And I know you’re not giving annual guidance here. But hopefully — I mean I’m wondering if there are some pieces that you can that you might have some visibility even before we Julie takes the reins, things like CapEx, a rough idea of what we should expect for CapEx or new units at Maple Street and Cracker Barrel? Maybe some of the kind of the bigger picture items in ‘24 guidance that hopefully you can provide, even if it’s not specifically on margins and such.
Craig Pommells: We can talk directionally about a couple of the big levers without getting too specific. So, for example, I would say, commodity inflation, we expect commodity inflation to be much more modest than it’s been historically. Wage inflation, we expect to moderate a bit from fiscal ‘23 levels, but we do think wages will likely remain higher than the long-term run rate, but more moderate than what we saw pre-COVID, for example. In terms of new units, given the environment, we are moderating new unit growth to some degree. Q1, we still have a little bit more in there, but we are moderating that. We’re still growing new units, but we’re moderating the level and the amount of spend that we’re putting against that for the time being. In terms of CapEx, there are other areas that we are constantly evaluating, but we’re thinking about all of that as a part of the broader capital allocation conversation.
Operator: Our next question comes from Dennis Geiger with UBS. Please go ahead.
Dennis Geiger: Thank you. And congratulations to Sandy and Julie. I have another one as it relates to ‘24, at a high level. I think you gave, Craig, which is really helpful, some kind of key points to be thinking about in ‘24, which is helpful. How about on the CEO transition side of things? And maybe keeping some of that flexibility in guidance, depending on what plans look like for the year, is there anything at a very high level to share on sort of what could move the outlook or numbers for ‘24? Might it be maybe remodels that you referenced? Other areas of reinvestment, whether it’s technology or otherwise? Recognizing there’s a reason you’re not speaking to it today, but anything high level to share on some things, at least, buckets, et cetera, that might move the needle as we think about some strategic opportunities this year to help us think through ‘24?
Craig Pommells: Hi Dennis, it’s Craig again. I think for now, we would say it’s still early days in that regard. The macro environment is particularly challenging a bit more uncertain. And Julie is off to an outstanding start, but she’s really only been here for a month. So, I think it’s still early days and really too early for us to make any comments about that.
Dennis Geiger: Makes sense. One more sort of related to some of that, Craig and team, if I could. Sandy, as you and the Board did the search and saw the opportunity with Julie, based on some of her strengths, thinking about store development, innovation across technology menu, et cetera, in her prior opportunity. Anything you can speak to? And I know you’re doing some work with some consultants, it sounds like. But kind of on the — on what you think some of the longer-term opportunities that you’ve been working on and maybe remain longer-term opportunities for the brand, again, whether it’s on the tech side, innovation growth, which encompasses a lot of things? Any very high-level comments to speak to as we kind of look out longer term?
Sandy Cochran: Well, I think you kind of summarized a lot of the reasons why we thought Julie — or the Board thought Julie would be the — a great leader for this sort of next — the next 50 years here at Cracker Barrel. Her experience with brands who have very successfully both evolved — I mean look at Taco Bell, and the kind of thing they’ve done and how successful they’ve been, I think, in remaining relevant despite being around a long time. And then the technology, I think Starbucks has been an amazing example of a brand that has sort of, in my opinion, has got amazing guest-facing technology to make the experience just so simple, you kind of can’t help yourself go more frequently. She’s also got retail experience, which is, for our brand, really important.
Our retail segment is strong, it’s profitable, and it is a very key component of the Cracker Barrel experience. It’s also surprisingly for a lot of people complex. And I think Julie’s background on both sides of this really position her to be able to think about how to bring in technology to a brand that’s 54 years old, to evolve the brand in a way that will both, be familiar and comfortable to our loyal long-term guests, but make it interesting and relevant to our newer guests and maybe people who don’t know us at all and to introduce things like technology, things like our loyalty program, in a really brand-appropriate way, which is not easy to do. Lastly, one of the questions sort of spoke to the idea that you might need to do a refresh.
I think that’s been certainly on our list, the thought about how do you — whether you and how do you think about the interiors of our stores and ensuring that those interiors sort of reflect the same level of freshness and modernization to be both appealing but comforting if you’ve been coming for years. So, I think, Julie is an innovative, flexible leader. She loves the brand, jumped in with both feet. Is that the metaphor, both legs and feet? And I think we’re just really excited to have her here.
