The Cheesecake Factory Incorporated (NASDAQ: CAKE) today
reported financial results for the third quarter of fiscal 2023,
which ended on October 3, 2023.
Total revenues were $830.2 million in the third quarter of
fiscal 2023 compared to $784.0 million in the third quarter of
fiscal 2022. Net income and diluted net income per share were $17.9
million and $0.37, respectively, in the third quarter of fiscal
2023.
The Company recorded a pre-tax net expense of $1.5 million
primarily related to Fox Restaurant Concepts (“FRC”)
acquisition-related expenses. Excluding the after-tax impact of
this item, adjusted net income and adjusted net income per share
for the third quarter of fiscal 2023 were $19.0 million and $0.39,
respectively. Please see the Company’s reconciliation of non-GAAP
financial measures at the end of this press release.
Comparable restaurant sales at The Cheesecake Factory
restaurants increased 2.4% year-over-year in the third quarter of
fiscal 2023 and increased 12.6% relative to the third quarter of
fiscal 2019, on an operating week basis.
“Our third quarter results reflect positive sales trends, as we
continued to outperform the broader casual dining industry led by
solid comparable sales growth at The Cheesecake Factory
restaurants,” said David Overton, Chairman and Chief Executive
Officer. “Our performance amidst the softening sales environment is
a testament to the resilient consumer demand for the distinct,
high-quality dining experiences we provide our guests. Our tenured
operators continued to do an excellent job effectively managing
their restaurants and consistently delivering exceptional food
quality, service and hospitality to drive sales.”
“During the quarter we opened two Cheesecake Factory restaurants
to strong demand, further underscoring the enduring appeal and
brand affinity for our flagship concept. We remain sharply focused
on accelerating our unit growth to achieve our long-term
development objectives, even though we continue to experience
delays beyond our control. As the macroeconomic environment has
gradually stabilized and input costs have continued to improve this
year, the stability of our operational and financial performance
reinforces our belief we are well positioned to drive meaningful
growth, shareholder value and market share gains going
forward.”
Development
During the third quarter of fiscal 2023, the Company opened two
Cheesecake Factory restaurants, one in Birkdale, NC and the other
in Estero, FL. While the Company continues to make progress against
its pipeline, opening timelines continued to be pressured by
substantial permitting delays, as such the Company is strategically
shifting some restaurant openings into the first quarter of fiscal
2024. As a result, the Company now expects to open as many as 16
new restaurants in fiscal 2023 and as many as four to six new
restaurants in the first quarter of fiscal 2024. The fiscal 2023
new restaurant openings include as many as five Cheesecake Factory
restaurants, four North Italia restaurants, and as many as seven
FRC restaurants, including one Flower Child location.
Additionally, the Company expects two Cheesecake Factory
restaurants to open internationally under licensing agreements in
fiscal 2023.
Liquidity and Capital Allocation
As of October 3, 2023, the Company had total available liquidity
of $300.5 million, including a cash balance of $64.0 million and
availability on its revolving credit facility of $236.5 million.
Total principal amount of debt outstanding was $475 million,
including $345 million in principal amount of 0.375% convertible
senior notes due 2026 and $130 million in principal amount drawn on
the Company’s revolving credit facility.
The Company repurchased approximately 453,400 shares of its
stock at a cost of $14.6 million in the third quarter of fiscal
2023. In addition, the Company’s Board of Directors has declared a
quarterly dividend of $0.27 per share to be paid on November 28,
2023 to shareholders of record at the close of business on November
15, 2023.
Conference Call and Webcast
The Company will hold a conference call to review its results
for the third quarter of fiscal 2023 today at 2:00 p.m. Pacific
Time. The conference call will be webcast live on the Company’s
website at investors.thecheesecakefactory.com and a replay of the
webcast will be available through December 1, 2023.
About The Cheesecake Factory Incorporated
The Cheesecake Factory Incorporated is a leader in experiential
dining. We are culinary forward and relentlessly focused on
hospitality. Delicious, memorable experiences created by passionate
people – this defines who we are and where we are going. We
currently own and operate 325 restaurants throughout the United
States and Canada under brands including The Cheesecake Factory®,
North Italia® and a collection within our Fox Restaurant Concepts
business. Internationally, 31 The Cheesecake Factory® restaurants
operate under licensing agreements. Our bakery division operates
two facilities that produce quality cheesecakes and other baked
products for our restaurants, international licensees and
third-party bakery customers. In 2023, we were named to the FORTUNE
Magazine “100 Best Companies to Work For®” list for the tenth
consecutive year. To learn more, visit
www.thecheesecakefactory.com, www.northitalia.com and
www.foxrc.com.
From Fortune ©2023 Fortune Media IP Limited. All rights
reserved. Used under license. Fortune and Fortune 100 Best
Companies to Work For are registered trademarks of Fortune Media IP
Limited and are used under license. Fortune and Fortune Media IP
Limited are not affiliated with, and do not endorse products or
services of, The Cheesecake Factory Incorporated.
Safe Harbor Statement
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, as codified in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements include, without limitation, statements
regarding positive sales trends, customer demand, continuing
permitting delays, stability of operational and financial
performance and restaurant development expectations. Such
forward-looking statements include all other statements that are
not historical facts, as well as statements that are preceded by,
followed by or that include words or phrases such as “believe,”
“plan,” “will likely result,” “expect,” “intend,” “will continue,”
“is anticipated,” “estimate,” “project,” “may,” “could,” “would,”
“should” and similar expressions. These statements are based on
current expectations and involve risks and uncertainties which may
cause results to differ materially from those set forth in such
statements. Investors are cautioned that forward-looking statements
are not guarantees of future performance and that undue reliance
should not be placed on such statements. These forward-looking
statements may be affected by various factors including: economic,
public health and political conditions that impact consumer
confidence and spending, including rising interest rates, periods
of heightened inflation and market instability, and armed
conflicts; supply chain disruptions; demonstrations, political
unrest, potential damage to or closure of the Company’s restaurants
and potential reputational damage to the Company or any of its
brands; pandemics and related containment measures, including the
potential for quarantines or restriction on in-person dining;
acceptance and success of The Cheesecake Factory in international
markets; acceptance and success of North Italia and the Fox
Restaurant Concepts restaurants; the risks of doing business abroad
through Company-owned restaurants and/or licensees; foreign
exchange rates, tariffs and cross border taxation; changes in
unemployment rates; increases in minimum wages and benefit costs;
the economic health of the Company’s landlords and other tenants in
retail centers in which its restaurants are located, and the
Company’s ability to successfully manage its lease arrangements
with landlords; the economic health of suppliers, licensees,
vendors and other third parties providing goods or services to the
Company; the timing of new unit development and related permitting;
compliance with debt covenants; strategic capital allocation
decisions including with respect to share repurchases or dividends;
the ability to achieve projected financial results; the resolution
of uncertain tax positions with the Internal Revenue Service and
the impact of tax reform legislation; changes in laws impacting the
Company’s business; adverse weather conditions in regions in which
the Company’s restaurants are located; factors that are under the
control of government agencies, landlords and other third parties;
the risks, costs and uncertainties associated with opening new
restaurants; and other risks and uncertainties detailed from time
to time in the Company’s filings with the Securities and Exchange
Commission (“SEC”). Forward-looking statements speak only as of the
dates on which they are made and the Company undertakes no
obligation to publicly update or revise any forward-looking
statements or to make any other forward-looking statements, whether
as a result of new information, future events or otherwise, unless
required to do so by law. Investors are referred to the full
discussion of risks and uncertainties associated with
forward-looking statements and the discussion of risk factors
contained in the Company’s latest Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as
filed with the SEC, which are available at www.sec.gov.
The Cheesecake Factory Incorporated Condensed
Consolidated Financial Statements (unaudited; in thousands,
except per share and statistical data) Consolidated
Statements of Income 13 Weeks EndedOctober 3, 2023 13
Weeks EndedSeptember 27, 2022 39 Weeks EndedOctober 3,
2023 39 Weeks EndedSeptember 27, 2022
Amount
Percent of Revenues
Amount
Percent of Revenues
Amount
Percent of Revenues
Amount
Percent of Revenues
Revenues
$
830,210
100.0
%
$
784,001
100.0
%
$
2,562,494
100.0
%
$
2,410,354
100.0
%
Costs and expenses: Food and beverage cost
194,733
23.5
%
197,774
25.2
%
602,051
23.5
%
590,457
24.5
%
Labor expenses
301,663
36.3
%
293,040
37.4
%
919,340
35.9
%
893,322
37.1
%
Other operating costs and expenses
229,534
27.6
%
217,009
27.7
%
687,459
26.7
%
643,844
26.7
%
General and administrative expenses
54,209
6.5
%
50,324
6.4
%
162,766
6.4
%
149,638
6.2
%
Depreciation and amortization expenses
22,837
2.8
%
22,651
2.9
%
69,124
2.7
%
66,764
2.8
%
Impairment of assets and lease termination expenses
48
0.0
%
-
0.0
%
1,637
0.1
%
313
0.0
%
Acquisition-related contingent consideration, compensation and
amortization expenses
1,414
0.2
%
1,081
0.1
%
3,890
0.2
%
2,920
0.1
%
Preopening costs
6,742
0.8
%
4,327
0.6
%
15,800
0.6
%
9,038
0.4
%
Total costs and expenses
811,180
97.7
%
786,206
100.3
%
2,462,067
96.1
%
2,356,296
97.8
%
Income/(loss) from operations
19,030
2.3
%
(2,205
)
(0.3
)%
100,427
3.9
%
54,058
2.2
%
Interest and other expense, net
(2,027
)
(0.3
)%
(1,315
)
(0.1
)%
(6,069
)
(0.2
)%
(3,906
)
(0.1
)%
Income/(loss) before income taxes
17,003
2.0
%
(3,520
)
(0.4
)%
94,358
3.7
%
50,152
2.1
%
Income tax (benefit)/provision
(942
)
(0.2
)%
(1,122
)
(0.1
)%
5,688
0.2
%
3,731
0.2
%
Net income/(loss)
$
17,945
2.2
%
$
(2,398
)
(0.3
)%
$
88,670
3.5
%
$
46,421
1.9
%
Basic net income/(loss) per share
$
0.37
$
(0.05
)
$
1.83
$
0.93
Basic weighted average shares outstanding
48,281
49,653
48,489
50,124
Diluted net income/(loss) per share
$
0.37
$
(0.05
)
$
1.80
$
0.92
Diluted weighted average shares outstanding
48,985
49,653
49,197
50,708
Selected Segment Information 13 Weeks EndedOctober
3, 2023 13 Weeks EndedSeptember 27, 2022 39 Weeks
EndedOctober 3, 2023 39 Weeks EndedSeptember 27, 2022
Revenues: The Cheesecake Factory restaurants
$
628,140
$
602,902
$
1,936,621
$
1,853,576
North Italia
62,417
54,113
191,654
163,108
Other FRC
58,642
52,193
193,010
171,045
Other
81,011
74,793
241,209
222,625
Total
$
830,210
$
784,001
$
2,562,494
$
2,410,354
Income/(loss) from operations The Cheesecake Factory
restaurants
$
67,637
$
42,122
$
231,700
$
169,893
North Italia
4,081
1,655
15,314
10,381
Other FRC
1,036
4,109
15,826
18,231
Other
(53,724
)
(50,091
)
(162,413
)
(144,447
)
Total
$
19,030
$
(2,205
)
$
100,427
$
54,058
Depreciation and amortization expenses: The Cheesecake
Factory restaurants
$
15,702
$
15,874
$
47,955
$
47,736
North Italia
1,578
1,556
4,713
4,076
Other FRC
1,891
1,661
5,627
4,712
Other
3,666
3,560
10,829
10,240
Total
$
22,837
$
22,651
$
69,124
$
66,764
Impairment of assets and lease termination expenses: The
Cheesecake Factory restaurants
$
29
$
-
$
160
$
(59
)
North Italia
-
-
-
-
Other FRC
-
-
55
-
Other
19
-
1,422
372
Total
$
48
$
-
$
1,637
$
313
Preopening costs: The Cheesecake Factory restaurants
$
3,861
$
2,757
$
8,401
$
5,163
North Italia
1,068
1,341
2,132
2,755
Other FRC
1,764
84
4,483
357
Other
49
145
784
763
Total
$
6,742
$
4,327
$
15,800
$
9,038
The Cheesecake Factory restaurants operating
information: 13 Weeks EndedOctober 3, 2023 13 Weeks
EndedSeptember 27, 2022 39 Weeks EndedOctober 3, 2023
39 Weeks EndedSeptember 27, 2022 Comparable restaurant sales
vs. prior year
2.4
%
1.1
%
3.2
%
8.2
%
Comparable restaurant sales vs. 2019
12.6
%
9.5
%
13.9
%
10.2
%
Restaurants opened during period
2
1
3
1
Restaurants open at period-end
213
209
213
209
Restaurant operating weeks
2,756
2,705
8,227
8,113
North Italia operating information: Comparable
restaurant sales vs. prior year
8
%
10
%
8
%
17
%
Comparable restaurant sales vs. 2019
28
%
18
%
30
%
21
%
Restaurants opened during period
-
1
-
2
Restaurants open at period-end
33
31
33
31
Restaurant operating weeks
429
395
1,287
1,150
Other Fox Restaurant Concepts (FRC) operating
information:(1) Restaurants opened during period
-
1
3
1
Restaurants open at period-end
37
32
37
32
Restaurant operating weeks
481
413
1,394
1,219
Other operating information:(2) Restaurants opened
during period
-
-
1
1
Restaurants open at period-end
40
39
40
39
Restaurant operating weeks
520
507
1,555
1,514
Number of company-owned restaurants: The Cheesecake
Factory
213
North Italia
33
Other FRC
37
Other
40
Total
323
Number of international-licensed restaurants: The
Cheesecake Factory
30
(1)
The Other FRC segment includes all FRC
brands except Flower Child.
(2)
The Other segment includes the Flower
Child, Grand Lux Cafe and Social Monk Asian Kitchen concepts, as
well as the Company's third-party bakery, international and
consumer packaged goods businesses, unallocated corporate expenses
and gift card costs.
Selected Consolidated Balance Sheet Information October
3, 2023 January 3, 2023 Cash and cash equivalents
$
63,987
$
114,777
Long-term debt, net of issuance costs (1)
469,543
468,032
(1)
Includes $339.5 million net balance of
0.375% convertible senior notes due 2026 (principal amount of $345
million less $5.5 million in unamortized issuance costs) and $130
million drawn on the Company's revolving credit facility. The
unamortized issuance costs were recorded as a contra-liability and
netted with long-term debt on the Condensed Consolidated Balance
Sheet and are being amortized as interest expense.
Reconciliation of Non-GAAP Results to GAAP Results
In addition to the results provided in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”) in this press release, the Company is providing
non-GAAP measurements which present net income/(loss) and net
income/(loss) per share excluding the impact of certain items. The
non-GAAP measurements are intended to supplement the presentation
of the Company’s financial results in accordance with GAAP. These
non-GAAP measures are calculated by eliminating from net
income/(loss) and diluted net income/(loss) per share the impact of
items the Company does not consider indicative of its ongoing
operations. The Company uses these non-GAAP financial measures for
financial and operational decision-making and as a means to
evaluate period-to-period comparisons.
The Cheesecake Factory Incorporated Reconciliation of
Non-GAAP Financial Measures (unaudited; in thousands, except
per share data) 13 Weeks EndedOctober 3, 2023
13 Weeks EndedSeptember 27, 2022 39 Weeks EndedOctober 3,
2023 39 Weeks EndedSeptember 27, 2022 Net
income/(loss) (GAAP)
$
17,945
$
(2,398
)
$
88,670
$
46,421
Impairment of assets and lease termination expenses(1)
48
-
1,637
313
Acquisition-related contingent consideration, compensation and
amortization expenses(2)
1,414
1,081
3,890
2,920
Tax effect of adjustments(3)
(380
)
(281
)
(1,437
)
(840
)
Adjusted net income/(loss) (non-GAAP)
$
19,027
$
(1,598
)
$
92,760
$
48,814
Diluted net income/(loss) per share (GAAP)
$
0.37
$
(0.05
)
$
1.80
$
0.92
Impairment of assets and lease termination expenses
0.00
-
0.03
0.01
Acquisition-related contingent consideration, compensation and
amortization expenses
0.03
0.02
0.08
0.06
Tax effect of adjustments
(0.01
)
(0.01
)
(0.03
)
(0.02
)
Adjusted net income/(loss) per share (non-GAAP)(4)
$
0.39
$
(0.03
)
$
1.89
$
0.96
(1)
A detailed breakdown of impairment of
assets and lease termination expenses recorded in the thirteen and
thirty-nine weeks ended October 3, 2023 and September 27, 2022 can
be found in the Selected Segment Information table.
(2)
Represents changes in the fair value of
the deferred consideration and contingent consideration and
compensation liabilities related to the North Italia and FRC
acquisition, as well as amortization of acquired definite-lived
licensing agreements.
(3)
Based on the federal statutory rate and an
estimated blended state tax rate, the tax effect on all adjustments
assumes a 26% tax rate for the fiscal 2023 and 2022 periods.
(4)
Adjusted net income per share may not add
due to rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101149897/en/
Etienne Marcus (818) 871-3000
investorrelations@thecheesecakefactory.com
Cheesecake Factory (NASDAQ:CAKE)
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