The Cheesecake Factory Incorporated Q1 2010 Earnings Call Transcript

The Cheesecake Factory Incorporated Q1 2010 Earnings Call Transcript
By Seeking Alpha ,

The Cheesecake Factory Incorporated (CAKE)

Q1 2010 Earnings Call

April 22, 2010 5:00 pm ET

Executives

Jill Peters - Vice President, Investor Relations

David Overton - Chairman & CEO

Douglas Benn - Executive Vice President & CFO

Analysts

John Glass - Morgan Stanley

Jeffery Bernstein - Barclays Capital

David Tarantino - Robert W. Baird & Co.

Nicole Miller - Piper Jaffray & Co.

Jeff Farmer - Jefferies & Company

Analyst for Matthew DiFrisco - Oppenheimer & Co.

Sharon Zackfia - William Blair & Company

John Ivankoe - JPMorgan

Destin Tompkins - Morgan Keegan & Company

Christopher O'Cull - Suntrust Robinson Humphrey

Brad Ludington - Keybanc Capital Markets

Mitch Speiser - Buckingham Research

Keith Siegner - Credit Suisse

Presentation

Operator

Compare to:
Previous Statements by CAKE
» The Cheesecake Factory, Inc. Q4 2009 Earnings Call Transcript
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» The Cheesecake Factory Q2 2009 Earnings Call Transcript

Good day ladies and gentlemen and welcome to the first quarter fiscal 2010 earnings conference call. My name is Kiana and I will be your operator for today. At this time all participants are on a listen-only mode. Later we will conduct a question and answer session. (Operator Instructions) I would now like to turn the conference over to your host for today, Ms. Jill Peters.

Jill Peters

Good afternoon and welcome to our first quarter fiscal 2010 earnings call. I am Jill Peters, Vice President of Investor Relations. With us today are David Overton, Chairman and Chief Executive Officer and Doug Benn, Executive Vice President and Chief Financial Officer.

Before we begin, let me quickly remind you that during this call items may be discussed that are not based on historical fact and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results can differ materially from those stated or implied and forward-looking statements as a result of the factors detailed in today’s press release, which is available in the investor section of our website at www.thecheesecakefactory.com and in our filings with the Securities and Exchange Commission (SEC). All forward-looking statements made on this call speak only of today’s date and the company undertakes no duty to update any forward-looking statements.

David will start off the call today with some opening remarks. Doug will then take you through our operating results and details and provide our thoughts on the second quarter of fiscal 2010 as well as an update on the full year of 2010. Following that, we will open the call to questions. Without further delay, I will turn the call over to David.

David Overton

We’ve seen improvement in our business and are pleased to report that comparable sales in the first quarter were positive for both the Cheesecake Factory and Grand Lux Café. Our comparable sales improvement was driven by better guest traffic. At the Cheesecake Factory all of our markets delivered positive, comparable sales, even in California, which was a softer market for us throughout the recession.

With comparable sales being better than we anticipated it drove higher earnings per share, which grew 82% from the first quarter of last year. Clearly we have a lot of leverage in our business model. Just as we were negatively impacted during the recession as a result of cost being spread over a lower level of sales, we were able to effectively benefit when sales are on the up-swing by spreading what is now a lower cost structure over a higher level of sales.

Capturing the leverage from improving sales drove significantly better operating margins in the first quarter. Going forward, our ability to generate continued improvement in comparable sales will play a key role in sustainably improving our margins and helping us to deliver earnings per share in the mid-teens range over the next five years. In addition, retaining the $27 million in savings that we realized in 2009 from our cost management initiative, as well as capturing nearly $6 million in planned additional savings in the first quarter of this year, also helped fuel our performance.

Our operators are doing an excellent job running our restaurants efficiently, while still delivering a fantastic guest experience. Even the year after we started rolling out efficiency improvements in our restaurants, both our hospitality and technical guest satisfaction scores still remain high demonstrating a good balance between cost savings and the importance of the guest experience.

On the development front, we opened two new Cheesecake Factory restaurants during the first quarter. Both locations opened to high-demand with long lines on their first day. It’s gratifying to see the affinity that consumers continue to have for the Cheesecake Factory brand even after all of these years. This demonstrates to us that we still have many years of profitable unit growth ahead of us.

Our plans right now call for one more new restaurant opening in the back half of this year. We recently completed our new menu roll-out during the first quarter and guests are responding well to our new menu additions. Our marketing plans for this year will continue to focus on brand engagement to drive profitable comparable sales using a variety of tools.

I hope you will have a chance to visit one of our restaurants during the next couple of weeks to see what’s new on the marketing front and try some of our new menu items. With that, I will turn the call over to Doug.

Douglas Benn

Total revenues of the Cheesecake Factory for the first quarter increased to $405.4 million compared to the prior year first quarter; an increase of 3.2%. Restaurant revenues reflect a 1% increase in total restaurant operating [inaudible] primarily from the opening of three new restaurants during the trailing 15-month period, plus a 2.9% increase in average weekly sales.

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