The Cheesecake Factory(CAKE) - 2025 Q2 - Quarterly Report

Revenue Growth and Financial Performance - Revenues increased by 4.4% to $904.0 million for the fiscal quarter ended July 2, 2024 compared to $866.2 million for the comparable prior year period, driven by new restaurant openings and an increase in comparable restaurant sales[96] - Net income increased to 5.8% of revenues in Q2 2024, up from 4.9% in Q2 2023[95] - The Cheesecake Factory sales increased 3.7% to $676.7 million in Q2 fiscal 2024, with comparable sales up 1.4% driven by a 1.6% increase in average check[97] - North Italia sales increased 14.6% to $75.5 million in Q2 fiscal 2024, with comparable sales up 2% driven by a 3% increase in average check[98] - Flower Child sales increased 6.6% to $35.7 million in Q2 fiscal 2024, with total operating weeks up 6.7% to 416[100] - Other FRC sales increased 12.0% to $73.6 million in Q2 fiscal 2024, despite a 5.7% decrease in average sales per restaurant operating week[101] - Adjusted net income for the twenty-six weeks ended July 2, 2024, was $88.7 million, compared to $73.7 million for the same period in 2023[125] - Total revenue for fiscal 2024 is anticipated to be approximately $3.56 billion to $3.60 billion[123] - Third quarter fiscal 2024 revenues are expected to be between $855 million and $870 million, with a net income margin of 2.6% to 3.0%[124] Restaurant Operations and Expansion - The company operates 340 restaurants in the U.S. and Canada, including 216 The Cheesecake Factory locations, 39 North Italia locations, 33 Flower Child locations, and 44 other FRC portfolio locations[85] - Internationally, 34 The Cheesecake Factory restaurants operate under licensing agreements[85] - The company plans to continue expanding The Cheesecake Factory and North Italia concepts, with a focus on opening new restaurants in premier locations[86] - The company plans to open as many as 22 new restaurants in fiscal 2024, including 3 The Cheesecake Factory, 6-7 North Italia, 6-7 Flower Child, and 7-8 Other FRC locations[124] - North Italia's total operating weeks increased 16.3% to 499 in Q2 fiscal 2024, compared to 429 in the prior year[98] - Flower Child's total operating weeks increased 6.7% to 416 in Q2 fiscal 2024, compared to 390 in the prior year[100] - Preopening costs increased to $7.0 million in Q2 fiscal 2024, up from $6.0 million in Q2 fiscal 2023, due to new restaurant openings[107] - Supply chain challenges and delays in new restaurant openings due to permitting and landlord readiness issues have impacted operations in fiscal 2024[83] Cost Management and Margins - Food and beverage costs decreased to 22.3% of revenues in Q2 2024 from 23.2% in Q2 2023, while labor expenses remained stable at 35.1% compared to 35.3% in the prior year[95] - Food and beverage costs decreased to 22.3% of revenues in Q2 fiscal 2024, down from 23.2% in Q2 fiscal 2023, due to menu price increases and sales mix shifts[103] - Labor expenses decreased to 35.1% of revenues in Q2 fiscal 2024, down from 35.3% in Q2 fiscal 2023, driven by menu price increases and improved productivity[104] - The company aims to recapture pre-COVID-19 pandemic margins and drive long-term margin expansion through sales leverage, bakery operations, and optimizing the restaurant portfolio[90] - Menu price increases have been implemented above historical levels (2%-3%) since 2022 to offset inflationary cost pressures, with potential future increases to manage significant cost rises[89] - A hypothetical 1% increase in food costs would negatively impact cost of sales by $2.0 million for both Q2 fiscal 2024 and 2023[145] - Commodities not under contract are subject to significant supply and cost fluctuations, especially for government-regulated items like dairy and corn[145] - International market purchases face greater cost and availability fluctuations due to currency values, trade disputes, tariffs, and geopolitical unrest[145] - The company attempts to negotiate short-term and long-term agreements for principal commodities like dairy and poultry, depending on market conditions[144] - The company evaluates hedging vehicles like direct financial instruments to manage commodity risk and variability[144] - The company had no hedging contracts in place as of July 2, 2024[144] Capital Expenditures and Financial Position - Estimated cash capital expenditures for fiscal 2024 are between $180 million and $200 million to support new unit development and restaurant maintenance[124] - Capital expenditures for new restaurants in the first six months of fiscal 2024 were $38.9 million, with $24.8 million allocated to existing restaurants and $2.6 million for bakery and corporate infrastructure[129] - Cash and cash equivalents decreased by $15.6 million to $40.7 million in the first six months of fiscal 2024[127] - The company repurchased 0.5 million shares at a cost of $16.4 million (excluding excise tax) during the first six months of fiscal 2024[135] - The company has a revolving credit facility with a total commitment of $400 million, of which $236.5 million was available as of July 2, 2024[132] - The company paid $26.7 million in common stock dividends during the first six months of fiscal 2024[134] - A hypothetical 1% rise in interest rates would increase annual interest expense by $1.3 million based on outstanding borrowings at July 2, 2024 and January 2, 2024[146] - A hypothetical 10% decline in market value of deferred compensation assets would reduce net income by $2.5 million at July 2, 2024 and $2.4 million at January 2, 2024[146] External Factors and Risks - Operating results in fiscal 2024 continue to be impacted by increased commodity and wage inflation from geopolitical and macroeconomic events[143] - Climate change may exacerbate factors affecting product and service costs, including labor availability, weather, and natural disasters[143] - The company targets a long-term financial objective of 13% to 14% total return to shareholders, driven by domestic revenue growth, margin expansion, and planned debt repayments[92] - The Cheesecake Factory's off-premise channel sales accounted for 21% of total restaurant sales in Q2 fiscal 2024, down from 22% in Q2 fiscal 2023[97]