Cracker Barrel Old Country Store Inc (NASDAQ: CBRL) Q2 2020 Earnings Call Transcript

Cracker Barrel Old Country Store Inc  (NASDAQ: CBRL) Q2 2020 Earnings Conference Call

February 25, 2020

Corporate Participants:

Adam Hanan — Manager of Investor Relations

Sandra B. Cochran — President and Chief Executive Officer

Jill Golder — Senior Vice President and Chief Financial Officer

Analysts:

Jon Tower — Wells Fargo — Analyst

Gregory Francfort — Bank of America — Analyst

Brett Levy — MKM Partners — Analyst

Jake Bartlett — SunTrust — Analyst

Jeff Farmer — Gordon Haskett — Analyst

Todd Brooks — C.L. King — Analyst

Bob Derrington — Telsey — Analyst

Presentation:

Operator

Good day, and welcome to the Cracker Barrel’s Second Quarter Fiscal 2020 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adam Hanan, Manager of Investor Relations. Please go ahead.

Adam Hanan — Manager of Investor Relations

Good morning, and welcome to Cracker Barrel’s second quarter fiscal 2020 conference call and webcast. This morning, we issued a press release announcing our second quarter results and our outlook for the 2020 fiscal year. On the call with me this morning are Cracker Barrel’s President and CEO, Sandy Cochran; Senior Vice President and CFO, Jill Golder; and Vice President of FP&A and CFO of Emerging Brands, Jeff Wilson. Sandy will begin with a review of the business and Jill will review the financials and outlook. We will then open up the call for questions for Sandy, Jill and Jeff.

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?

Sandra B. Cochran — President and Chief Executive Officer

Good morning, and thank you, Adam. I’m pleased with the results we announced this morning, which included positive comparable store restaurant sales that outperformed the industry, GAAP earnings per share of $2.55, and operating income growth of 3.2%. Jill will review the financial results for the quarter as well as our updated full-year expectations. But before she does, I want to speak to some highlights from the quarter and provide an update on our plans for the remainder of the fiscal year.

Holidays are an important time for Cracker Barrel, and we believe this year we further strengthened our reputation as a destination for both in-store and off-premise holiday dining occasions. Our second quarter menu promotion featured the return of our popular Country Fried Turkey offering and it was supported by seven weeks of national TV. Additionally, we built awareness of the brand throughout the holiday season by featuring our vintage red truck and a Cracker Barrel tiny store in events throughout the country that earned media attention and built excitement for the debut of our float at the Macy’s Thanksgiving Day Parade.

During the quarter, we also completed updating the creative on our billboards, which continues to be a key channel for communicating with our guests. The new billboard messaging is balanced to highlight two of our differentiators, our every day value and our heritage of serving breakfast all day. I was pleased with the menu promotion and marketing campaign, which drove top-line growth that was in line with our expectations.

The second quarter is a key period for our off-premise business and we again saw strong growth across all three channels of this business, which meaningfully contributed to our top-line results. There continues to be strong demand for our Thanksgiving and Christmas heat and serve offerings. In fact, this quarter, we sold a record number of heat and serve units, even with an average price increase of nearly 15%. We believe the continued growth of this business underscores the trust that guests have in Cracker Barrel to provide a convenient and delicious home-cooked meal at a good value.

The employee and guest experience remains a focus. We implemented several enhancements to drive an improved guest experience during this high-volume quarter. And while we still have room to improve, I believe we made progress and was encouraged by the results. Additionally, I was pleased with how strongly our operators managed the labor line, while also having a heightened focus on the guest experience during this high-volume quarter.

Turning to retail. While we improved our comparable store retail sales trend over the previous two quarters, our top-line retail performance fell short of our expectations. This year’s seasonal assortments, particularly our Christmas decor merchandise, delivered strong sales growth over the prior year. However, continued weakness in women’s apparel and softness in our gifting assortments contributed to results that were below expectations. We’re working to drive improvements in our retail sales performance by continuing to review and refine our assortments, and continuing to optimize the price-value relationship of our offerings. But this will take some time and we’ve lowered our full-year comparable store retail sales guidance, given the underperformance in the first two quarters.

Looking to the remainder of our fiscal 2020, we will continue to execute our business priorities, which include driving top-line growth through craveable signature food, accelerating our off-premise business, enhancing the employee experience and guest experience, and leveraging long-term growth drivers such as Maple Street Biscuit Company and Punch Bowl Social. I’m excited about our current menu promotion, which is centered around Cracker Barrel homestyle favorites such as our chicken and dumplings, country fried steak and Grandma’s Sampler.

In addition to reminding our guests of offerings that they know and love, featuring these core menu offerings will benefit our stores by reducing complexity while we implement our menu evolution initiative. As a reminder, this initiative is targeted at strengthening the dinner daypart by introducing new signature craveable items while also simplifying our menu to increase consistency and execution, and providing a more optimized menu.

Earlier this month, we began implementing specification and process changes that improved the quality of several targeted offerings. In the coming months, we’ll be introducing offerings such as a new and improved chicken pot pie and country fried pork chop, as well as a new menu design that reorganizes the menu into some new categories and better highlights our signature menu items and our abundance value and variety.

For off-premise, we continue to be pleased with the demand for third-party delivery, which, as a reminder, is available in approximately 600 stores, and we’ll be testing several initiatives such as increased marketing support to help us further expand our reach and frequency. We’re also looking forward to Easter as we look to further grow this heat and serve occasion. While this occasion is smaller than the Thanksgiving and Christmas occasions, we’re optimistic about its sales growth over the prior year.

Regarding our investment in Punch Bowl Social, we continue to partner with them to leverage our expertise and experience. Jill will speak to the financial impact of this investment in Q2, but we were pleased with their holiday sales and are looking forward to the upcoming opening in Miami this weekend, and in Phoenix in April.

Lastly, we continue to make progress on the Maple Street Biscuit Company integration, which includes the conversion of Holler and Dash into Maple Street. Our teams have been working diligently to execute our plans. Scott and his leadership team have done an excellent job leading through this transition. During the second quarter, we rolled out an initiative to open all Maple Street locations on Sunday. We’ve been encouraged by the early results and we believe this will help Maple Street improve its business model, increase AUVs to over $1 million, and deliver solid store-level EBITDA of over 17%. We remain very excited about this acquisition and are looking forward to growing the brand after we complete the integration and build a strong foundation for its long-term success.

With that, I’ll turn it over to Jill.

Jill Golder — Senior Vice President and Chief Financial Officer

Good morning, everyone, and thank you, Sandy. I would like to begin by discussing our financial performance for the second quarter of fiscal 2020 and then our outlook for the fiscal year. In this morning’s release, we reported second quarter net income of $61.2 million and GAAP earnings per diluted share of $2.55 compared to prior-year earnings per diluted share of $2.52. Our reported earnings per diluted share includes a $0.15 loss from the Company’s equity method investment in its unconsolidated subsidiary Punch Bowl Social.

For the quarter, we reported total revenue of $846.1 million, an increase of 4.2% when compared to prior-year revenue of $811.7 million. Our restaurant revenue increased 5% to $663 million, and our retail revenue increased 1.4% to $183.1 million. Our total revenue increase was primarily driven by positive comparable restaurant sales, the net opening of four new Cracker Barrel locations and our acquisition of 28 Company-owned Maple Street locations.

Cracker Barrel comparable store restaurant sales in the quarter increased 3.8% as average check increased 4% and traffic decreased 0.2%. The increase in average check reflected core menu price increases of approximately 2.2% and a favorable menu mix impact of 1.8%. The second quarter mix favorability was driven primarily by the growth of our off-premise business, off-premise price increases and our signature fried chicken platform.

Second quarter comparable store retail sales increased 1.3%. While we had strong sales growth in this year’s seasonal assortments, our overall retail sales performance was below expectations. We are working to address the underlying drivers, but we believe retail will remain challenged in the back half of the fiscal year.

Moving on to expenses. Total cost of goods sold in the quarter was 32.2% of total revenue versus 32.7% in the prior-year quarter. Our restaurant cost of goods sold was 26% of restaurant sales, a 30 basis point decrease versus the prior year. This decrease was primarily due to the recognition of favorable vendor allowances. On a constant mix basis, our food commodity costs were approximately 1.4% higher in the quarter than in the prior-year quarter, driven primarily by increases in beef, dairy and pork.

Our retail cost of goods sold was 54.4% of retail sales compared to 55% in the prior-year quarter. This 60 basis point decrease was primarily a result of higher initial margins. Labor and related expenses were $284.8 million or 33.6% of revenue, compared with $276.8 million or 34.1% of revenue in the prior-year quarter. This 50 basis point decrease was primarily due to productivity improvements. We were pleased that we saw another quarter of strong execution and labor management from our operators, which has been a point of emphasis for our organization.

Other store operating expenses were $171.6 million in the quarter or 20.3% of revenue, compared with other store operating expenses of $156.8 million or 19.3% of revenue in the prior-year quarter. This 100 basis point increase was primarily driven by the following. First, higher advertising expense to support our menu promotion. Second, planned depreciation increases related to investments in our strategic initiatives. And third, costs associated with the growth in our off-premise business.

General and administrative expenses were $38.4 million in the quarter or 4.5% of revenue, compared to G&A expenses of $36.2 million or 4.4% of revenue in the prior-year quarter. GAAP operating income was $79.1 million or 9.4% of revenue, compared with $76.7 million or 9.5% of revenue in the prior-year quarter.

Net interest expense for the quarter was $3.5 million compared to $4.2 million in the prior-year quarter. This decrease was primarily driven by the benefit of interest income resulting from our lending to Punch Bowl Social. Our effective tax rate for the second quarter was 14.4%, compared to an effective tax rate of 16.2% in the prior-year quarter. This decrease was primarily driven by the tax benefit generated from our investment in Punch Bowl Social and the tax benefit of the retroactive reinstatement of the Work Opportunity Tax Credit.

In the second quarter, we paid $31.3 million in dividends and repurchased shares totaling $5.8 million, which resulted in us returning $37.1 million to shareholders in the quarter.

Turning to our balance sheet. We ended the fiscal quarter with $72.8 million of cash and equivalents compared to $169.6 million at the prior-year quarter-end. Our total debt was $460 million at quarter-end.

With respect to our fiscal 2020 outlook, everyone should be mindful of the risks and uncertainties associated with this outlook as described in today’s earnings release and in our reports filed with the SEC. Our fiscal 2020 earnings estimate continues to assume total revenue of approximately $3.15 billion to $3.2 billion. We now expect Cracker Barrel comparable store restaurant sales growth in the range of 2% to 2.5%. We now anticipate Cracker Barrel comparable store retail sales growth will be approximately flat. We continue to anticipate our fiscal 2020 core menu pricing will be approximately 2%.

We continue to expect to open six new Cracker Barrel stores and one Maple Street location in fiscal 2020. As a reminder, we are in the process of converting Holler and Dash units into Maple Street locations, and we expect these conversions to be completed in the next few months. We now expect increased food commodity costs on a constant mix basis in the range of 1.5% to 2% for the fiscal year. This lower estimate is driven by updated expectations for the pork and poultry categories. We plan to reinvest a portion of these expected savings in various initiatives, including training to support the roll out of our menu initiative and increased marketing support in our fourth quarter. However, we still anticipate marketing as a percent of sales in the fourth quarter will be lower than the prior year.

We have locked in our pricing on approximately 60% of our commodity requirements for fiscal 2020 compared to approximately 60% at this time last year. We continue to project that our retail margins as a percent of sales for the full year will be approximately flat to the prior year. We now project approximately $11 million in business model improvements resulting from sustainable cost savings. Taking these assumptions into account, we continue to expect full-year operating income margin of approximately 9% of total revenue. We continue to project net interest expense of approximately $12 million. As a reminder, this includes the benefit of interest income resulting from our lending to Punch Bowl Social.

We now anticipate an effective tax rate for the fiscal year of approximately 16%. As a reminder this guidance includes the expected tax benefit from the estimated loss from our equity method investment in Punch Bowl Social. We now expect capital expenditures for the year of approximately $125 million. This increase is primarily due to updated expectations for the roll out of our new POS system. We now expect depreciation of approximately $115 million. Our guidance implies an increase in fiscal 2020 EBITDA of approximately 2% to 3% compared to the prior year.

Taking these assumptions into account, we now expect to report GAAP earnings per share between $8.55 and $8.65. I want to remind everyone that this estimate includes the following. First, an expected loss from our equity method investment in Punch Bowl Social of approximately $0.80. And second, transaction and integration expenses related to the acquisition of Maple Street of approximately $0.15.

Lastly, I would like to note that our current guidance contemplates some impacts from the coronavirus, such as expected delays in some shipments of retail product. However, if the situation worsens, our future results could be negatively impacted by higher retail cost of goods sold and/or missed retail sales due to further delays in receiving products.

And with that, I will turn the call over to the operator so that we can take your questions. Thank you.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Jon Tower of Wells Fargo. Please go ahead.

Jon Tower — Wells Fargo — Analyst

Great. Thanks. Just a quick clarification question. What was the off-premise growth in the quarter? And then, I guess, the question stems from that is, how — can you just talk about the traffic growth in the period in-store versus off-premise and how that played out throughout the quarter?

Jill Golder — Senior Vice President and Chief Financial Officer

Great. Good morning, Jon. This is Jill. We were really pleased both with our in-store and off-premise performance this quarter. So off-premise grew 210 basis points versus the prior-year quarter. We saw growth across all three channels, so individual, To-Go, occasion and catering. And all three of those channels were up double digits. So we’re very pleased with that. As we look at the in-store, and I’m sure you’ve seen some of this from an industry standpoint, we as well as the industry benefited from some weather favorability, primarily in January. For us, it’s really difficult to pinpoint exactly what that favorable weather impact is just given our travel consumer. So if I had to give you a number, I’d say it was approximately 60 basis points. I’d give a range around that number. But overall, we were pleased with both our in-store performance as well as off-premise.

Jon Tower — Wells Fargo — Analyst

Okay. Thank you. And then just looking at the balance of the year for guidance and I think you hit on this a little bit earlier, but I just want to confirm. It suggests that some of the — I guess, the guidance suggests the back half of the year growth is going to decelerate from a EBITDA and EPS standpoint. And I just want to confirm that the majority of that is coming from the reinvestment that you’re suggesting, I think talking about taking some of the commodity cost savings and pouring it back into some of the initiatives and training. But if you wouldn’t mind clarifying, that’d be great.

Jill Golder — Senior Vice President and Chief Financial Officer

Yeah. So, you’re exactly right, Jon. We had a solid second quarter performance. For the year, we modestly raised our same-restaurant sales guidance and modestly lowered our retail same-restaurant sales guidance. The favorability in commodities, we chose to reinvest much of that in marketing, primarily in the fourth quarter, given the fact that we were wrapping on our chicken launch last year in the fourth quarter. Now, that said, our marketing will still be below prior year’s fourth quarter.

And then, we’re also investing in training and support around our menu initiative that Sandy discussed in her prepared remarks. And we’ll also be adding some additional point-of-sale in the fourth quarter. We’re still working through those plans, but we’ve included some training there. So, year-to-date, we’ve got about a 170 stores that have our new point-of-sale, which we call Max, and we’ll add a few more to those in the back half in the fourth quarter.

Jon Tower — Wells Fargo — Analyst

Great. Thank you. I appreciate it.

Operator

The next question comes from Gregory Francfort of Bank of America. Please go ahead.

Gregory Francfort — Bank of America — Analyst

Hey, I just had a couple of questions. Thank you. The first is, Sandy, the dinner daypart initiative that you’re doing, can you just remind me maybe where SKUs are today and where you’re trying to get them to kind of as you get through this program?

Sandra B. Cochran — President and Chief Executive Officer

Good morning. I’m not sure what you mean by SKUs.

Gregory Francfort — Bank of America — Analyst

Well, I think you talked about menu simplification kind of through this process and just kind of where you envision it to get to versus where it is today.

Sandra B. Cochran — President and Chief Executive Officer

So first, maybe I’ll start by reiterating that the initiative is targeted at strengthening the daypart from a consumer standpoint first, which was the daypart that we’ve seen under the most pressure, and it’s sort of introducing when we finish new signature craveable items while also simplifying the menu to increase consistency and ease of execution. So the purpose in simplification wasn’t necessarily to reduce the number of SKUs, although that may be an outcome when we finished it all.

It will allow us — reducing some SKUs in the short term, some delays will allow us to introduce as we roll through the initiative, which will go into next fiscal year, new items and sort of allow our field leaders to be able to execute at a high level against that. But we’re in test right now with various phases of the initiative. I think we’ve got a little over 100 stores on it and we’ll be rolling as we go through the next few months, stop as we get into the fourth quarter and then begin again in the first quarter of next year.

Gregory Francfort — Bank of America — Analyst

Got it. Got it. Thank you. And then just in terms of labor this quarter, it was a lot better than we had expected. And can you maybe talk about some of the productivity improvements and kind of maybe some specifics around what you’re doing out on that front, what’s really kind of driving the improvements on the labor line? Thanks.

Jill Golder — Senior Vice President and Chief Financial Officer

Yes. Good morning, Greg. We were pleased with our labor and related decrease of about 50 basis points in the quarter versus prior year. So, we do have productivity improvements for several cost-savings initiatives in there. I think we’ve talked about — whatever, we talked about from a labor standpoint, we haven’t given a lot of detail on those, but they’re fairly simple. Like we talked about pan liners, I think, in the past, so how that impacts the dish area, but the team has also done a really nice job, doing better forecasting, better labor scheduling. And so we are managing our labor and it’s not just making sure that we have lower labor dollars, but making sure that we have the right labor at the right place at the right time so the team continues to do a good job there.

And then within the quarter, we also leveraged the growth in our overall sales that you saw. The sales growth helped us leverage labor. So the team is doing a really nice job there. As we look at the back half, I guess, we expect it to be a little bit higher from an inflation standpoint in the back half. So in the second quarter, we were closer to the low-3%s and in the back half, we expect it to be closer to the mid-3%s inflation growth on wage rates. So hopefully that’s helpful.

Gregory Francfort — Bank of America — Analyst

Got it. That’s helpful. Maybe I going to sneak one last one in here. Sandy, you talked a little bit about the coronavirus impact on your sourcing out of China. Can you maybe just help us understand, as you look to the next holiday season, when do you need product to ship by this year to have that in stores? Is that the next couple of months, is that sort of more like the summer just as we kind of try to frame that up? Thank you.

Sandra B. Cochran — President and Chief Executive Officer

It starts in the next couple of months. It starts now. We have productions, probably, we hope, going on right now for the Christmas ornaments and the decor, which is sort of how we roll out the Christmas season and then as we get into the more gifting part, which sets a little bit later. So the issue is, we’re currently focused on where we are in terms of our inventory, and we will continue to be until we believe we’re really out of the woods with this, but this will go on for months.

Gregory Francfort — Bank of America — Analyst

Understood. Thanks for the thoughts.

Operator

The next question comes from Brett Levy of MKM Partners. Please go ahead.

Brett Levy — MKM Partners — Analyst

Great. Thank you. If I could, a few questions. First, would you care to share any more detail on just how the quarter — how the quarterly cadence went, what you’re seeing across regions or even any incremental color since quarter-end, given what we’ve seen out there in the landscape? And then a couple of operational questions.

Jill Golder — Senior Vice President and Chief Financial Officer

So, we don’t want to get into monthly cadence except to the degree that we talked about the fact that weather was more favorable in January. So as we look at dayparts, weak pork performance, our breakfast daypart was the strongest daypart, specifically weekday breakfast. Lunch and dinner were comparable performance, probably weekend dinner continues to be the most challenge, given the competitive environment. Beyond that, from a region standpoint, performance was broad and similar in our outperformance versus the industry.

Brett Levy — MKM Partners — Analyst

Great. Now that you have about 107 units with the Max POS, what are you seeing in terms of potential savings, productivity? How does that differ from what you’re able to do on the other scheduling items that you called out as drivers for this quarter?

Sandra B. Cochran — President and Chief Executive Officer

I’ll start and maybe turn it over to Jill. The POS system was really — it allowed us to do a variety of things, really a platform that we would use to then add additional functionality. So tablets is probably one of the ones that will be the soonest, and we’re pleased with the testing and the results we’ve gotten from that. We continue to work through some technology issues, making sure that the battery lives match the rhythm of the business, making sure that the tablets can withstand the kind of volume that they get in a Cracker Barrel and so on. That will help both speed into the kitchen as well as server labor hours. We then will be able with the new functionality to add our PCM, our food and labor systems, which we’re excited about, the operator’s ability to use these more sophisticated systems to manage food, fixed costs and to allocate labor.

To Jill’s point, it’s — to some degree, the benefit is not just reducing labor, it’s making sure that you’ve got the labor allocated in the right place. It does give us the ability to do a little bit more functionality in our retail store around promotional activity, but that’s probably sort of on the lower end of the — where we’re excited about.

Jill Golder — Senior Vice President and Chief Financial Officer

Yeah. Brett, and I think, Sandy covered it, I just want to make sure. So, we now are in a 170. I just want to make sure that you heard me correctly. I wasn’t sure if he said 107. So we’re in a 170 today.

Brett Levy — MKM Partners — Analyst

This time, I actually got it right, but thank you. And if I could just field one last question. Do you have any measure on what level of incrementality you’re seeing from off-premise? Then I’ll go back into the queue.

Jill Golder — Senior Vice President and Chief Financial Officer

There is that [Speech Overlap] question. Do you want to start or…

Sandra B. Cochran — President and Chief Executive Officer

No, I’ll let you.

Jill Golder — Senior Vice President and Chief Financial Officer

Awesome. We believe — it’s a great question, hard to tease out. Certainly, as we’ve gotten into third-party delivery, that was easier to measure kind of early on, we believe that is very incremental. But it’s hard to tease that out overall incrementality. Certainly, within the second quarter, we felt like a fair amount was incremental, because we saw an improvement both in the dine-in as well as the off-premise, and of course the special occasions support a different meal occasion for our consumer.

Brett Levy — MKM Partners — Analyst

Thank you.

Operator

The next question comes from Jake Bartlett of SunTrust. Please go ahead.

Jake Bartlett — SunTrust — Analyst

Great. Thanks for taking the question. Mine was about the same-store sales guidance for the year and it looks like the implied in the back half of year is about 1% to 2%, given what you did in the first half. And just trying to understand why the potentially more conservative view for the back half? I know you have a difficult compare in the fourth quarter, but easier in the third. But what are some of the puts and takes as to why you think comps might decelerate?

Jill Golder — Senior Vice President and Chief Financial Officer

No. That’s a great question, Jake. So what we would say is, as we look at the back half, we still are assuming that the industry will be soft, although we have forecasted some modest improvement on the industry performance kind of taking out any weather impact. But also as you said that we are wrapping on the roll out of our very successful platform for the bone-in fried chicken, so we’ll have that to wrap on in the fourth quarter. And we’ll have modestly lower marketing support against that initiative. And then versus our current performance, off-premise is very big for us in the second quarter and we continue to expect it to grow, but occasions or not — the occasion for off-premise, you can’t see me doing that in quotes, but the special occasions for off-premise is a smaller part of the business in the back half.

Jake Bartlett — SunTrust — Analyst

Okay. And then you mentioned cake[Phonetic] and that the weekend dinner was the most challenging. How would you characterize the competitive environment in terms of value orientation? And did you think that that’s getting more challenging or less challenging? And then also just how you’d expect to react to that? I know in the past you did the Daily Delights and kind of had promoted that. Is that something that you might work more into your marketing plan in the back half of the year?

Sandra B. Cochran — President and Chief Executive Officer

Well, Jake, it remains very competitive out there and it does feel to us like it has become more promotional. We continue to believe that we’re well positioned in the environment, because we offer the everyday value that we’re known for. We reinforced it in the second quarter when we redid our billboards as I mentioned. They focused on the value and then breakfast all day, which we thought was a differentiator, and it reinforced that in an environment where we thought guests were looking at it.

The work we’re doing around the dinner initiative, we do believe is in that way we’ve redesigned the menu. We are seeking to ensure that we continue to first have great value and to highlight it, make it easy for our guests to find the value and so that’s easier than the Daily Delights was in our opinion. And so I think that we’ll be well positioned for an environment that we’re assuming going forward is going to remain very competitive and very promotional.

Jake Bartlett — SunTrust — Analyst

Got it. Got it. And then the last question. This is more of a modeling question for Jill. But other expenses, you mentioned, were up. Your other restaurant or store-level expenses were up about 100 basis points in the second quarter, but also in the first. I just wanted to just make sure I understood what is driving that. I think you mentioned some greater marketing in the second quarter, but seems like it’s been pretty consistent for the whole first half of the year. Should we expect maybe in the third or in the fourth that should come down as the marketing is less on a year-over-year basis?

Jill Golder — Senior Vice President and Chief Financial Officer

Yeah. No, Jake, that’s a great question. So within the second quarter, other operating expenses was higher by approximately 50 basis points driven by the higher marketing. And so we expect in the back half, marketing will be slightly less than it was in the first half so that won’t be as much of a headwind in that line item. But the items that will continue is, as we’ve talked about a number of our initiatives like the platform for the bone-in fried chicken as well as our new POS that we call Max, we’ve had increased spending in our capital expense, which will result in higher depreciation. We expect that to continue. Also, in other operating expense is where we capture supplies associated with our off-premise sales and we would expect that to continue.

Jake Bartlett — SunTrust — Analyst

Great. Thank you very much.

Jill Golder — Senior Vice President and Chief Financial Officer

Welcome.

Operator

The next question comes from Jeff Farmer of Gordon Haskett. Please go ahead.

Jeff Farmer — Gordon Haskett — Analyst

Thanks. A handful of follow-ups, but I’ll just start with or begin with what Jake just asked and that’s — depreciation was one I’m focused on. So I think the accelerated depreciation that you’ve seen over the last several quarters has had a lot to do with some of the investments that you guys have made in this business. So do those fall off as we get into FY ’21? Or can we expect to see accelerated depreciation and the depreciation line continue to increase year-over-year as we get into FY ’21?

Jill Golder — Senior Vice President and Chief Financial Officer

So at this point we’re not guiding to ’21.

Jeff Farmer — Gordon Haskett — Analyst

Okay. But even taking a step back, so in terms of thinking about the accelerated depreciation, when did the lion’s share of that begin? What quarter did the lion’s share of that begin in? Are we almost four quarters through it, more to come?

Jill Golder — Senior Vice President and Chief Financial Officer

So, we’re really in our second year of that spending.

Jeff Farmer — Gordon Haskett — Analyst

Okay. I’ll move on from that. So talking about the top line, beyond weather, which a lot of your casual dining peers have pointed out as a driver for the January same-store sales, did you see anything else that you believed to be driving the strength in January casual dining segment same-store sales trends? And if yes, is there something out there that you think is sustainable that potentially rolls into February, March, April?

Sandra B. Cochran — President and Chief Executive Officer

Jeff, what we’re saying is that January was surprisingly good. Certainly, some of it is the weather. Jill tried to quantify for us how much is very noisy. And the question that is whether the improvement is sustainable, I think we’re being cautious about that.

Jeff Farmer — Gordon Haskett — Analyst

Okay. And then final unrelated question as it relates to off-premise. I might have missed this, but I think you did say year-over-year it’s up 210 basis points. But where does off-premise stand as a percent of sales currently? And do you think you have a chance to get beyond that 10% of sales mix target that you laid out, I think, a couple of years ago?

Jill Golder — Senior Vice President and Chief Financial Officer

So for the second quarter, our off-premise was 13.2% of sales. And what I would say is, we are on track to deliver at least the 10% of sales.

Jeff Farmer — Gordon Haskett — Analyst

All right. Thank you.

Operator

[Operator Instructions] The next question today comes from Todd Brooks of C.L. King. Please go ahead.

Todd Brooks — C.L. King — Analyst

Hey. Good morning, everybody. Nice sales results in the quarter. I just wanted to follow-up and maybe dig a little bit on — it’s another three months of experience with Punch Bowl Social here across kind of your first holiday of involvement with the brand. I guess what are you finding as you dig in further on the brand? Are you finding anything you can kind of share on more or less consistency around unit performance? And I know there’s been some talk about other ways to extend the brand, whether it’s kind of reusing some anchor real estate in some of the malls or maybe a lodging play. Just your thoughts on this brand being where you want from a consistent return standpoint before extending it into kind of new use occasions. Thanks.

Sandra B. Cochran — President and Chief Executive Officer

So I’ll give you just a couple of comments. I won’t speak to some of the questions you have. I’ll let the folks at Punch Bowl. We learn everyday about things going at Cracker Barrel, Maple Street and Punch Bowl. As we said, we’re pleased with the holiday performance and we’re pleased with the work that the team is doing there on a number of fronts, attacking things like site selection and how to improve that, the middle of the P&L with labor, attacking capital. So they have work streams against a number of areas and are making progress against it. I won’t speak to what the views are of the brand going forward. Jill, do you want to add anymore?

Jill Golder — Senior Vice President and Chief Financial Officer

Yeah. I mean, I guess, on the financials, we don’t want to get into much detail. But Todd, as you said, it’s a young brand, so we continue to learn everyday as that team is learning. And as Sandy talked about, it’s the site selection and then what does the honeymoon period look like. It is just all kinds of great learning and partnership with that team.

Todd Brooks — C.L. King — Analyst

Okay. Great. Thank you. And then just a follow-up on Maple Street. It sounds like the testing around the Sunday openings has gone well, rolling it out to all the units and it sounds like getting the AUVs where you wanted. I know it’s still early, but when should we be looking — and maybe at the Analyst Day in June for kind of guidance on the growth trajectory of that business assuming that with this fixed — around opening schedule has proven out the return model for you. Is the first we’ll hear about it at the June meeting?

Sandra B. Cochran — President and Chief Executive Officer

We — just to be clear, we were happy with the model even before they were open on Sunday. And so the successful initiative to open Sunday has even strengthened it more. And I think the leadership team at Maple Street did a phenomenal job of leading that organization through all of the different elements to do that successfully in terms of hiring and messaging and all of that. So now that we’re through that, we’ve gotten the team sort of stabilized, we’re putting together the foundation for growth. We’ll be, I think, rolling out the growth plans probably at our Analyst Day, which will be in the summer.

Todd Brooks — C.L. King — Analyst

Okay. Great. Thanks for the questions.

Operator

The next question today comes from Bob Derrington of Telsey. Please go ahead.

Bob Derrington — Telsey — Analyst

Yeah. Thank you. Quick question on the — to follow up on Maple Street. This past quarter, you opened a store, you closed a store. Just specifically, were those both old country stores, was one a Holler and Dash?

Jill Golder — Senior Vice President and Chief Financial Officer

So, good morning, Bob. This is Jill. Yeah, we opened one Cracker Barrel store and we closed one Holler and Dash.

Bob Derrington — Telsey — Analyst

Okay. All right. And then you have a total of six, I believe, old country stores planned for the year. You’ve got one to-date. So I assume — how do we think about the next couple of quarters, two to three each quarter?

Jill Golder — Senior Vice President and Chief Financial Officer

So yeah, we actually have two openings this quarter, and I think we’ve opened.

Adam Hanan — Manager of Investor Relations

Two already opened.

Jill Golder — Senior Vice President and Chief Financial Officer

Yeah. And we’ve already opened two.

Bob Derrington — Telsey — Analyst

Okay. All right. Got you. As we think about Punch Bowl, just trying to model out obvious — as best we can, the losses that flow from the business currently, what’s the timing on new store openings? I know, Sandy, you mentioned two coming up, is it just two more for this fiscal year for the Company?

Jill Golder — Senior Vice President and Chief Financial Officer

Yes. We’re going to open two in this fiscal year. One opens in a week or so. And that — those will be the openings last for this fiscal year. And then we’re not really talking beyond that.

Bob Derrington — Telsey — Analyst

Okay. All right. That’s fine. And then last question. Jill, you gave us some color on the commodity situation and your contract. How — is that — I assume those comments were related to the fiscal year specifically. Is there any coverage for the second half of the calendar year?

Jill Golder — Senior Vice President and Chief Financial Officer

So yeah, whenever I talk about the commodities, it’s always talking to this fiscal year. So right now, we’ve got 60% kind of locked in.

Bob Derrington — Telsey — Analyst

Okay. And any color for the balance of the calendar year?

Jill Golder — Senior Vice President and Chief Financial Officer

So, no, I mean, I think, as you look at the guidance, we brought the commodities guidance down modestly from what we had before. We brought it down primarily due to the pork favorability, due to the near-term concerns about African swine fever a little less, although we’ve kept in some protection in our forecast. We also entered into a good negotiation on poultry, so that’s included in there. So versus the first half, you’ll see that we do expect some big increase in the commodities inflation in the back half and some of that is because we’re wrapping on low inflation a year ago.

Bob Derrington — Telsey — Analyst

Got you. Very good. Super. Thanks for the color. I appreciate it.

Jill Golder — Senior Vice President and Chief Financial Officer

You’re welcome.

Operator

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

Sandra B. Cochran — President and Chief Executive Officer

Well, thank you for joining us today. Cracker Barrel continues to be one of the strongest and most differentiated brands in the industry, and we remain confident that our strategy and business initiatives will drive performance. We appreciate your interest and support.

Operator

[Operator Closing Remarks]