CAKE - Earnings call transcript Q2 2022 | The Cheesecake Factory Incorporated

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Operator

Good afternoon. My name is Emma, and I will be your conference operator today. At this time, I would like to welcome everyone to The Cheesecake Factory Second Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President conference. and Vice may Relations, begin your of Marcus, Investor Finance you Etienne

Etienne Marcus

Emma. afternoon, you, XXXX Thank Good earnings quarter our call. fiscal second and welcome to

Chairman today On with Matt Officer. Clark, President Gordon, are and Vice and Chief Executive Chief David our the President; Executive me Overton, and call our David Officer; our Financial

statements at not Actual during implied within Act of in this filings are factors to will detailed be our today's items we update any result let Exchange begin, which call, and with undertakes today's the the a statements. of the Securities is me Before meaning be only stated statements of duty facts All that the speak the quickly different date based on are and Private our this considered made Reform or investors.thecheesecakefactory.com and historical forward-looking statements remind Company those and forward-looking from in forward-looking results you release, as that Litigation of materially website on discussed as in Commission. call Securities press available could XXXX. forward-looking on no

during this review website, results on on adjusted operational assets financial call comparable an we David reconciliations previously GAAP will will the with of explanation which and measures quarter non-GAAP remarks, and measures update. our David Matt will as opening conference be of financial Gordon Overton update. second a an appear consideration, of and release press begin then some most presenting and our and described. to provide amortization exclude will today's in our provide results impairment acquisition-related terminations an expense, call, basis, lease directly contingent addition, and In compensation our use

call Following to Overton. that David over the that, for turn open With we’ll questions. I'll call the

David Overton

sales finishing XX.X% at and quarter increased an second Thank you, Comparable with second sales restaurants consumer COVID-XX XXXX. increase second The industry. broader in once the cases pleased XXXX, expected And sales, to versus dining the We X.X% of with were relative despite overall the our headwinds. the quarter and within second quarter casual outperformed our in performance Etienne. Factory Cheesecake range, XXXX of quarter again

busy Our restaurants The million industry-leading with volumes at concepts. of the Cheesecake casual the extremely at Factory be dining unit Factory quarter. remain for reaching continues one annualized volumes demonstrate $XX.X The differentiated Cheesecake most restaurants to These

us On Our Cheesecake, crustless Cheesecake, of and Classic on are enable flavor top innovation, fresh center. cheesecake unique, to version Factory’s and service, newest covered a whipped appeal operational and our focus classic unwavering a Cheesecake is Basque broad Saturday, The berries hospitality recipe, cream. with relevance. ultra-creamy, menu demographic and excellence, a with we maintain launching custard-like an burnt

lean differentiators, our week, of competitive into key distinctive we addition, menu incremental our this menu began as our new rollout to drive In summer one sales.

Turning to development.

sites, working been the pipeline. active have on remain of we All our in

However, affected approval to opening permit and chain challenges supply dates by continue be delays.

and such, fiscal Cheesecake open seven restaurants, for Child locations. other XX XXXX, year we expect as as Italia’s now restaurants, including many Flower four in North new As three Factory FRC including to restaurants

track also Despite, X% control, timing of next these goal currently under unit We Cheesecake open to growth which are Factory out remain expect of internationally a licensing challenges, we one restaurants on year. annual agreement. achieve our our to

will determine chain and call, adjust by earnings disruptions. Gordon. to I closely implementing headwinds As now substantial to dynamic to challenges call stated And in what remain a monitor menu tight level continue the the commodity will and David I increase high pricing committed change further environment over we is environment additional labor to supply time. and point, our protecting the with To last four-wall Despite, a objective. market face that we to may on turn we that to our over I'll be summer X.XX that, needed. this With recognize we are of process turn our continue support margins marked inflation, we of the pricing price inflationary

David Gordon

David. you, Thank

capability quarter efficiency Our incremental the teams solid to highlights our sales our manage restaurants for productivity. performance best-in-class results effectively operators, labor key indicators, execute to expectations our exceeded their including well, proven Operationally, sales. and capture food across and

execution to Our our to to operational sales. has ability staffed those and been imperative adequately incremental capturing restaurants

overall pockets levels some quarter. to our continue we throughout of staffing While continue the improve staffing encounter to challenges,

hourly month the applicant importance sequential satisfaction quarter hourly improvement the to of service remains industry-leading hires Cheesecake performance. June far July hourly X% continues to to to off-premise the improvement pre-pandemic trend single number of quarter restaurant dining With a the weekly overall and annualized in in to and year. guest increased for success of new sales any levels. the Factory close second channel research believe average record sales sales pre-pandemic trend flow at we as our of with contributor total have twice experience this our annual levels. hourly solid. confirm XXXX The for scores. of this guest levels now higher the channel highest second staffing to XX% so Industry accounting record continue to totals, contributing Specifically well above and staffing And is We retention our are key lows. needs staffing Combined

Italia. Now North turning to

all to margin comparable improvements over million locations. quarter Italia for the averaged quarter adjusted of unit volumes XX% XXXX all North locations quarter. for XX% in parts and for the and with inflation XXXX Despite, impact mature grew $X improved XX.X% mature second sales geographies. four-wall Second day Annualized the versus high versus

as FRC performance brand XX% ahead quarter. during our quarter as topline our strategy margin effectively is is Factory’s. and second strong For one made goal near pricing the profitability the The we similarly progress of Cheesecake total four-wall towards drove

up culinary style additionally inside pizza chicken. one mortar stretch existing location opened started pop enhanced and fast and Fly is first one FRC or later FRC in plenty our ghost two concept pandemic. locations of are In Sales weeks Fly Both their kitchen open offering their the Fly Bye stages market. the early newest ago of weeks crispy first Bye FRC Detroit of two are Phoenix brick as a the open dining locations casual Bye expectations. this that for currently to dropout And during the exceeding year. the more

review. continue to with We over drive moving now brands concepts turn for And We'll to I believe the our and FRC emerging forward. will develops. differentiated meaningful call growth financial Matt that

Matthew Clark

Thank you, David.

along faced During higher quarter industry the restaurant we headwinds broader then the substantially second anticipated. inflationary had initially with we

produce XXX driven primarily basis higher, commodity spot the categories. pricing was Specifically, by in points dairy inflation and

maintenance the costs totaled inflation, wage These and or in combined to $XX $X.XX for million And repairs EPS and were In quarter. higher-than-expected. the restaurant utilities expectations. of variance the hourly majority account approximately addition, of

specific the to some details Turning quarter. around

sales comparable million. quarter at FRC comparable North million Cheesecake and Italia sales, Child North fiscal Sales of and week approximately Second bakery XX% in Factory the second XXXX. Italia $XXX.X Flower per quarter contribution during from totaled were external total were The restaurants including $XX.X operating at $XXX.X including sales year-over-year. X.X% increased year-over-year. increased $XXX,XXX million Revenue FRC, revenues

by wages, pricing. in expenses. by significantly costs, Labour by operating general $X.X FRC Cost items. points, Now driven in openings driven sales And higher primarily the million to charge, G&A percentage year. during with and the finally, XXX quarter, mostly commodity million menu versus insurance points, lapping an compared we $X.X second higher the points, primarily predominantly associated a period. basis which the compared moving $X.X second and two higher million declined increased reported a basis inflation inflation are increased prior to preopening XX due quarter, of XX of quarter the as bonus basis three second basis sales lower points, in And Other quarter last increased period. accrual. primarily opened claim activity. after-tax XX primarily year acquisition-related year expenses related lower the in to utility We were driven by to costs restaurants prior

GAAP quarter income was share share income common net was per $X.XX. Second diluted Adjusted $X.XX. per net

cash remained second credit turning ending and flow dividend CapEx the at approximately liquidity about million new quarter. balance million and $XXX flow development activities million including our and second unit maintenance available and available With debt million $XX operating outstanding over in during share million. repurchases during cash totaled quarter and total just Company on facility. over returned approximately via $XXX $XX $XXX quarter. approximately approximately our during $XX sheet. of $XX Now balance cash The for from shareholders $XXX Total the million revolving of our completed we a to the to million, generated of million

While dynamic. guidance operating and be sales comparable not continues we be specific given very to the will environment providing earnings

our between we on including COVID-XX and XXXX, provide $X.XX the virus our to second the million. $X.XX nuances revenues the continue recent updated anticipate similar more to to on Factory for performance of will having, quarter. impact, total assumptions including our the last Based We be Cheesecake billion underlying some timing for billion. quarter approximately $XX trends With thoughts AUVs reaching latest to is resurgence balance year

$XXX the quarter, Taking the total million million. this reminder, between third $XXX approach a in impact revenue XXrd the a be and includes similar of As week XXXX. operating to fiscal anticipate we for would

during with now XXX and approximately in over quarter. the an on prior increases we basis, outlook expect basis of XXX to we annual increase year, the for CPI basis point headline inflation directionally represents observed Next, XX% point XX% commodity to line which a our about is

of well channel now are with wage minimum average labor. also X% modeling quarter commodities for around labor of other X% fourth components year-over-year the half, labor higher average complex when be the market X% mix, known many and than rates, inclusive net than are in latest the wage we in We inflation lower for dynamic the trends factoring around of parts, be about the to total The moving quarter. as back pressure to as third continues annual increases, annual modeling

the to outlook inflationary to the anticipate the expect services, be low XX% third operating we full the benefit we in Given pricing, quarter. mid-XX% other at the approximately now for the ending and expenses year of fourth still of and range with in for quarter sales energy

to mentioned, committed four-wall protecting our remain longer-term we As margins. David

remains risk current driven cost measurable the associated However, there environment. with fluctuations, by

incremental third for as of the the a timing million mind, about rollout. menu reminder, for only G&A We The which $XX approximately the $XX inflationary in price half additional anticipated benefit will to $XX experiencing, anticipate year. to close QX the additional our increase X.X% a put above margin is supportive are fully we previously X.XX% of increase, as we Keep of the objectives. we pressures implementing which measurably once current pricing the the our year-over-year price menu menu is in and quarter deployed. Given the includes be around of are about week this to level an process million price based and now on million quarter, receive our fourth of extra

Our fourth million plans, in million preopening assumption to $XX and the unchanged our in for year the at quarter. $X third the million support remains approximately $X development with quarter

plans on some in three XXXX. this million for regard CapEx expect to unit our we quarter. have as about that to for as modeling with as as using rate we full-year locations a $XX to $XXX million includes approximately into required year. the shifted to level in the that development, restaurants the of this balance With depreciation the Note open purposes in XX of maintenance of this and anticipate we're Finally, well X% XX% open currently support third new We CapEx many year, for to tax now development, restaurants. plan for would

mind program still closing objectives for despite year, financial in of unprecedented declared our are we dividends. the progressing towards encountered keep challenges In two XXXX. addition, during this many we have In primary our half have the buyback that stock and first reinstated

which between more be year trends to XXX And that track menu declining inflation points may continue and coupled for year. at to year-over-year now these calls signs outlook inflation we booked higher for about with this half in lowest still level commodities we has including peaked, with far are some Specifically a approximately our levels. this the four-wall XX% now on will starting see the of XXXX the that back margins of so the If early wage and year. basis inflation be pricing of exit end we

our share of unchanged we'll latest the dissimilar of said, addition to beginning of believe sales Delta and total operations billion. $X.XX with the year having, operator, questions. sales the we we strength approximately be midpoint and Thus the our Omicron well that brands ways, with our resurgence sheet, now remained earlier not take value our and to shareholder over remain has positioned take team, the grow outlook And In even annual impact appears including at the from the of to time. balance market virus

Operator

from comes with question [Operator first Instructions] Your Piper the Sandler. Nicole of Miller line today

open. line is now Your

Nicole Miller

I afternoon, so lot, call the much a about question so of of should Good outside update. asking talk guess Clearly and slow revisiting mean, past that's for it time period control. in in North a this it's some probably for your engine. inside I you was now of growth you it did thank and I different reasons was Italia, the growth bucket it Can really that at development, your and recession Cheesecake the control, you case,

to short-term do to think the there, please. do in weaken of we how growth want were what in So you if the about things opportunity terms

Matthew Clark

perspective. just It's a Nicole. Hi, on of Matt. I'll financial start kind

brands. bank, million have the in the of $XXX we unit long-term in these believe We economics

if all that we margin is our going take, good shallower turning that time. goals and we We've development shorter a to then there with be balance maybe improvements opportunity at downturn, all and this sheet on will forward of purposely And and the will market believe really strong them. that point. believe building lot remarkably we're point move that there of are kept to in We be of be in it a a and the will

across I've of all sites moving years, to the And seen we in look aggregate, we we had where with. we total we And move the a so with. I sites were more at in have that think as forward don't of couple that time next continue forward

back need do the to or don't really point. this any see pull have so at plans to we So

Nicole Miller

there then I share those well, can course, versus of profile? income brands as have you cross-sell I'm And and of Italia then frequency by higher but income to lower could Cake, for guess, user thinking you a just cohort, remind you custled trying that, cohorts. income, anything were the us income on of North at specifically Is if it the understand please?

Matthew Clark

I we for higher savvy, particularly Obviously, Matt again, best the tech Sure, of think Cheesecake the country. education, is entire in income, Nicole. first $XXX,XXX over thing locations in higher average income. on This is higher neighborhoods definitely for the skew we're the all Factory, are in

well best as as surrounded we're foot the so And business by neighborhoods, usually traffic.

to regardless, similar We historically we're yourself probably but right, the those I in cohort and And a guests, get occasion special as that insulated is seen some for need to in what say so anyone. an think I we've as FRC, North still actually same because birthday anniversary regard. And for want even guests would do it you shares or still come downtime. treat in a very

too. we So the we remind and good Factory have I still menu position, think value I'll everybody, that in just are in Cheesecake tremendous a

and We $XX from have $X ranging may shareable. incredibly the items get large to $X portions or

a cloth that will white I last number and bit historically little think independent can the navigate to keeping the way. probably people this our take their in able people table menu substantially those had is think mom-and-pops, our menu, we too, so I much different and will a share, to we’re so there taking. I dip and are is have is question take think because market that certainly we're more And value groups what be than competitor some one have prices And remind the with very a seen come if we because thing, what up of

a And if so spot than anything, competitive before. better we're in

Nicole Miller

it. you so Thank Appreciate much.

Operator

from Blair. question with Zackfia comes next Your the of Sharon William line

Your now open. line is

Sharon Zackfia

just demand Hi, afternoon. perspective. good about the guess I talking consumer

variant impacting mentioned you're think on the as call I've sales. first I been the new

that? expected? perspective like there? may provide you regionality So itself, some if there's from of seeing next some average are an some your guess thoughts what of income fallout And attach? this lower if think round? or have you are can beverage kind towards of to kind than of will to the price all slowdown you on back into as price anything round you And secondarily, there kind then greater a starting seems demand look to quarter what you go elasticity to of had then the fewer And of if can it quarter just within seen consumers? of, any of color at you kind is Do you right out, the lastly, you're see fewer check on, half see I from us Is this now appetizers there

Matthew Clark

Sure, Sharon. It's enough Matt, every to point so I notes think I get took to here.

right? I tied And very I they're all -- if So and all relevant questions, think no, I they're together. no, think

kind up, see you down, happen this sales then see down. see on go next much and like the high probably thing out very than see sales get is is cases can day of it's when you XX-months the the first cases, level. when would you when XX, then And or But one at you move phenomenon. that cases at the the go think sales So because is I there next But factor people you mean, we looked they up by been undercounted and come higher what mind virus. you I seen last don't read the and as when go time will more cases so keep the a track of go of out home. over see correlation the back if any a journals, you and it's as to of in We've sustainable a say the went moved maybe the week. or holiday the probably of And And previously. holidays testing movement same we I are documented now, medical it's the everybody's

XX-months. business plus last pricing we the by keep the returning What So our ran against levels. that we for over XXXX is we a regression to trend week see

in that. said I trends the X% not we what running can we just anticipate April, we above X% are think ran above in were level, to. we and to had to because don't get were thing our January, that We we as to And that first back on where same people So last we through when said we in think run continue ended then call, happens out. that's we've that the went I able and up, it back the -- quarter downside the below quarter the measurably rebounded we when pointing but

were those the think XXXX those California whether We example, quarter moving beginning on in in June, right? we the might one and of can see for in counts, ran you see LA or are both that the and just pockets And mandate quarter at not. that based the I going talking starts County at to plan, performance much we period back in so So think second hot a pricing. periods look trends, to to on matter it's And other it's of the believe be down in I in it up plus our the -- when pretty comparison about able might down, back go right where if when when it it to they're be starts it. but And case mass we sales a also on come can up. here we're

been And averages continue Cheesecake. would deserts down. The are so year-over-year new Well, true be check our we on that. the declines. the would trend, pockets and we of is to us. sort a broad-based, much any bit on, even big based smaller of I on this remains to when driver that of more a for go up kind imagine all down has recession, see but we see right trade more be seen a little regional much And right haven't attachments

that's mean the think over mean, quarters. at seen that reverts and happen So depending five each we've last we like I feel what the scenario, it the time, of on I to

think and mentioned can flexibility can the price I to I capture much they price that going spend we share. with were much guests decide they're in to as able question, and Nicole’s historically menu so elasticity have how in we our

on June, X.X% The surface the the other a even little that go up everybody X.X% average will which in higher based guarantee remove thing importantly, to needing we to us more. about put we bit remain as full catch will pricing below

fully against think competitively, And scale spot. who I as trends. good in likely Cheesecake I more the the remain even don't even of have plus compete that because says Factory, XXXX those have pricing So just a independents, reiterate, as more be pricing the probably competitive that guest our and capture trend. we we really inflation, they we'll be think we and keep again, It I'll to see able

Sharon Zackfia

you. Okay. Thank

Operator

next Your the line of Garber comes Jared question Sachs. with from Goldman

now open. line Your is

Jared Garber

And could Thank the taking the Understood was price Matt, help sure an more the just the some question. the separately give we maybe guys in as traffic a environment mix? frame from then is that with traffic follow-up was make future for to of have some about little in a and of you us that? color if loyalty are Factory, for traffic? the just traffic program components I help and normalizes. mix off if business I that little hoping there where the wanted there -- of the a a wondering And stem driving the comp you losses just how last declines Cheesecake decelerating? know CRM the are couple we commentary on us maybe to that quarters spending premise just you or I the and bit working the on component so consumer program could But understand different can where bit you have for been with potential might is you

Matthew Clark

to because go answer the as That transaction that it It Sure, count I we out there in premise. the it to the traffic more and guest a one quarter, butts we and was and can you are a and then was being Jared. essentially tell our is you bit out, to pricing I'll the Gordon. it's the for bit positive little said, This business get continue restaurant, X.X% whole per part first seats. that wash David mix funny X.X% actually with way on as a a of and pointed little pricing. then Cheesecake X.X% a equal negative is math comp the then Factory to direct as versus was hand Matt. is reported

I actually, So is true. mean, it

greater this year did QX traffic have we in of We year. last than

So I think that that, continues happen. to

we've the some at a not good comfortable percentage of and are in. I research, coming or still looked a last of there's when back maybe think also even guest third our more

gap So what premise in when being has talked we take at around point you're look recovery on or time we that give been. what and that XX%-ish about of looking at the it, traffic

If gap, guest at really comfortable. the still not that the be you look may it's last

to we've So We're experiences. and $XX track movement even as and talked give as between we to AUV, going long guest about to we want so just agnostic that great the million we're on-premise off-premise, happy.

still ago seem number we tracking laid we to overall, be six the months so out. to And that

David Gordon

Hi, Jared. Gordon. This David is

rewards Just in on program, the we launched mid-June. pilot our

decide of to objectives was for the the the we guests five good next but small that measure this move market, that whether program. So all is we program our of to the effectively working importantly the the ROI program really comprised we're to Houston our this exceeds well, the be well. of there year still in be beta understand is year, is program to technology own make we full continue have all restaurants great go with guest have just still methodology them And far launch our the point throughout to the continues could pilot do Houston to plan news the enthusiasm would want is in redeem our data that And experience. year some most remainder sure ability pilot determined, of that forward plan that the about expectations. a to in thus and and market, And at over which of the the XX to days which our to train were another measure into a to XX,XXX

Jared Garber

the Thanks Great. color. for

Operator

line with Your next comes question Oppenheimer. Brian from of the Bittner

now Your line open. is

Brian Bittner

we trends, came And Matt, very Since the April XQ with slowdown back. revenue out and and just that headed I on a pull for or seeing quarter slow the quarter. I the consumer from low what the at could end second your do trends not marketed taking do consumer your given you're where afternoon. to question. disclosure want Hey, Thanks have flush whether is continue uncertainty revenue for good just in third to the all could think the the in there your of you implies pretty comps trends was guide expected. all

seasonality confirm can the well to question return reversion economically? anything do like. just is, you're more the that simply to perhaps if and to is this mean seeing saying and a you'd not you that in believe You business a just But are as softness maybe normal you your simply relates

Matthew Clark

what's the all two everybody and looking. going of I person was first only openings was trillion when gotten question April. work asks Anybody mean, know you're consumer have when one dollar announced gas I job there who over what what That's a March or Matt. to The to the than indicators they mean that it's actually time. war job every remains I market mean, I I time today do in any job. it's those knows is high that reach all, in Brian, really behaving, mean out how certainly better wants why to don't that's for question. can are the it asking scarier the prices get

move to that support that the seeing on back potentially our -- will ways other based So economy. around there's income cohort work money that, and is the so to we're coming lower

great me that think play, in that's X% time still today is tell negative, that you'd me of there of financial that factor recovered is just That a remarkably a as has documented our a and across periods these there being most back but these we for and just geography a and to could been see for. I people, that it scare that that size But recession say X%, whatever thinking January negative And pretty reverts creating little of was slowdown. I what factor of there's months were I the think In believe based broad-based have as significantly tells same of right? bit for that and negative good X% that And double XX%. tremendously. every seem see for that the the if we dining. other the December moderated the in us seeing not people level that catastrophe last have said, time the it our to mean. more the negative only three or words, five moved a linear data, pockets be couple timing, that of that quarters casual than the lot look or don't do saw I running could XX% I of trends to we're we be things, a mean when that fueled on another mean, probably stands around all wouldn't factors. you it much you restaurants, alone digits is running state the much it which last you over track smaller company would over when are We at country. ago, down might it about media movement else. then looked indicate the to there anything probably were was comparison the economics, at has when data, well

moving are due in before had than quarter believe in we is that where to the a for and virus we of parts latest different of had couple guide were factors points we the better that. we Our The that week most geography. of June through weeks we third below the is the

back come seeing we're it already. So up actually

tells well, But about back full-year that to will accommodate so from two go points think latest about weeks I me doesn't if that I to And back. what much to our just than it's changed a couple right of the for see But you not quarter guide that's starting us, think consumer how week so pulling we it the kind just it down, And revenue indicate right? guide The again, trend. think a it so perspective. our point. better downward when now. points hasn't the ago, net but that of is But

Brian Bittner

second helpful. you're matched I guess, And super XXXX, that where Thanks of indeed margins? that which going with kind to positioned nicely with question No, where be EBIT exceed is of four-wall for you you're margins is, are saying us. EBIT does this? you that kind XXXX that exit leading as XXXX would margins Is that. occur, that's XXXX just If

Matthew Clark

depreciation is That's XXXX margins we back been I four-wall from If you the go. is can math. get better to can the better. our see G&A mean, the and levels, get objective

can net on we've prepared margin we that the the enterprise labor it inflation so believe noted we stays as where again, remarks, in and track worse we EBIT measurably the should doesn't to And if be accomplish better. And today, that. if commodity the get seen

mentioned, As will have we David Overton we'll inflation continue and up. we note if to keep to,

share say, to four-wall and want a important kind have, we the grow we margins. want is we have market of we protect -- will dual I mandate, have We really to like Fed,

accomplish. Sometimes each like those and the that's I to threading odds with at what And needle. we're trying think other are it's

Brian Bittner

Thank you, Matt.

Matthew Clark

welcome. You're

Operator

of question next Bernstein line comes the from Jeffrey with Your Barclays.

line Your is open. now

Jeffrey Bernstein

Great. Thank very much. you

on question First up one. following just the last

to assumption think benchmark Just I relative June. just third your you comp quarter because did

can what you second assuming month you were to the saw the just comp trend just the what the frame the third second what quarter? in If July trends were and for quarter? by share through you're they through maybe quarter And running

Matthew Clark

Yes.

right we this by we're July, If a that below And kind don't is in go in the which -- we running assumption move is could for XXXX quarter our but few improve that remember June, mean. third level And reversion to we're bit. back at that I that, point. basically end of to the seen the back recently back that get plus would sort So the and close we April. a about being little Jeff, we pricing, that of to points on plan, quarter. We've of then we were trend our check and essentially thinking

a u of little a it's shape. So bit

Jeffrey Bernstein

Got it.

said with could if wondering you you consider summer and but further just I share points the Okay. maybe you're know taking what to think that -- increases, clarify, I would or the guess I'm X.X% just just And then you to you wondered menu X.XX ultimately, means rush all quarter. necessarily managing in sense and I that get be mentioned third offset fully long-term. fourth inflation for wouldn't I the But in long-term. pricing will get you that be not the the to the we're a know business business necessarily the the right for

about again for the inflation you you managing of the want So think long-term? the how business framework of in do to much how that offset

Matthew Clark

good a it's Jeff, question. Yes.

may So on my [indiscernible] check I math this. have

the pricing So X.X%. clarify, be quarter I want just fourth just to will

basis, is third menu rolls The pricing a the and intention productivity, will the to inflation, model price is guest And it’s third for around demand in of, kind the okay? et fourth of fully of X.X% right in So quarter, the when obviously got our cetera, all going there. the is we on we're of X% all out, in factors, on our be think other middle, business that quarter quarter. because weighted X% the

input executing we're have sole are logical below pricing when an where it’s in well service that so pressured, on environment reason that are grocery. the to we're that so below business the being costs And dining pass model, margins full still you

mind So but sort our too say of little that's follower. that happen. keep we fast make from kind we traditionally perspective, bit a be still a room behind, would I strategic And of have of a to we're more may way in

the the a of about noted, be XX% was ahead one we progress the the brand quarter year, goal to And the pricing. to they're by behind for because Cheesecake, the as margins going it's because end on in of couple Italia get about North the to that growth. You points can Cheesecake the of of for year see

working. work. close are If because the for top natural it's it's if back to on So it if if revert the pretty high can grow overtime will so gets our pricing degree commodities where stabilize, getting We at back that. time room which some of And Cheesecake gas have least we better, to then and believe was. we of pricing where some all an between at give is some somewhere and of see we remain it's to staffed, these we fully costs,

Jeffrey Bernstein

traffic a mall, just to any within that malls the neighborhoods? so lastly, positioned in consumer mall those levels Thank neighborhoods, know that there any any you're than mean, know well I a based, well-to-do and of you they with the neighborhoods, anybody well-to-do just levels impacted to I But back higher perspective, income from you. back don't affluent you're And occupancy I pretty I then heavily worse or the pretty or full or guess, malls fact is you're I within Understood. strength better the more being else neighborhood? pre-COVID our the broader mentioned mall change are guess. if off just that differently than

David Gordon

Jeff, this of any know that don't rest remain locations David we've consistent. mall-based and tenancy malls Gordon. versus is the the The in change seen strong. I consistent our locations. remains market from They

We haven't in goes occupancy retailers as and strong really seen traffic any actually drop consistent. has as off remained far and

Jeffrey Bernstein

that much. stores non-mall wipe question that if your you stores clarity, out. great would mall right and That's no difference between Thank very your big

David Gordon

Yes.

Operator

Glass question next the Stanley. with Your John line comes Morgan from of

Your is open. now line

John Glass

understanding if to remember contingency I bites there are think was or that if timing, consumer Thanks small very continues small plans? introduced, a you gets pretty but that the this may uncertainty the you plates yet, forgive that this much. the think is was I maybe around? refreshed. [indiscernible] think have look you're do like it around what not from slow, plan, you And knowing Recognizing be correct still successful. if for might not out is? there? What time need that may me That you about there's How responding, must

Matthew Clark

Matt. it's John, Hey,

our environments. I the evaluating it's and relevant constantly point definitely team the rest strategic a think that is assured management responses to

we one with and David in. you And than have items key, to to coin, sales special the there's wants we margins better and we out the are menu is better you of that different value points, price remind that able on that. of to ensure two at sides put came card do went think everybody a I and think that to just I remain relevant, recession obviously, whenever out

environment what And so if we'll deploy again and wanted easy that's to that's the to an do. we watch thing us for certainly

As done that of very would very running rewards a David surgically, to. when say talked Gordon program. midst we the thing of to That earlier, that successful activity were we to And deploy before. third wanted value the we're during on the never about piloting is if I a promotions pandemic side us certainly be be able the vehicle for new would in type we

if so we that that we it where a little case, well. muscle. more pull up And the could And something bit built were certainly is as

we're So did I before. to going think than disposal have at our more we

learnings more the and before than specific have guests. ability to We reach we did

So respond I feel confident there. can that we

the On the key most expenses variable restaurant time. margin side, the over are is space in that

that But recapture on margin. speed the the and And that of the move medium get So alignment every variability to most so to that sales. components it's in to for right? the going which term. is are some and in rents over degree you recover so it's percentage even an the example with around fixed important variability can moderately standpoint with There thing at operation case, we're rents, those margins, from

goal. would our if margins, shooting So XXXX that we're be for

any maintain how it depends margin to long is. our be of same Now goal level that pullback deep the how on over medium would and But term.

John Glass

very Got much. it. you Thank

David Gordon

John, David Gordon. it’s

a just of would add the XXXX, field portion operations leadership nimble. XXXX they're I operationally experience especially team, our the very recession, that Sorry, XXXX, good team,

best have in We class retention.

operators, we'll point ever And ever got that operating, able business. are how the we at where to to changes be if flex we if make our were structural in best the a to So in were we any time. to appropriately point need we

John Glass

you. Thank

Operator

the from James. Raymond comes of Brian question next Vaccaro line with Your

open. line now Your is

Brian Vaccaro

then is patterns any your you ordering delivery when in the also how And restaurant? in can seeing performing? are regions, or COVID it regions reemerging Hi, that's thanks like are sounds so, and certain behavior if It you're there you an seeing, et across guess attributing are customers or concerns. some of within changes issue? the of good comment channel, And evening. you're off on to decline looking premise versus cetera., moderation where sales I less takeout

Matthew Clark

Matt. is This Brian. Sure,

We've of sort more Florida is places less of seen cases have in pressure like a And Northeast. greatest where reported Southern initially in the that saw the we Texas. example, California initially in impact and For been. number

in were talking had that enough, past and I and noted another in week was moves the it of I this of whole news Now around, cases. and about headline it bit looking city, And was seen is little surge paper the they summer particular we googled pressure. just the sure back at this bunch a geography local the a

a be almost can board -- we could we like sounding CDC. So for the

track of work saw can or are of back pretty Omicron So in statistic the behavior holidays surge is there average it's they're that into of than more when we the go respect We it, they're in restaurants You with those seen like et guests change stable, X people that's haven't as million been now to the many In home out people twice care people, right? can’t people. sick at check really cetera. any the areas meaningful. taking I it’s mean, where

us down in nobody's confidence gives those about of in geographies. at that point at this that traffic foot really in So restaurants. a time purely trading least lot our It's

David Gordon

that and very, consistent phone X%. comprises is XX% ordering and X% remains very delivery is of XX% lockup online the and off And premise mix

in So with almost of quarters. couple previous right the line

Brian Vaccaro

you Can you expect right, first of you to compare net said or That's the wage that how the And X% All in second the I experienced half? great. front, the quarter half. around helpful. inflation wage remind in us labor then you've think think does the on second I inflation

Matthew Clark

Yes, into about of year be the around year. would to first the X% half to we for bumped X% it it went the up thinking X%,

noted, X% have an year-over-year inflation to So X% of back And in the net represent moderate. the we half. X% wage about seen as would we the improvement

and trend of that combined. components all other at looking so And the

Brian Vaccaro

to recently? expect And other I starting for Matt, areas? think, guess significant I outsized been more those you time and do pretty why? Are costs and then normalization has And Okay. not, costs ease over training some when a those if And you. in headwind

Matthew Clark

people May, off no people business to Yes. over you and when still. I you hit comes you're time. even in of again a waves as we you're hire have but winter, March in higher out newer April running the ads of hire lot virus, to pun people, mean, and kind and then intended the had and really so of tell people training you’ve coming mean, I and it we would with I took

that's So in what seen staffing side most dip, back-to-school point in the those knows ease we've Brian a which level is of better our some dining, the little pretty an see that a casual with to aggregate we bit and everybody known a this in stage, environment are is labor late third get because the recent pattern more might stable, sales maybe seasonal that and where that just will you levels quarter. at fourth

Brian Vaccaro

pass you. I'll along. All right. Thank it

Operator

Your next question line comes from the Jon Citi. of Tower with

Your now open. line is

Jon Tower

here. and to run was Great. hoping follow A through ups few I

out if that flare curious Just got call the I'm own So case didn't showing mentioned then up and a is up, that levels hitting questions, few mind. you certain stores? on obviously you staffing or COVID but stuff, not more impacting if the it's your had that's I've markets don't at whether you actually the

Matthew Clark

give I Jon, driver we would, specific real tell it you could -- that. Hey I number, know question, is don't you is but what that Yes. well time one can There's that Matt. right? this anticipated we have And I a no what above only X running of is our there's

in anecdotally, it's you'll and can called market I through it calls, leadership this restaurants and members each and one our kind three operations as about moves week. story our all of on after staff talk these another also a We tell you managers

that. we seeing are definitely so And

slightly to in the that but Fortunately, a through restaurants to too. move better we it, are spot buffer be seeing we're able

Jon Tower

call mean, following to move in to seeing Okay. seem changes ability cases earlier you're John's mentioned And the think Matt had I that earlier of question I go calls of then marketplace your terms where up sales just up I in to down. scenarios you in to with kind the respond action. think

do to a fight bigger drive the the presence, you in and this mean, you social done COVID coming forward? out promotions past, past media have I traffic. much think you of how media do presence in So I going some have utilized

doing that of you respond? can you quickly And how are yet? So any

Matthew Clark

tell of completed they're just things. bit thinking we'll and we consumers be I'll understand you that how little so are consumer Well, particularly research there's about and some digesting more our and couple One, a what behaving around brands. to a

was of So it's we timing to people. and paradigm right felt back get out a the good understand, because, new sort with

be we'll effective. So we think learn about little think what more bit a I would

other the end them, aggregate, it's in believing we're understanding we're track operationally trends AUV, individual of in $XX day, it going to the on at markets dictate do, in X% volumes need the in really are month, given We to adjusting not whether operationally, there, the us any X% still potentially think get to up million hit we margins. right? the the about if than which change and strategy I big moves down because the that's for to or or a

little levels, We So as we to trend we around we believe if that have us plus that we navigate to efficient, learn to to if aggregate, be to are causes we bit. more then have think there. just ups in But a that. volumes the are, XXXX downs I and the or to pricing less and have to continue adjust the

David Gordon

something of flexibility on we lever prior for react basis talked a do only able to or status promotion about the we we're a DoorDash something our the would the strong off had so and and a and be what from earlier whatever learnings that's I is to our to we where us quickly pull versus fluctuations add, the all premise, Whether the we of weeks. place the Jon, as David, in just on on promotions to think that two current ordering, of see. weekly puts to look pandemic front this we meet at online pretty I want at Matt within pandemic that playbook can pretty

Jon Tower

the just you favorable still and believe to know, believe just then think, I pretty have I lastly, a hit the them explored more to grown, in you delivery brands you move channel. other (ph) in with And price XPD [XPD] brands, relationship even or potential are platforms fairly on have on you considered But you. other DoorDash. the and/or how to have I taking particular given exclusive economics

I in-store X% that. differential or menus you competitors much but think said than so and something higher it’s like between delivery menus, today are

-- taking why considered or you pricing curious you've I'm So wouldn't there? if

David Gordon

that take Certainly, like And delivery. conversation set as we that we X% more forward also X% our in to. to If wanted out we menu, hit we that's and we if that taking margin sales margins, what a discuss pricing moving prefer certainly we continue find competitive were can take the that would differential we'll on around the targets the to have differential do the it than for ability to we for to advantage feel have we without it's a need than protect do. to more if to that

still far we an the As relationship and agreement. very with happy do DoorDash, that have as with agreement exclusive we're

is as quickly get marketing that it marketing because relationship then ability the we like and our and communicate launched the the pull and as of of on Some that working and nimbleness with to to promotions to lever us out their consumer.

now. and we to stay very you plan the economics us said, are for we're as very like continued So and still is favorable path down the our happy relationship that for

Jon Tower

right. All I pass along. will it you. Thank

Operator

Your comes of Andy question with the from Barish Jefferies. line next

is now line open. Your

Andy Barish

David be but was from perspective that of less up? match yet G's additional the and that just kind I or late, heard guys. margin Hey, obviously you something some shortfall. costs worked is of on on And it the on comments food just with higher-than-expected hopped labor a there Can efficiency, just could input I little pricing? a productivity

Matthew Clark

to Andy versus the it’s was related pricing. Matt, it input the costs XXX%

supply spot now of the some roof natural of, R&M so costing the demand than particularly of services, right had. significant we dairy the So out just it's come someone gas and kind produce, went through that care to the and much the and get take more what and equipment, market is and and to imbalance

Andy Barish

are surges. just was Last the cause on did sales logic which the that? a How know noise around increased lot less I then following into of some time, the on surging, years, issues with here? staffing. from delta up comparison baking and the this virus but the year there's beyond callouts projection of you just obviously And and you. obviously thoughts of couple callouts last Got kind

Matthew Clark

Andy, it's think I Yes. mean, why, that's a I Matt.

to sort of seen been over six is the back months of that best mathematically that. to What benchmark we forth a is and past and the that adding it's So XXXX now to-date then benchmark. pricing nine have really the

you're last of exactly the so were And the this those mean, year using of and down up because we the year that last sort purely eliminates I declined of is peak to June and It it months time. saw of the period probably you and and probably in July highest what the year Delta just that and lapping, dropped or think in year-over-year were it X%, the the of right. July about some And comp through probably if that kind early hit and of trough year. roof the came late then back X% of they August. from just comparisons,

through. is the that goes that of see how we established, so of, And kind trend it

to being And really of looking way so it. pricing sort best we're XXXX evaluate at as plus the that

Andy Barish

the Thanks for color. Okay.

Operator

line Bank. Your comes with last question the from today Deutsche of Mullan Brian

is Your now line open.

Brian Mullan

Hey, thanks.

just versus a at the Anything on pre-COVID you philosophy. on looking the question program? the current is speak perhaps you're when different could executing allocation, share repurchase wondering capital parameters Just to if

opportunistic more wondering consistent? be Just when of maybe the you think stocks and if just programmatic you to want or undervalued

Matthew Clark

both I have it's for with the mean, very conviction Brian, believe toe on where brand. in in, think also Matt. we equities do sort Hey a our I putting long-term it's it's our it based time we're right. but think I opportunistic traded I mean, of the to

we -- we type also can't And time, we not That's jobs. a out our put figure over lower. more bit the perform it's that place you that But market, would have so [XX-BXX] the when in where do little right? it's I we of going it typical is stock buy because a and say to (ph)

it one in we in want and don't to we're And out to market. build to we so certainly, be want this month, month over time. able sort But buyers to be next of

Brian Mullan

want closely to factors are Or growth looking see before or separate the the And for thanks. like key if as you or priorities wonder unit watching just update just two? a brand, Flower to an there? might say over then next could North maybe you Child Italia? Okay, the What on you most accelerate you it the year at give out there follow-up, have

David Gordon

David. is This Brian. Hi,

recent very well, what see in is and direction. thus priority job good our Cheesecake geographies at be when The have and we the feel future to clip. the And that remain signs growth the to positive. all then the want bit the newer on bullish leverage We're and grow continue continued a capability guest their for Flower right very we and continue openings has it markets different that we into very done that if development to But We positive to Factory. I'd little about pull in and continue there supply place to chain people to good Child, ensure the to perform say quicker brand. trying on some is now decide that's we leadership move lever a reception side, remain team moving the right margins on of focused parts in

Brian Mullan

you. Thank

Operator

you. question-and-answer very attending. Thank you for Thank session conference concludes much today's This and call.

You may now disconnect.

The Cheesecake Factory Incorporated (CAKE) 28 Jul 222022 Q2 Earnings call transcript