Yahoo Finance Cheesecake Factory Inc (CAKE) Q1 2024 Earnings Call Transcript Highlights: Strong Performance ...
Revenue: $891 million, towards the high end of expectations.
Adjusted Net Income Margin: 4%, exceeding the 3.5% guidance.
Dividends and Stock Repurchases: Returned $25.3 million to shareholders.
Cheesecake Factory Restaurant Sales: $668 million, up 2% year-over-year.
North Italia Sales: $70.9 million, up 12% from the previous year.
Other FRC Sales: $74.2 million, an increase of 8% year-over-year.
Flower Child Sales: $34.5 million, up 10% from the previous year.
GAAP Diluted Net Income Per Share: $0.68.
Adjusted Diluted Net Income Per Share: $0.73.
Total Liquidity: Approximately $297 million.
Total Debt: Unchanged at $475 million.
Principal CapEx: Approximately $37 million for new unit development and maintenance.
Share Repurchases: Completed approximately $12.5 million.
Dividends: Returned $12.8 million to shareholders.
Q2 Revenue Forecast: Between $890 million and $910 million.
Full Year Revenue Forecast: Approximately $3.6 billion.
Full Year Net Income Margin Forecast: Approximately 4.25%.
Planned New Restaurant Openings: Up to 22 new restaurants in 2024.
Annual CapEx: Estimated between $180 million and $200 million.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Cheesecake Factory Inc reported revenues near the high end of the expected range, with a 20% year-over-year growth in adjusted earnings per share.
The company successfully opened five new restaurants in the first quarter, keeping on track with its expansion plan to open up to 22 new restaurants in 2024.
Cheesecake Factory Inc was named one of Fortune Magazine's 100 Best Companies to Work For for the 11th consecutive year, highlighting its strong company culture and ability to attract and retain talent.
Comparable sales and traffic for Cheesecake Factory restaurants significantly outperformed the industry, demonstrating strong consumer demand and effective market share capture.
Operational execution within the restaurants was excellent, with labor productivity, food efficiencies, and wage management exceeding expectations.
Negative Points
Comparable sales at The Cheesecake Factory restaurants slightly declined by 0.6% year-over-year, primarily due to adverse weather conditions in January.
The company recorded a net expense of $3.2 million related to impairment of assets, lease terminations, and acquisition-related expenses.
General and administrative expenses increased by 60 basis points, driven by higher staffing and legal costs.
Despite overall positive performance, the company noted that the consumer environment remains challenging, with other companies in the industry reporting softness.
The company is taking a cautious approach with the Cheesecake Rewards program, not expecting a measurable impact on sales in its first year, indicating a slow start to this new initiative.
Q & A Highlights
Q: Hi, good afternoon, Matt. Just first a quick clarification question related to your assumptions. You mentioned that you're assuming that the trends you saw in February and March were would be the kind of run rate you're assuming in that in the guidance. So could you just elaborate on what you saw in February and March? And then I then I have a follow-up. A: Sure. So this is Matt. So if you think about the quarter and Cheesecake Factory comps were negative 0.6. And what we had said on the last call was the impact from those 2.5 weeks of weather in January was about 1.5% to 2% for the entire quarter, right? So the net of those two things being kind of what we saw in the back half of the quarter. So low single digits positive that.
Q: Hi, thank you. Thanks for the question. I wanted to ask first about the about the four-wall margin a little bit better than expected as you said, so I was wondering if you could just further clarify. I think you mentioned input costs, but sort of where where the upside came from. And then the second part of the question is just is this kind of the right level we should be thinking about for the remainder of the year? A: Sure, Katie, it's Matt. So I think just going back to the last answer for David, on the sales trends, I mean, I think having that steady predictable historical Cheesecake pattern, our operators just did a fantastic job delivering flow-through on the sales. So a lot of it just goes to the ability to execute in a normalized environment. We saw commodities were I didn't want like roughly flat issuance, but within the predicted range. Utilities were slightly better. I mean, natural gas obviously is low. But I think the most important part of that is just execution and being able to manage the business with a very predictable sales pattern. So that helped a lot easier. If you think about the rest of the year and every quarter is a little bit different, right? There's seasonality and things so that those numbers might not be the absolute same quarter-to-quarter. Typically do see a little bit of a tick-up and the absolute number for Q2. And then it comes back down in Q3 and goes back up a little bit in Q4. So it moves around. But I think on a full year basis, it's probably close to it somewhere in that in that ballpark.
Q: Thank you. Just actually wanted to follow up on flower child's, some encouraging stuff features you mentioned. Could you just remind us what kind of AUVs and maybe sort of level margins you're targeting there on the new development and if you could incorporate some of the good work you've done, I just referenced and then is there a long-term target you'd be willing to discuss in terms of the long-term opportunity? Can this be a national brand one day if things break right? A: Sure, Brian, this is David Gordon, I think I'll answer your last question first, and that is yes, we believe that McCann big national concept, part of the reason that we've taken a more fully under our umbrella and leverage things like the supply chain team is because we have a very strong belief in the concept of MEOQ. one AUVs at the run rate of those are 4.4 million average average unit volumes. So they've been very, very strong. The new markets have been very strong, just opened a new Flower Child in Plano, Texas which is an existing market, but very happy with the sales there thus far. So we think it's very promising and we're excited to open up the six to seven more this year and that continued growth moving into next year and the years beyond.
Q: Hi, thanks and good afternoon. And just circling back on the comp component at Cheesecake Factory Matt, I think you said the mix was down in the low fours. Obviously a much larger drag versus your peers and what we typically hear it. But can you just remind us what the pieces of what's driving that, kind of what the underlying dynamics are there and then how you see that playing out or normalizing over the next few quarters? A: Sure. That's right. It's in the low fours, about 1% of that is just the optics of the to-go and how we count that. So, you know, you're about 3% and just as a reminder, for everybody, that's about half of what it was really nine months ago. So what we saw is really outsized. I'm purchasing things like alcohol and attachments in '21 and '22. So we're still currently running, we call them incident rates, right? It's how much of each type of product to guests are buying on slightly above 2019 levels. So people are really regressing. They're just returning to the normal behaviors. So we anticipated that it would be at this level in Q1. So it's pretty predictable. So we feel good about our estimates going forward. Q2 will probably come down even a little bit more Q. three, a little bit more by the time we get to Q4. It's going to be pretty close to normal in our our models today.
Q: Great. Thank you. First question is on the unit growth outlook. It's great to hear that you did five in the first quarter, five in the second hopefully and pretty steady in the back half. That's quite an anomaly. And just wondering, as you think about going into next year, I'm not looking for guidance per se. But would you expect that you could accelerate the number of openings next year? And if so, which brand do you see having the strongest demand and now that you have more of a portfolio to choose from just wondering which brand you see as having the greatest upside as we think going into next year? Thanks. A: Jeff, this is David again. I'll we're certainly not going to get too far over our skis and talk about how many we might have for next year. But I think what's most important is that whether it's North Italia Flower Child or Cheesecake Factory. The demand for those concepts from landlords remains very, very high. So we're still getting a site real estate opportunities, and we have enough brands including culinary dropout to be able to fit the needs of those landlords everywhere from 3,500 square feet all the way up to 10,000 homes. So that's why we have such a positive outlook on the potential for next year and certainly still feel pretty good about our unit growth target of some 7% annual unit growth.
Q: Thanks. And I apologize if this has been addressed, but I'm ask it anyway, just on the margin, some of the margin expansion was very impressive. You know, it might have
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
