Core Viewpoint - The Cheesecake Factory Incorporated (CAKE) is expected to benefit from unit expansion, strong performance of Flower Child, and effective marketing strategies, although concerns exist regarding the uncertain macroeconomic environment and elevated expenses [1]. Factors Driving Growth - The company opened eight new restaurants in the fiscal first quarter, including three North Italia, three Flower Child, and two FRC units, with plans to open up to 25 new restaurants in 2025 [2] - Flower Child's sales increased by 26.1% year over year to $43.5 million, supported by a 19.2% rise in total operating weeks and a 5.8% increase in sales per restaurant operating week [3] - The company executed a successful marketing strategy, including a menu update with over 20 new items, generating significant media attention and nearly double the PR impressions compared to the same quarter last year [4] Loyalty Program and Market Performance - The Cheesecake Rewards loyalty program is gaining traction, with high member acquisition and satisfaction levels, shifting towards a personalized engagement strategy [5] - Shares of Cheesecake Factory have increased by 7.7% over the past six months, outperforming the industry's decline of 5.2% [5] Concerns for CAKE Stock - The company is facing an uncertain macroeconomic environment, with concerns over fluctuations in commodity costs, labor, and various expenses [7] - Anticipated cost pressures include low-single-digit commodity inflation and net total labor inflation in the low-to-mid-single-digit range, with general and administrative expenses expected to be around $60 million [8] - Total costs and expenses for the second quarter of fiscal 2025 are projected to rise by 4.6% year over year to $884.6 million [8]

Financial Data and Key Metrics Changes - The company reported total revenues of $927 million for Q1 2025, finishing towards the high end of guidance, with a 27% year-over-year increase in adjusted earnings per share [5][15] - Adjusted net income margin was 4.9%, exceeding the high end of the guidance range [15] - The Cheesecake Factory restaurants' total sales were $673 million, up 1% from the prior year, with comparable sales also increasing by 1% [16][17] - The four-wall restaurant margins increased to 17.4%, up 140 basis points from Q1 2024 [6] Business Line Data and Key Metrics Changes - North Italia's total sales were $83.4 million, up 18% from the prior year, with comparable sales declining by 1% [17][12] - Flower Child's sales totaled $43.5 million, up 26% from the prior year, with comparable sales increasing by 5% [17][13] - The company opened eight restaurants in Q1 2025, including three North Italia and three Flower Child locations [6][24] Market Data and Key Metrics Changes - The off-premise sales mix for The Cheesecake Factory was 22%, consistent with Q1 2024 [16][100] - North Italia's annualized average unit volumes (AUVs) increased to $7.75 million, while Flower Child's AUV was over $4.6 million, reflecting strong consumer demand [12][13] Company Strategy and Development Direction - The company aims to open as many as 25 new restaurants in 2025, with a focus on accelerating new unit growth [7][24] - The company has been recognized as one of Fortune Magazine's 100 Best Companies to Work For for the twelfth consecutive year, highlighting its commitment to employee satisfaction [7] - The company is focused on menu innovation, operational execution, and maintaining contemporary restaurant designs as key components of its strategy [8][25] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment feels less robust than three months ago, citing various external factors impacting performance [29] - The company anticipates total revenues for Q2 2025 to be between $935 million and $950 million, reflecting a cautious outlook due to economic conditions [21] - Management remains confident in the company's ability to absorb potential tariff impacts without changing adjusted net income margin expectations [21][39] Other Important Information - The company returned $153.8 million to shareholders during the quarter through dividends and share repurchases [15] - The company ended the quarter with total available liquidity of approximately $501.9 million [19] Q&A Session Summary Question: Is the uncertain macro environment already impacting the business? - Management indicated that while the business remains stable, the environment feels less robust than previously expected, suggesting a prudent outlook for the remainder of the year [28][29] Question: Can you quantify the expected impact of tariffs on the P&L? - Management noted that the biggest impact would likely be in other operating expenses, with potential pricing adjustments of 50 to 75 basis points if necessary [34][39] Question: What are the same-store sales components for The Cheesecake Factory? - The Cheesecake Factory experienced 4% effective pricing, with traffic down 1.2%, indicating a mix shift due to menu changes [47] Question: How is the loyalty program performing? - The loyalty program is seeing strong member acquisition and positive guest feedback, with plans to implement more personalized offers moving forward [42][44] Question: What is the outlook for commodity inflation? - Management reported that commodity inflation was close to breakeven in Q1, with expectations of low single-digit inflation in Q2 [64] Question: Are there any planned closures affecting guidance? - Management confirmed a closure in Seattle but indicated no other planned closures at this time [66] Question: What differentiates Flower Child's performance in a slowing environment? - Flower Child's strong performance is attributed to food quality, operational stability, and effective staffing, which resonate well with consumers [70]