Cheesecake Factory Inc (CAKE) Q1 2025 Earnings Call Highlights: Strong Growth Amid Economic ...

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Thu, May 1, 2025, 1:19 AM 4 min read

Total Revenue: $927 million, towards the high end of guidance.
Adjusted Net Income Margin: 4.9%, exceeded guidance.
Adjusted Earnings Per Share: $0.93, a 27% year-over-year increase.
Comparable Sales - Cheesecake Factory: Increased 1%.
Annualized Unit Volumes - Cheesecake Factory: Exceeded $12.5 million.
Four Wall Restaurant Margins - Cheesecake Factory: Increased to 17.4%, up 140 basis points from the prior year.
New Restaurant Openings: Eight in Q1, including three North Italia, three Flower Child, and two FRC restaurants.
North Italia Revenue: $83.4 million, up 18% year-over-year.
Flower Child Revenue: $43.5 million, up 26% year-over-year.
External Bakery Sales: $12.7 million.
Cost of Sales: Decreased 100 basis points due to favorable commodity costs.
Labor Costs: Declined 30 basis points, driven by improved retention and productivity.
Pre-Opening Costs: $8.1 million, compared to $5.9 million in the prior year.
Shareholder Returns: $153.8 million returned through dividends and share repurchases.
Total Available Liquidity: Approximately $501.9 million.
Debt Outstanding: $644 million.
Capital Expenditures: Approximately $43 million in Q1.

Warning! GuruFocus has detected 6 Warning Signs with CCI.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Cheesecake Factory Inc (NASDAQ:CAKE) delivered solid top and bottom line results in the first quarter, with revenues finishing towards the higher end of guidance and profitability surpassing expectations.
The company achieved a 27% year-over-year increase in adjusted earnings per share, marking the sixth consecutive quarter of 20% or higher growth.
Comparable sales at Cheesecake Factory restaurants increased by 1%, with annualized unit volumes exceeding $12.5 million, highlighting strong performance.
Cheesecake Factory Inc (NASDAQ:CAKE) opened eight new restaurants in the first quarter and plans to open as many as 25 new restaurants in 2025, indicating robust expansion efforts.
The company was named to Fortune magazine's 100 Best Companies to Work For list for the 12th consecutive year, underscoring its strong culture and employee satisfaction.

Negative Points

Cheesecake Factory Inc (NASDAQ:CAKE) adjusted its total revenue outlook to align more closely with the lower end of previous expectations due to revised economic growth forecasts.
Comparable sales for North Italia declined by 1%, impacted by external factors such as the Los Angeles fires.
The company anticipates potential impacts from tariffs, which could affect operating expenses, although they plan to absorb these impacts without changing margin expectations.
Cheesecake Factory Inc (NASDAQ:CAKE) closed a location in Seattle, which may impact overall sales performance.
The macroeconomic environment is described as less robust than expected, leading to cautious revenue projections for the remainder of the year.

Q & A Highlights

Q: Have you already seen the uncertain macro environment affecting your business, or is it just a projection for the future? A: Matthew Clark, CFO, explained that while the business remains stable and predictable, the environment doesn't feel as robust as it did three months ago. They are managing it well and have built credibility over the past year and a half with their results.

Q: Can you quantify the impact of tariffs on your P&L, and how do you plan to absorb them? A: Matthew Clark, CFO, stated that the biggest impact would be on other operating expenses, particularly for imported small wares and packaging. They plan to absorb the impact through operational efficiencies, potential pricing adjustments, and working with vendors for cost offsets.

Q: How important are loyalty and marketing initiatives for 2025, and are they more of a long-term driver? A: David Gordon, President, highlighted the success of their new menu and PR efforts. The loyalty program is exceeding expectations, with personalized offers driving higher engagement. They see it as a promising lever for future growth.

Q: What are the components of same-store sales at The Cheesecake Factory, and how did calendar shifts affect them? A: Matthew Clark, CFO, noted that effective pricing was around 4%, with traffic down 1.2%. The mix was affected by new lower-priced menu items. Calendar shifts, like a later Easter, were headwinds in Q1 but are expected to help in Q2.

Q: How do you expect commodity inflation to play out in the second half of the year? A: Matthew Clark, CFO, mentioned that Q1 saw breakeven on commodities, with low single-digit inflation expected in Q2. They anticipate some pressure from tariffs in the second half but still expect low single-digit inflation overall.

Q: Are there any planned restaurant closures that could impact your annual guidance? A: Matthew Clark, CFO, confirmed a Cheesecake Factory closure in Seattle but stated there are no other planned closures that would impact their guidance.

Q: What differentiates Flower Child's performance in a softer environment? A: David Gordon, President, attributed Flower Child's strong performance to food quality, operational stability, and attractive restaurant design. The concept resonates well with consumers, offering a competitive advantage in a tough staffing market.

Q: How do you view the pricing strategy for the rest of the year, especially with new menu changes? A: Matthew Clark, CFO, stated that they expect to maintain a 4% pricing strategy for the year. They will evaluate pricing with each menu change, focusing on balancing guest value and margin needs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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