Cheesecake Factory Q1 Earnings Call Highlights

Key Points

• First-quarter beat: Cheesecake Factory reported Q1 revenue of $978.8 million and adjusted diluted EPS of $1.05, outperforming expectations with The Cheesecake Factory comps up 1.6% and improved restaurant-level margins.
• Digital rollout driving traffic: The new Cheesecake Rewards mobile app "exceeded expectations," earning top app-store rankings and strong early engagement that management says is boosting digital ordering, personalized marketing, and incremental guest acquisition.
• Growth and outlook: Management models fiscal 2026 revenue near $3.91 billion (midpoint), plans up to 26 new restaurant openings and about $210 million in capex, and returned $32.6 million to shareholders while ending the quarter with $601.6 million in liquidity and $644 million of debt.

Cheesecake Factory NASDAQ: CAKE reported first-quarter fiscal 2026 results that management said exceeded internal expectations on revenue, margins, and adjusted diluted earnings per share, supported by steady demand at its namesake restaurants, continued momentum at Flower Child, and expanding unit growth across its portfolio.

First-quarter performance and brand demand

Chairman and CEO David Overton said the company “delivered strong results in the first quarter, exceeding expectations across revenue, margins, and adjusted diluted earnings per share,” attributing performance to “disciplined execution across our restaurants and continued demand for our differentiated high-quality concepts.”

Comparable sales at The Cheesecake Factory restaurants increased 1.6% in the quarter, which Overton said outperformed the industry. He added that average weekly sales reached an all-time high, bringing annualized unit volume to “nearly $12.8 million.” Overton also highlighted recent menu additions, including “new bites and expanded bowl options,” saying they have been well received and help keep the brand “competitively positioned without relying on discounting.”

President David Gordon said the menu additions contributed to “sequential improvements in traffic and check mix,” which allowed the company to “moderate menu pricing without impacting restaurant level margins.”

Digital engagement: Cheesecake Rewards app rollout

Gordon said the company’s new mobile app launch “exceeded expectations,” citing early app store rankings of “number 3 overall and number 1 in food and drink during the rollout week.” He said guest feedback has been positive, particularly around reservations, menu browsing and ordering, reordering favorites, and accessing rewards in one place. Gordon also said the company is seeing “solid early traction” from increasing use of the app for digital ordering.

While the company declined to disclose specific membership or download figures, Gordon said management is “very pleased” with downloads and also with “the amount of sign-ins” after download. He also pointed to encouraging opt-in behavior, including location enabling and notifications, which he said supports more personalized marketing and improved ROI.

CFO Matt Clark added that he has been “really pleased with the number of new guests that we’re getting for the sign-up,” framing the rollout as an opportunity to “open the funnel to attract incremental traffic.”

Concept-by-concept update: margins, comps, and new openings

Gordon provided detailed updates across the portfolio:

• The Cheesecake Factory: Comparable sales increased 1.6%, with off-premises mix at 22%, in line with the prior quarter and prior year. Restaurant-level profit margin increased 10 basis points year-over-year to 17.5%.
• North Italia: Annualized AUVs were $7.4 million and comparable sales declined 2%. Restaurant-level profit margin for adjusted mature locations was 14.8% versus 16.6% a year ago, which Gordon said primarily reflected “sales deleverage” and higher building expenses including repairs, maintenance, and utilities.
• Flower Child: Comparable sales increased 10%, which Gordon said translated into annualized AUVs of $4.9 million, a quarterly high for the concept. Restaurant-level profit margin for adjusted mature Flower Child locations was 19.6%, up 100 basis points year-over-year.
• Other FRC concepts: The company opened a The Henry in Phoenix that Gordon said has seen average weekly sales above $280,000 in its first four weeks, implying an annualized AUV above $14 million.

On North Italia, Gordon said the concept has seen “strong early results at new restaurant openings,” including a Brea, California location that he described as “the busiest opening week in the history of North Italia.” He added that new markets have also been well received and the brand plans to continue a roughly “50% new to existing markets” approach.

Responding to questions on North Italia’s margin decline, Clark pointed to comp-related deleverage, fixed-cost pressure, and mix within the “mature margin set,” noting that the group can change each year. He said management’s focus remains on returning to positive comparable sales, which he called the “primary attribute to recapturing the margin piece,” and reiterated confidence that mature margins should be in the 16% to 18% range longer term.

Etienne Marcus, vice president of finance and investor relations, provided North Italia comp components: price was about 3%, mix was positive 1%, and traffic was negative 6%.

Financial results, balance sheet, and capital return

Clark said total revenues were $978.8 million, “meaningfully above the high end of the range” previously provided. Adjusted net income margin was 5.2% and adjusted diluted earnings per share was $1.05, both above expectations. GAAP diluted EPS was $1.02.

By segment, Clark reported:

• The Cheesecake Factory restaurant sales of $690.5 million, up 3% year-over-year
• North Italia sales of $89.5 million, up 7%
• Other FRC sales of $104.5 million, up 20% (sales per operating week: $145,200)
• Flower Child sales of $52.6 million, up 21% (sales per operating week: $94,500)
• External bakery sales of $13.9 million

On costs, Clark said cost of sales improved 10 basis points, helped by favorable dairy costs but partially offset by higher beef and seafood costs. Labor as a percentage of sales declined 20 basis points on productivity gains, partially offset by higher group medical costs. Other operating expenses increased 40 basis points, driven by higher utilities and bakery overhead.

The company returned $32.6 million to shareholders through dividends and share repurchases, including $18.4 million in buybacks and $14.2 million in dividends. It ended the quarter with $601.6 million in liquidity, including $235.1 million in cash and $366.5 million available under its revolving credit facility. Total debt outstanding was $644 million, including convertible notes due 2026 and 2030.

Outlook and development plans

While management did not provide specific comparable sales or earnings guidance, Clark shared assumptions for the second quarter and full year. For the second quarter, the company expects total revenues between $990 million and $1.0 billion and modeled adjusted net income margin of about 5.5% at the midpoint of that range. The company expects low-to-mid single-digit commodity inflation and low-to-mid single-digit labor inflation, with other operating expenses about 20 basis points higher year-over-year due to higher marketing spend to support the rewards app launch.

For fiscal 2026, Clark said the company anticipates total revenues of approximately $3.91 billion at the midpoint of its sensitivity modeling (±1%), assuming no material operating or consumer disruptions. The company expects total inflation across commodities, labor, and other operating expenses to remain in the low- to mid-single-digit range. It also expects depreciation of about $115 million and pre-opening expenses of approximately $35 million to $36 million, with full-year net income margin around 5% at the revenue estimate.

On development, Overton said the company opened three restaurants in the quarter (a North Italia, a The Henry, and a Flower Child) and had one licensed international Cheesecake Factory opening in Mexico, which he said is “the only international opening we expect this year.” Subsequent to quarter end, the company opened a North Italia that marked the concept’s 50th location. Clark said the company expects to open “as many as 26 new restaurants” in 2026, with roughly three-quarters in the second half, including up to 6 Cheesecake Factory units, 6 to 7 North Italia locations, 6 to 7 Flower Childs, and 7 FRC restaurants. Cash capital expenditures are expected to be about $210 million.

During the Q&A, Clark said the company remained “pretty steady throughout the quarter” despite monitoring macro headlines, adding that management did not see meaningful trade down and that “both the guest traffic and the mix were both steady throughout.” He also noted that pricing at The Cheesecake Factory was 3.3% in the quarter and is expected to be 3% in subsequent quarters, while mix was negative 0.3 and traffic was negative 1.4, which he described as a material improvement from the fourth quarter.

Overton also noted the company was named to Fortune’s “100 Best Companies to Work For” list for the 13th consecutive year, a recognition he said reflects direct staff feedback and supports recruiting and retention in a competitive labor environment.

About Cheesecake Factory NASDAQ: CAKE

The Cheesecake Factory Incorporated NASDAQ: CAKE is an American restaurant company and distributor renowned for its full-service casual-dining concept and specialty cheesecakes. Headquartered in Calabasas Hills, California, the company operates more than 200 restaurants under The Cheesecake Factory® brand across the United States, Puerto Rico and select international markets. In addition to sit-down dining, Cheesecake Factory franchised locations offer catering and take-out services, while a separate manufacturing arm supplies branded cheesecakes and desserts to supermarkets, hotels and other foodservice operators.

The origins of the brand trace back to a small cheesecake bakery founded in Detroit in the 1940s.

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