Prepared remarks
Welcome to the BJ's Restaurants Second Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead.
Thank you, operator. Good afternoon, everyone, welcome to our fiscal year 2026 second quarter investor conference call and webcast. After the market closed today, we released our financial results for our fiscal 2026 second quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President, followed by Todd Wilson, our Chief Financial Officer. After which, we will take your questions. With that, I will turn the call over to Lyle. Lyle?
Good afternoon, everyone, thank you for joining us to discuss our Q2 financial results, operating performance, and outlook. Q2, or celebration season, as we call it, was another very strong quarter for BJ's. It was energizing from a performance standpoint, reinforcing our relevance in the social splurge occasion I have talked about, and meaningful from an organizational perspective. Q2 represented our eighth consecutive quarter of sales and traffic growth and our seventh consecutive quarter of profit growth. Same-store sales increased 6.5%, driven by 8.3% traffic growth, continuing to significantly outperform Black Box casual dining benchmarks. On the profit side, restaurant-level operating margins expanded roughly 20 basis points to 17.2%, inclusive of roughly 5% of food inflation, which impacted cost of sales by 120 basis points. Adjusted EBITDA margins were up roughly $2.3 million at 11.4%, inclusive of roughly 40 basis points of deferred comp expense, which Todd will address in his remarks. A few notable Q2 highlights. Our operators delivered outstanding performance. Mother's Day and Father's Day were up over 8% and 3% year-over-year respectively, and more than 80 restaurants broke daily or weekly sales records, all while continuing to improve guest metrics. A strong reinforcement of our ability to win across multiple occasions. Our marketing plan continues to work effectively and efficiently. As I have previously shared, I shifted marketing dollars from Q1 into Q2 to optimize spend timing and drive the highest returns. For the first half overall, we invested the same dollars, but we are about 20 basis points more efficient as a percentage of sales versus last year, while delivering an increase of 67% in impressions in Q2 and 146% in the first half overall, supporting our strong sales. The results continue to reflect the progress our marketing and culinary teams are making, aligning product, messaging, and go-to-market strategies. Our Biscoff seasonal Pizookie was a hit, doubling Pizookie incidents year-over-year during the quarter, and we saw growth across all geographies, all day parts, and all channels. On check and mix, there are a few key points I think are worth calling out. The majority of compression came from Tuesday and Friday. Tuesday is driven by an iconic promotion that builds acquisition and ritual amongst younger guests. Friday is when the Pizookie Meal Deal has opened the social splurge occasion to more people, driving both new guests and repeat visits. Importantly, our sales growth is relatively evenly split between all of the weekdays and the weekend days. We are not overly reliant on any one day or promotion, and our value proposition is resonating across the week. As I mentioned last quarter, as we move further through the menu renovation and continue to optimize programming, we expect more balance between traffic and mix, which we started to see in Q1. What we cannot fully plan for is when a product, like the Biscoff Pizookie, hits a cultural nerve and drives extraordinary trial. Thankfully, our marketing and culinary teams have a pretty impressive hit rate and have built a strong pipeline going forward. Ultimately, the key point is that we are driving profitable traffic. Even with 120 basis points of cost of sales headwinds driven by food inflation, we grew total dollars and expanded restaurant-level cash flow margins. From an organizational perspective, Q2 was a meaningful quarter. We hired Monika Saxena, who came to us most recently from LongHorn Steakhouse, as our Brand President. Monika's track record of delivering sustainable long-term results through clear brand positioning, a relentless focus on product quality and guest experience, and her ability to build high-performing teams makes her an ideal addition to our leadership team. We also recently brought in Birju Amin as our new Chief Technology Officer, coming most recently from Yum! Brands, where he led restaurant technology for Taco Bell. These hires, along with the other leadership team changes over the past 18 months, reflect our commitment to unlocking the full potential of BJ's as we enter our next phase of growth. I'm confident their perspectives, combined with the strong existing team and tenure we have at BJ's, will help us continue to drive long-term value for our shareholders. Overall, I'm very pleased with our Q2 and first half results and encouraged by the positive momentum we've carried into Q3, including sustained significant outperformance versus Black Box casual dining benchmarks. Looking ahead, we have a deeper understanding of our business and our consumer. We've identified our core growth drivers and are clear on the levers to pull in both the short and longer term. Our strategy remains centered on ensuring our people, our food, and our atmosphere work in concert to make BJ's the brand of choice. Everything starts with our team members. They're the ones who bring our brand promise to life, and we're committed to ensuring they have the tools they need to deliver for our guests every day. That means continuing to invest in our training, embedding the new team member and manager programs we rolled earlier this year, building one BJ's way consistently across our restaurants, and developing our leadership pipeline to support future growth. It also means making our team members' jobs easier. Through continued work on POS simplification and modernization, tablet upgrades, and tech enablement, like our AI-supported activity-based labor model, which we'll continue to expand through year-end, our priorities are informed by listening to our teams and investing in the tools they need to deliver. These investments are reflected in our consistent guest metric improvements, continued reduction in comp food and beverage, team member and manager retention outpacing casual dining benchmarks, and ultimately, in our sales and profit performance. On the menu front, we feel good about the progress we're making and will continue taking a disciplined category management approach. We will focus on leveraging the chicken sandwich and burger category refreshes through Q3 while advancing other key category and item work across the menu. Our three culinary pillars of Pizookies, the Pizookie Meal Deal, and product news drive our culinary calendar, and we continue to optimize for more balance between traffic and mix. We have a strong Pizookie lineup for Q3, anchored in perennial favorites S'mores and Spooky, and we'll be bringing some new flavor innovation for holiday while continually building our pipeline to drive buzz and engagement. The Pizookie Meal Deal continues to resonate, driving both new customer acquisition and repeat visits. As I mentioned last quarter, we're testing potential evolutions, including a premium tier. The test is providing great learnings, but it's still in its early stages as we explore ways to give guests pathways to trade up while reinforcing two core BJ's equities, variety and the Pizookie. On the product news side, I remain pleased with the category work we have done to date, and I'm excited about what lies ahead. Across pizza, burgers, and chicken sandwiches, each renovated category is driving higher incidents, more sales, higher average price, and higher dollar margin than before, inclusive of over $1.5 million of investments we've made back into product quality, particularly with pizza. As we continue progressing across the menu, I expect us to deliver a more craveable, compelling, consistent, and profitable offering over time. Ensuring the atmosphere of our 219 existing restaurants remains a competitive advantage is another key focus. We've invested incrementally over the past 18 months and plan to continue doing so over the next 18, getting fully caught up on deferred facilities work and ensuring our fleet, both the physical plant and equipment, is gold standard for team members and guests. This work, combined with our remodel program, is fundamental as we plan for growth. On new unit development, the two planned openings later this year, Buckeye, Arizona, and Joliet, Illinois, are well underway and will showcase a meaningfully refreshed expression of the BJ's brand. These markets represent a mix of an established performance market in Buckeye, Arizona, and a development market in Joliet, Illinois, where we expect nearby restaurants to benefit from increased brand awareness and operational leverage. We continue to build our pipeline as we dial in the new prototype and apply a right size, right place, right cost approach to our next chapter of unit growth. In closing, I'm confident in our plans, excited about what lies ahead, and committed to continuing to invest in our people, ensuring they have the tools and support to bring our brand to life every day, advance operational excellence, making BJ's better and easier for team members and guests, elevate our food and beverage offering, and set the foundation for future unit growth. Q2 delivered another quarter of sustained traffic-driven growth and share gains. While the environment remains dynamic, we enter Q3 with strong positive momentum, clear plans, and significant outperformance versus Black Box casual dining benchmarks. Two years into our journey to unlock the full potential of BJ's Restaurant and Brewhouse, our performance speaks to the progress we've made. Going forward, we remain focused on our strategic pillars and on making sure BJ's continues to be the restaurant of choice when people want to get together with those they care about most. Before I close, I want to thank all our BJ's team members, from our restaurants through to the support center, for their passion and commitment. We talk a lot about being better every day and stronger together. Once again in Q2, our teams took care of each other, our guests, and our restaurants, and delivered another strong result for BJ's. Thank you. I'll now turn it over to Todd for more color on our financial results and outlook.
Thank you, Lyle. Good afternoon, everyone. We delivered strong second quarter results led by 6.5% comparable restaurant sales growth. We achieved 20 basis points of restaurant margin expansion despite a 120 basis point commodity headwind, and delivered a $4.7 million increase in restaurant level operating profit and a $2.3 million increase in adjusted EBITDA. Total revenue for the quarter was $388.9 million, a 6.4% increase versus last year. The comparable restaurant sales increase of 6.5% was led by 8.3% traffic growth and included 1.8% average check compression. Traffic growth was driven by several initiatives, including the success of our seasonal Pizookies, PMD offerings, and menu innovation, all of which benefited from the shift in marketing investment. In addition, our operators continue to do a great job driving increased guest satisfaction, and remodeled restaurants are delivering traffic growth that exceeds the rest of the portfolio. Lyle commented earlier on the check compression. Growth in both traffic and sales across the week underscores the breadth of our performance. Guests are responding to our total value proposition as our promotional offers, combined with an improved overall BJ's experience, are driving growth across all days of the week and across all day parts. Restaurant level operating profit was $66.8 million, and margins increased 20 basis points to 17.2%. Cost of sales was 25.5%, a 70 basis point increase versus last year. The increase primarily reflected a 120 basis points margin headwind due to approximately 5% inflation in our commodity basket, led by an expected 20% increase in beef costs. Produce increases further pressured costs in the quarter due to severe weather and higher transportation costs, though we have seen some relief early in the third quarter. Operationally, we continued to deliver improvements in food waste management and reduced comp food and beverage incidents, including through our efforts to support outlier restaurants. Alongside our operational initiatives, the menu work completed to date is helping us offset a portion of the commodity pressure through improved product architecture and mix. We expect the year-over-year commodity inflation rate to subside in the balance of the year and the benefit of this work to be more visible in the second half. Total labor expense improved 90 basis points to 34.5% as sales leverage and disciplined execution more than offset a 10 basis point increase in workers' compensation costs. Our operators did an excellent job leveraging sales growth to improve margins across hourly labor, management, and benefits while continuing to increase guest satisfaction measures. We remain committed to delivering a great guest experience and expect to continue delivering labor margin gains through the remainder of the year. Occupancy and operating expenses were 22.8%, unchanged versus last year. Within this category, I would highlight three items. First, marketing. We strategically shifted dollars from the first quarter into the second to support our high volume celebration season. This increased second quarter marketing expense by $1.2 million or 20 basis points versus last year. On a year-to-date basis, marketing dollars were unchanged and declined 10 basis points, reflecting improved efficiency and return in driving significant traffic growth. Second, repair and maintenance. We increased our P&L investment in repairs and maintenance during the quarter by approximately $1 million or 14% versus last year as part of the journey to the gold standard physical plant and equipment Lyle mentioned earlier. This builds on incremental maintenance CapEx investments we have made over the past 18 months. We believe the condition and atmosphere of our facilities are important drivers of guest traffic and repeat visits, as well as team member satisfaction and retention. We expect to continue investing at a measured pace over the next several quarters, consistent with our updated financial outlook. Third, the remaining expenses in this category leverage sales growth, improving by 20 basis points versus last year. General and administrative costs were 6.8%, a 90 basis point increase versus last year. This included $1.4 million of incremental costs related to a legal reserve and leadership transition costs, which we excluded from adjusted EBITDA. Additionally, the liability associated with our deferred compensation program is recorded in G&A and totaled $1.5 million. Notably, this liability is offset in other income by increases in the value of the underlying investments. Excluding these items and other smaller adjustments, on a normalized basis, we estimate the quarter would have been approximately $23 million and unchanged versus last year at $5.9 million sales. We continue to expect a normalized G&A run rate of up to $90 million annually. These components parts delivered an adjusted EBITDA increase to $44.4 million compared to $42.1 million last year. The business continues to generate significant free cash flow, which we deployed across three priorities. First, we invested $23.3 million in capital expenditures, primarily maintaining our restaurants, completing five remodels, and constructing two new restaurants targeted to open in the fourth quarter. Second, we repurchased and retired approximately 64,000 common shares for $2.4 million. Third, we repaid $18 million of debt. We ended the second quarter with net debt of approximately $30 million, a substantial reduction from the $61 million we carried at the start of the year. While our cost of debt remains low at approximately 5%, strengthening our balance sheet further positions us to act with conviction on high return investments in remodels, new restaurants, share repurchases, and other investments to drive shareholder value. Turning to our 2026 financial outlook, based on our strong first half results, we are raising guidance for select financial metrics. Our updated guidance is as follows. Comparable restaurant sales growth in the range of 3%-4%, compared with our previous range of 1%-3%. Restaurant level operating profit in the range of $228 million-$235 million, compared with $221 million-$233 million previously. Adjusted EBITDA in the range of $145 million-$152 million, up from $140 million-$150 million previously. We continue to expect capital expenditures in the range of $85 million-$95 million, and our share repurchase guidance is also unchanged at up to $50 million, subject to market conditions. I'll also provide additional color for modeling purposes. First, the third quarter is off to a good start with continued sales and traffic growth and results beating the Black Box casual dining benchmark. Second, we expect third quarter comparable restaurant sales to somewhat outpace the fourth quarter, given the shape of the sales comparison in the third and fourth quarter of last year. Finally, we launched a new menu in late June that included an approximately 110 basis point price increase. We expect total effective pricing of approximately 3.7% in the third quarter, 2.6% in the fourth quarter, and 3% for the full year. We believe average check pressure will ease in the third quarter compared with the second, and anticipate returning to moderate average check growth by the fourth quarter. The performance of our seasonal Pizookies can affect these results, as we've seen in prior quarters, as their popularity can reduce average check while providing a clear benefit to guest traffic, sales, and profit dollars. In summary, our second quarter results reflect strong traffic momentum, disciplined execution by our operators, and meaningful progress in strengthening our balance sheet. These results are only possible because of the hard work of our restaurant, field leadership, and support teams. Congratulations, and thank you to the entire BJ's team. As we move through the balance of the year, we remain focused on executing our core strategies, maintaining daily operational discipline, and investing in the guest experience, operational excellence, and high return growth opportunities. With that, we'll now open the line for questions. Operator?
Questions and answers
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble the roster. The first question will come from Alex Slagle with Jefferies. Please go ahead.
Hey, thanks for the question. Really impressive leverage on the labor line. I guess if not for that cost of goods being elevated, would the restaurant level margin have been closer to the 18% level? Curious looking at cost of goods and how much that can come down maybe versus these Q2 levels. I know you gave the guidance, but is there some room for upside there if things play out?
Yeah, Alex, Todd here. As we're looking at cost of sales for the balance of the year, we do think that Q2, to your point, obviously was impacted by a lot of commodity inflation. We get a little relief on a year-over-year basis in inflation. Keep in mind, though, sequentially, some of our beef costs in particular still increase. We think cost of sales can improve a little bit. We're not looking for a big step down by any means, but we do think we could see a little bit of cost of sales improvement in the balance of the year.
Okay. I think you mentioned you expect the third quarter to somewhat outpace the fourth quarter, if I heard that right. I was just sort of surprised if that was the case.
I think it was third quarter to somewhat outpace fourth quarter, based on the shape of sales last year.
Fourth quarter, okay. Was there anything sort of one-time in nature in that second quarter comp and traffic? I know that the seasonal Pizookie was really big, and I don't know if there was anything with World Cup or the lapse from last year, if there was any aftermath from the L.A. fires or anything like that?
No, there really wasn't, Alex. Todd, you can build on this, but any of that L.A. fire stuff was really Q1. With respect to Q2, there really wasn't. World Cup, I would say, you saw kind of individualized bumps in some individual restaurants around individual games. It was really nothing that was materially visible or differentiated when you look at all restaurant performance across geographies, day parts, and channels. There wasn't anything anomalous. It was really the programming and the progress we've made.
All right. Congrats. Thanks.
The next question will come from Sharon Zackfia with William Blair. Please go ahead.
Hi. Thanks for taking the question. I wanted to ask about the implied comps for the back half. I think the math suggests like 1.5% to 3.5%, and it sounds like you had some durable results in the second quarter, and it sounds like trends were off to a good start in July. Just curious on your thought process as you enter the second half with that implied guidance.
I'll start and Todd, you can pick up. What I would say, Sharon, is we are—I am very pleased with the trends and momentum the business has thus far in Q3. Much like we were when we were on the Q2 call. Our teams continue to do an excellent job executing, and I'm really pleased with what I'm seeing across the business and confident in the performance. You guys have probably gotten to know me a little bit the past two years. My predisposition tends to be that I want to ensure we do what we say we're going to do and not get too far out over our skis, but I feel really good about the performance we have and how the business is performing to date.
Thanks for that. I know you've been doing a lot of menu innovation, and it seems like that's been going really well. Is there anything else we should expect you to refresh before the end of this year? What's on the short list at this point?
In terms of rolled out category refreshes, I wouldn't expect more rolled out category refreshes. We're right now in test on a number of different pieces of both category work as well as item work. I would expect more category work coming through next year. What you do see this year is how we've used seasonal work to preview a little bit of work that's coming. It provides an opportunity to get scaled learning about some of the work we're doing. The Wagyu Burger found its way first onto a PMI earlier in the year. I think about some of the work we did around buffalo chicken sliders, those types of things. These things we start to get learning on and go into the bank and inform the future rollout. We do both the operations test and market test, and also use our seasonal platforms to get scaled learning about it. You'll see some of that in the fourth quarter reflected through some of our seasonal programming, but I wouldn't expect another category rollout this year beyond what we're doing with burgers and chicken sandwiches from a category perspective.
Okay. Thank you.
The next question will come from Jon Tower with Citi. Please go ahead.
Great. Thanks. Maybe I didn't quite pick it up in the prepared remarks, but I'm curious if you could just speak to what drove the negative mix in the quarter. It sounds like some of your seasonal Pizookies might have been the primary driver of it, but if you could expand upon that it'd be great.
Yeah. It's not a new story, but it's a codified story. A lot of it is driven by the seasonal Pizookie when that really hits a nerve. You saw some of the things I said about Biscoff being double the incident rate or double the size of last year. When you see that kind of hit, you get a lot of trial checks. We're bringing a lot of people in, not necessarily buying on discounts, but buying a smaller check as younger guests try the Pizookie. When I take a step back, not all mix is created equal. We continue to drive outsized traffic with programs like the Pizookie and the PMD. Those guests come back more often, and we're flowing more profit through to the bottom line. As we continue the work across the menu, we expect that to moderate over time. With some of these seasonal products, when they hit a nerve and trial spikes, you'll often see some mix impact. When you look at the menu work going forward—pizza, burger, and chicken sandwiches—each renovated category is growing incidents, sales, average price, and dollar margin. Some of that is trading within the menu, some is new guests. You may see some trade from steaks and entrees, which tend to carry a higher dollar check but are lower margin, offsetting some things. The key is that the category renovation work we're doing is working. As we do the rest of the menu work, we expect to drive similar behavior and ultimately balance things out as we progress.
Interesting. Okay. I know you referenced tiering out the Pizookie Meal Deal and where you are in the process. I'm curious if you could dig into that a little more in terms of what you've been finding so far, what resonates from a price point or product perspective, and if there are things that aren't working as you've been testing and a timeline for a premium tier coming through.
It's too early for me to give you anything I would feel comfortable standing behind. The work on PMD is twofold. One is keeping that menu fresh. We retired one item and brought in a classic chicken sandwich, which delivered a great margin and resonated well. On the tier test, we're early in the process, and I don't have results I'm comfortable sharing yet, but it's part of our learning. The thing I'd tell you is we always take a big-picture view: are we delivering a more compelling BJ's through the combination of things we're doing that bring more guests in and allow us to grow profits? Looking at the big picture, I'm pleased with how the pieces are working together. We're continuing to see comp growth driven by traffic, restaurants are executing better, we're delivering more restaurant profit, we're opening two new restaurants as planned, and we're returning dollars to shareholders. I'm focused on the big picture while we optimize the parts; I want to be intentional about how we do it.
Got it. Thanks for taking the question.
I want to be intentional about how we do it.
The next question will come from Todd Brooks with Benchmark StoneX. Please go ahead.
Hey, thanks for taking my questions. A couple for you. One, a couple times during the call, you anchored the quarter-to-date performance to your Black Box peer group. I know you're not going to give us detail on your performance, but can you talk about where the peer group performance sits through July, just based on some of the strength we saw in the bar and grill category during the World Cup?
Hey, Todd. Todd here. What we've seen to start Q3 in the Black Box numbers is similar to what we saw in Q2, meaning for Black Box we see traffic a little negative and sales a little positive. That's consistent with Q2. We had significant outperformance in Q2; we beat Black Box traffic comparisons by over nine points in Q2. We see Black Box very consistent to start Q3 and continue to beat Black Box in these first weeks of the quarter.
Okay, great. Thanks.
By the way, Todd, that's the casual dining benchmark we're referencing. I'm not sure there's a separate bar and grill sub-benchmark; the benchmark we're talking about is casual dining.
Perfect. Thanks. I look at the volumes and the traffic you were able to generate during celebration season. For the longest time, the mantra at BJ's was to grow the business, and during celebration season hold the hill on the traffic you always get. To see material growth in traffic during prior peaks where you thought you couldn't drive many more people through, I'd love to hear about the key unlocks for how you were able to service so many more customers during celebration season.
I haven't seen an indication that we are tapped out in our ability to accept traffic and move people through. Traffic growth exists during this period in our top AUV restaurants through all quintiles. Once you get below the top quintile, there is proven ability to grow as shown by top quintile performance. The things that help include great operations. We continued to emphasize reservations, which is helpful for planning. Chris, for example, focused on transitions and shoulder periods going into this celebration season. Often you'd see a wait during an early transition when we shouldn't be on a wait because the transition wasn't managed well. We put a lot of focus on planning for known high-volume periods, being disciplined on managing the shoulders, and ensuring full hands in and out, and pre-bussing. It comes down to running a good shift, and our teams planned and executed well to move the people through.
Todd, I'll tag in. When we look by day of week, sales and traffic grew across every day of the week, every day part, and every geography we operate in. That broad-based nature reinforces that we're winning across multiple occasions. It's the broad appeal of the brand.
No, that's helpful. Thanks, and congrats to you both.
Thank you, Todd.
The next question will come from Nick Setyan with Mizuho Securities. Please go ahead.
Thank you. The marketing has been very successful. Can you remind us how you're thinking about the back half of this year in terms of marketing spend year-over-year, and maybe even Q3 versus Q4? Anything under the hood in terms of the evolution of how you're thinking about marketing—more social and digital versus broader media—would be helpful.
Year-over-year for the full year, from a percentage reinvestment point of view, we're targeting flat year-over-year percentage. As we grow sales, that will generate a few more dollars to invest. Ultimately, we're keeping a similar percentage reinvestment rate and looking to get more efficient and effective. Over the past couple of years we've moved more toward social, cultural, and word-of-mouth marketing. We've also sharpened our communications architecture: a couple of times a year when we decide to talk more broadly in broader media we might leverage PMD and a value message to get more people in. The other two pillars—product news and Pizookie news—do well from social and digital. We continually monitor markets that traditionally get broader media in our primary windows to ensure we're getting the return. We're piloting how we might evolve that mix depending on those markets. For example, a couple of markets got Tier 2 broader support in Q2 that we shifted to all social and saw great results. That allows us to reinvest or drive social harder. We're constantly optimizing channel mix and market mix by looking at returns. The key is the intersection of relevant product news and the right channel strategy.
Okay. On margin and flow-through in Q2, could we get in Q3 really solid comps with better flow-through? Was Q2 a one-time effect with less flow-through? Should we expect more flow-through in Q3 and going forward?
Nick, I hope it came through. Q2 year-over-year flow-through was impacted heavily by commodity inflation. If you think about the shape of our year, inflation started to peak in the second half of last year and carried into the first half of this year. We were actually a little ahead of our expectations given those headwinds. For the balance of the year—Q3 and Q4—as those inflation headwinds subside, we do expect dollar margin and percentage margin to increase more substantially than they did in the first half.
Understood. Thank you.
The next question will come from Brian Mullan with Piper Sandler. Please go ahead.
Hi, this is Allison Arfstrom on for Brian. Thank you for the question. The menu mix drivers in Q2 that you outlined were clear and also that it should moderate over time. More near term, should the Q2 trend hold? Is that Q2 mix level a good way to think about the back half of this year?
Allison, Todd here. The mix impact should ease. It eases in Q3 compared to Q2 and takes a further step down in Q4. As Lyle mentioned, the variable is the degree to which our seasonal Pizookies resonate. On a normalized basis, that is our baseline expectation: mix eases in Q3, steps down further in Q4, and by Q4 we expect check to be, in total, moderately positive.
Okay. Thank you.
The final question will come from Jeff Farmer with Gordon Haskett. Please go ahead.
Thanks. Just two quick ones. One more on July. I believe you said that Black Box casual dining traffic was down about 1% in Q2. Can you share what that number looks like in July or at least month-to-date in July?
Jeff, Todd here. We're seeing similar Black Box numbers to start Q3 as in Q2—traffic slightly negative and sales slightly positive.
Okay. Bigger picture on marketing strategy: many casual dining concepts are improving advertising across social and digital channels. You guys have had a lead there, but competitors are narrowing that lead. Strategically, how do you stay ahead in digital and social channels that have worked well for you?
A couple of thoughts. The bigger story is the delta between those who are winning and those who are losing in full service. That delta is about your holistic value proposition: are you delivering a more compelling alternative? Marketing strategy is part of it, but the bigger story is better operations, better product, better atmosphere, and how the whole thing works together. We've focused on improving the entire value proposition. On leveraging digital and social, I'm pleased with our progression and trajectory. The intersection of our product pipeline and those channels is the multiplier. We have some iconic, ownable platforms we can build upon and I feel good about our ability to continue to resonate in those channels within the context of our overall value proposition.
Very helpful. Appreciate it. Thank you.
Sure.
This concludes our question and answer session, as well as the conference call. Thank you for attending today's presentation. You may now disconnect and have a great day.