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The Cheesecake Factory Incorporated (CAKE)

Q4 2011 Earnings Call

February 21, 2012 5:00 pm ET


Jill S. Peters - Vice President of Investor Relations

W. Douglas Benn - Chief Financial Officer and Executive Vice President


Joseph T. Buckley - BofA Merrill Lynch, Research Division

John S. Glass - Morgan Stanley, Research Division

Matthew J. DiFrisco - Oppenheimer & Co. Inc., Research Division

Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division

Alexandra Chan - Jefferies & Company, Inc., Research Division

Nicole Miller Regan - Piper Jaffray Companies, Research Division

Michael Kelter - Goldman Sachs Group Inc., Research Division

Sharon Zackfia - William Blair & Company L.L.C., Research Division

Will Slabaugh - Stephens Inc., Research Division

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Bryan C. Elliott - Raymond James & Associates, Inc., Research Division

Mitchell J. Speiser - Buckingham Research Group Incorporated

Jeffrey Andrew Bernstein - Barclays Capital, Research Division

Karen Holthouse - Crédit Suisse AG, Research Division

John W. Ivankoe - JP Morgan Chase & Co, Research Division

Jonathan R. Komp - Robert W. Baird & Co. Incorporated, Research Division

John Dravenstott - KeyBanc Capital Markets Inc., Research Division

Greg Margolis

Conrad Lyon - B. Riley & Co., LLC, Research Division




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Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 The Cheesecake Factory Earnings Conference Call. My name is Melanie, and I'll be your coordinator today. [Operator Instructions] As a reminder, today's meeting will be recorded. I would now like to turn the call over to Jill Peters. Please proceed.

Jill S. Peters

Thank you. Good afternoon, and welcome to our fourth quarter fiscal 2011 earnings call. I'm Jill Peters, Vice President of Investor Relations. I'm here with Doug Benn, our Executive Vice President and Chief Financial Officer. Unfortunately David Overton could not be with us on today's call. 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 could differ materially from those stated or implied in forward-looking statements as a result of the factors detailed in today's press release, which is available in the Investors section of our website at and in our filings with the Securities and Exchange Commission.

All forward-looking statements made on this call speak only as of today's date, and the company undertakes no duty to update any forward-looking statements. We'll start of the call today with some opening remarks and then take you through our operating results in detail. Following that, we'll discuss our outlook for the first quarter of 2012 as well as the full year and then open the call to questions. Now I'll turn the call over to Doug.

W. Douglas Benn

Thank you, Jill. The fourth quarter marked our highest comparable sales and guest traffic levels of the year with The Cheesecake Factory and Grand Lux Café both solidly positive. We've now had 2 straight years of positive quarterly comparable sales. Each of our markets delivered positive comparable sales demonstrating the strength of our brand. Consumers have many choices when it comes to dining out. Our guest counts rose solidly during the fourth quarter, one more measure that tells us we're doing many things very well for our guests. Our operators continue to demonstrate their leadership in the industry, resulting in high guest satisfaction scores, and at the same time, a disciplined focus on margins. Over the past 3 years, our guest satisfaction scores increased by 20%, which is significant given that our base level score was already pretty high. This improvement in guest satisfaction is clearly a key driver of our growth in guest traffic over the last 8 quarters. We saw our highest profitability levels of the year in the fourth quarter with an 8.3% operating margin. Our long-standing goal is to recapture peak operating margins and deliver mid-teens earnings per share growth. And our performance this quarter illustrates our ability to effectively turn higher comparable sales into profit. The latest example of our continued leadership in menu innovation is our SkinnyLicious menu. Without getting into too many details, I will tell you that guests love the new menu and they love having more options. In Cheesecake Factory style, the flavors are big, the dishes are what people want to eat, the portions are generous and the items are priced to generate full margins.

As to development, we expect to open as many as 7 to 8 new restaurants in the United States this year, including a new Grand Lux Café. Our first opening of the year is scheduled for next month in Salt Lake City, Utah. We've tightened the range of our new unit openings as we know that some of our opening dates have shifted out a little bit. Our desire to expand and our capabilities to do so haven't changed. We continue to be selective about choosing sites and taking the appropriate business risks to ensure we can hit our required returns.

In addition to our domestic expansion, we're also expecting that as many as 3 new restaurants will open in the Middle East this year under a license agreement. We're also continuing to explore other international opportunities. We're in active dialogue with potential partners to further assess the market for our concept outside the United States as well as build relationships with established multi-brand operators in other countries.

Our performance continues to be in line with our longer-term objectives for growth. We are moving down the path to becoming a global brand and are confident in our ability to continue to expand The Cheesecake Factory and to deliver on our earnings growth targets.

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