Cheesecake Factory targets 4% to 5% revenue growth for 2026 as menu innovation and unit expansion continue

Earnings Call Insights: The Cheesecake Factory Incorporated (CAKE) Q3 2025

MANAGEMENT VIEW

* David Overton, Founder, Chairman & CEO, announced "our third quarter results were solid with consolidated revenues within our guidance range and earnings and profitability finishing above the high end of our expectations." Overton emphasized that positive comparable sales at Cheesecake Factory restaurants amid a "more challenging and competitive environment" highlighted the brand's resilience. Comparable sales increased 0.3% for the quarter, with annualized unit volumes averaging over $12 million. Overton stated, "we will remain focused on delivering exceptional food, service and hospitality, the hallmarks of our success while continuing to execute against our long-term growth strategy."
* Overton confirmed 19 restaurant openings year-to-date and affirmed the objective to open as many as 25 new restaurants in 2025, with plans to accelerate to 26 openings in 2026.
* David Gordon, President, reported notable improvements in manager and hourly staff retention, and highlighted that recent menu additions have driven higher appetizer attachment rates and improved check mix. Gordon added, "the new bites have driven higher appetizer attachment rates, while the new bowls are among some of the most frequently ordered new items we've introduced in recent years."
* The Cheesecake Rewards program continues to gain traction, with a dedicated rewards app in development to enhance engagement.
* Matthew Clark, Executive VP & CFO, stated, "total revenues of $907 million finished near the midpoint of the range we provided. Adjusted net income margin of 3.7% exceeded the high end of the guidance we provided, and we returned $13.8 million to our shareholders in the form of dividends and stock repurchases."

OUTLOOK

* Clark provided fourth-quarter revenue guidance of $940 million to $955 million, which represents an approximate 1% step down from Q3 sales trend. He projected a Q4 adjusted net income margin of about 5.1% at the midpoint of the sales range. For the full year, Clark maintained an outlook for a 4.9% net income margin.
* For 2026, Clark targeted total revenue growth of approximately 4% to 5% over 2025, with sales trends expected to improve as the year progresses. "We plan to continue accelerating unit growth next year. At this time, we expect to open as many as 26 new restaurants in 2026, with roughly 3/4 of those openings planned for the second half of the year," Clark said.
* Clark noted, "we expect G&A, depreciation and preopening expenses to remain essentially flat as a percent of sales compared to 2025," and estimated $200 million to $210 million in cash CapEx for 2026.

FINANCIAL RESULTS

* The company reported third-quarter total revenues of $907 million. Cheesecake Factory restaurant sales totaled $651.4 million, North Italia sales were $83.5 million, Flower Child sales were $48.1 million, other FRC sales were $78 million, and external bakery sales were $18 million.
* Comparable sales at Cheesecake Factory increased by 0.3%. Restaurant-level profit margin at Cheesecake Factory increased 60 basis points year-over-year to 16.3%. North Italia's adjusted mature locations margin rose 70 basis points to 15.7%. Flower Child locations saw a 140 basis point improvement to 17.4%.
* Third quarter GAAP diluted net income per share was $0.66, and adjusted diluted net income per share was $0.68.
* The company ended the quarter with total available liquidity of approximately $556.5 million.

Q&A

* Andrew Barish, Jefferies: Questioned the drivers of consumer caution. Clark answered, "it's mostly in the traffic...the more cautionary tone is associated with the fourth quarter."
* Brian Vaccaro, Raymond James: Asked for comp breakdowns and margin outlook. Clark replied that Cheesecake pricing was about 4%, traffic was negative 2.5%, and mix made up the difference, while North Italia had price at 4%, mix at negative 1%, and traffic at negative 6%.
* Jon Tower, Citigroup: Inquired about menu promotions and pricing strategy. Gordon emphasized continued use of separate menu cards and leveraging the rewards program for awareness, while Clark projected effective pricing to moderate to about 2% in the first half of next year.
* Sharon Zackfia, William Blair: Asked about impact of government shutdown and sales outlook for 2026. Clark noted "the bigger shift has come in October" and sales should improve through menu changes and easier comparisons in the back half.
* Sara Senatore, BofA Securities: Asked about Flower Child's strength and North Italia value proposition. Gordon attributed Flower Child's relative strength to "menu variety and strong price points," and outlined ongoing value initiatives at North Italia.

SENTIMENT ANALYSIS

* Analyst sentiment was slightly negative, with persistent questions on consumer softness, traffic declines, and competitive pressures. Several questions sought clarity on margin sustainability, pricing, and consumer trends.
* Management maintained a confident and steady tone in prepared remarks, but provided cautious responses regarding the near-term macro environment and consumer behavior. Clark used "we believe" and "we are confident" to signal underlying stability but tempered optimism for near-term growth.
* Compared to the previous quarter, management was somewhat more cautious, frequently referencing external uncertainties and using phrases such as "we will remain focused" and "we believe our strong execution...will enable us to emerge even stronger."

QUARTER-OVER-QUARTER COMPARISON

* Revenue for Q3 ($907 million) declined from Q2 ($956 million), while net income margin dropped from 5.8% to 3.7% but remained above guidance. Comparable sales growth at Cheesecake Factory slowed from 1.2% in Q2 to 0.3% in Q3.
* Restaurant-level profit margins at Cheesecake Factory and North Italia both improved year-over-year, though Flower Child margins decreased from 20.4% in Q2 to 17.4% in Q3.
* Guidance language shifted to a more cautious tone, with management noting a "softer macro and consumer environment" and a "more competitive environment." The outlook for traffic was tempered, and management predicted a "1% step down from the Q3 sales trend."
* Analysts focused more on traffic softness, macro headwinds, and competitive pressures than in the previous quarter, seeking greater detail on margin levers and the sustainability of recent performance.

RISKS AND CONCERNS

* Management noted risks from "a softer macro and consumer environment," specifically lower traffic and increased competition, including aggressive discounting in the industry.
* Commodity inflation, particularly in beef, is expected to pressure margins in Q4 and into 2026.
* The potential impact of government shutdowns and broader macroeconomic uncertainty was highlighted as a headwind.
* Management emphasized ongoing efforts to refine menu innovation, loyalty programs, and operational discipline to mitigate these risks.

FINAL TAKEAWAY

The Cheesecake Factory delivered stable revenues and strong profitability despite a challenging consumer environment, benefiting from menu innovation, disciplined operations, and robust retention. With a cautious outlook for Q4 and 2026, management aims to accelerate new unit growth, target 4% to 5% revenue growth for 2026, and maintain a focus on operational execution and financial resilience in the face of macroeconomic headwinds.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/cake/earnings/transcripts]

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