Cheesecake Factory Inc (CAKE) Q2 2025 Earnings Call Highlights: Record Sales and Strategic ...
Adjusted Net Income Margin: 5.8%.
Cheesecake Factory Sales: $683.3 million, up 1% year-over-year.
Cheesecake Factory Comparable Sales: Increased 1.2%.
North Italia Sales: $90.8 million, up 20% year-over-year.
Flower Child Sales: $48.2 million, up 35% year-over-year.
Flower Child Comparable Sales: Increased 4%.
Restaurant Openings: Eight new restaurants opened in Q2.
Cheesecake Factory Restaurant Margin: Increased to 18.5%, up 80 basis points year-over-year.
North Italia Restaurant Margin: Improved 290 basis points to 18.2%.
Flower Child Restaurant Margin: Reached 20.4%.
Cash Balance: $148.8 million.
Total Debt: $644 million.
Capital Expenditures: Approximately $42 million in Q2.
Shareholder Returns: $14.3 million returned via dividends.
Warning! GuruFocus has detected 5 Warning Sign with KRC.
Release Date: July 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Cheesecake Factory Inc (NASDAQ:CAKE) reported second quarter results that exceeded expectations, with consolidated revenues and adjusted earnings per share setting new milestones.
The company achieved a record high average weekly sales and realized unit volumes of nearly $12.8 million for the quarter.
Cheesecake Factory's four-wall restaurant margin increased to 18.5%, the highest level recorded in eight years.
The company successfully opened eight new restaurants in the second quarter and plans to open as many as 25 new restaurants in 2025.
Flower Child, a concept under Cheesecake Factory Inc, saw second quarter comparable sales increase by 4%, significantly outperforming the Black Box fast casual dining index.
Negative Points
Comparable sales for North Italia declined by 1%, partly due to the impact of Los Angeles fires and sales transfer from new restaurants.
Cheesecake Factory's traffic was down 1.1% in the second quarter, despite a 4% increase in net effective pricing.
Other operating expenses increased by 40 basis points, primarily driven by higher facility-related costs.
Pre-opening costs rose to $9 million in the quarter compared to $7 million in the prior year period.
The company recorded a pre-tax net expense of $1.2 million related to FRC acquisition-related items and impairment of assets and lease termination expenses.
Q & A Highlights
Q: As it relates to the increase in the net income margin for 2025 from 4.75% to 4.9%, is this primarily operationally driven at the store level? A: Matthew Clark, CFO: Yes, the improvement is operationally driven. Our expectations for the four-wall margin have increased due to better-than-expected Q2 results, reflecting operational excellence and stable sales trends.
Q: Can you provide some perspective on labor retention levels relative to pre-pandemic or prior peaks? A: David Gordon, President: Our staff and management retention levels are as good as or better than pre-pandemic levels, driven by our strong company culture and career growth opportunities. This retention helps reduce overtime and training costs, contributing to labor productivity.
Q: On Cheesecake Factory, can you share the Q2 breakdown related to price and mix and the implied traffic? A: Matthew Clark, CFO: The net effective pricing in Q2 was about 4% for Cheesecake Factory. Traffic was down 1.1%, and mix accounted for the balance. We aim to improve traffic while maintaining stable sales.
Q: Did the February menu update lead to a noticeable customer response in terms of innovation? A: David Gordon, President: Yes, the new menu items were highlighted on a separate card to ensure visibility. The previous menu change in February showed good stickiness, and we expect the new menu to be equally or more successful.
Q: Can you provide insights on Flower Child's profitability and unit economics? A: Matthew Clark, CFO: Flower Child's mature unit margins reached 20.4%, with AUVs approaching $5 million. The concept is performing exceptionally well, with returns in the mid-30s, and we expect it to play a larger role in our results going forward.
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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