Cheesecake Factory Q2 Earnings Call Highlights

Cheesecake Factory (NASDAQ:CAKE) reported second-quarter fiscal 2026 results that exceeded its expectations, with quarterly revenue surpassing $1 billion for the first time and adjusted diluted earnings per share rising 24% from a year earlier.

Chairman and Chief Executive Officer David Overton said the company’s core Cheesecake Factory restaurants led the performance, generating 5.8% comparable-sales growth and positive traffic. Restaurant-level margin at the Cheesecake Factory reached 20%, the highest level in a decade, supported by higher sales, labor productivity gains and food-cost efficiency.

“Our strong top-line sales this quarter reflect disciplined execution across our restaurants,” Overton said. He added that menu additions, including the company’s bowls and bites offerings, have helped attract guests and reinforce value without relying on discounting.

Core Brand Traffic and Digital Engagement

President David Gordon said Cheesecake Factory traffic increased 2.7% year over year during the quarter, outperforming the Black Box Casual Dining Index by 350 basis points. Average weekly sales reached a company record, lifting annualized unit volumes above $13.5 million.

Chief Financial Officer Matt Clark said the Cheesecake Factory’s quarterly comparable-sales increase reflected approximately 3% pricing, 2.7% traffic growth and a roughly flat mix. Sales trends modestly improved during the second half of the quarter, he said, and the company’s third-quarter outlook incorporates continuation of that elevated pace.

Management attributed the traffic gains to restaurant operations, menu innovation, rewards-program engagement and marketing activity. The company launched its app during the period, and Gordon said adoption exceeded expectations, driving member acquisition and offering a direct channel for personalized guest communications, reservations and online ordering.

During the question-and-answer session, Clark said the app launch was a catalyst for downloads and engagement, although management said the sales improvement reflected multiple initiatives rather than the app alone. The company said it has also observed increased engagement from younger guests, including through social-media channels and what management described as a return of younger consumers to malls.

Clark said certain social-media activity has been measurable in restaurant sales, including attention around menu items and “menu hacks.” The company is investing in social listening internally and through external partners, Gordon said, while continuing to use traditional marketing channels to reach its broad customer base.

Other Concepts Show Mixed Results

North Italia posted a 3% decline in second-quarter comparable sales, although its total sales rose 8% from the prior-year period to $98.4 million. Annualized unit volumes were $7.9 million. Adjusted mature North Italia restaurant-level margin declined to 15.6% from 18.2% a year earlier, which management attributed to sales deleverage and higher commodity inflation.

The company said it is testing initiatives at North Italia during the second half, including lower-priced pasta offerings, lunch specials, targeted marketing, in-mall advertising, restaurant-week participation and community events. Gordon said improvement will take time and traffic may vary in coming quarters as those efforts are evaluated.

Flower Child continued to outperform the fast-casual segment, with comparable sales up 13% and a two-year comparable-sales increase of 17%. Annualized unit volumes reached $5.3 million, while adjusted mature restaurant-level margin was 20.1%.

Clark said roughly two-thirds of Flower Child’s comparable-sales growth came from traffic, with about 2.5% pricing and additional check-average benefit from catering. Some Flower Child locations are producing annualized sales in the $6.5 million to $7 million range, according to management. The company said it intends to prioritize traffic growth and value rather than push margins beyond the current 20% level through aggressive pricing.

The Henry, another Fox Restaurant Concepts brand, opened a location in Wilmette, Illinois, during the quarter. Gordon said the restaurant averaged about $200,000 in weekly sales during its first six weeks, implying annualized volume of more than $10 million.

Financial Results and Capital Allocation

Total second-quarter revenue exceeded $1 billion. Cheesecake Factory restaurant sales increased 7% to $729.5 million, North Italia sales increased 8% to $98.4 million, and Flower Child sales rose 18% to $56.6 million. Other Fox Restaurant Concepts sales totaled $104 million, up 15% year over year, while external bakery sales were $15.4 million.

Adjusted net income margin was 6.8%, and adjusted diluted EPS was $1.44, compared with GAAP diluted EPS of $1.41. The company generated record quarterly net income of $68 million, up 25% year over year, and record adjusted EBITDA of $118 million, up 18%.

Cost of sales increased 20 basis points as higher beef, produce and seafood costs were partly offset by lower dairy costs. Labor expense as a percentage of sales declined 80 basis points, while other operating expenses declined 30 basis points. General and administrative expense increased 30 basis points, primarily due to legal costs and stock-based compensation.

Cheesecake Factory ended the quarter with $561.7 million in available liquidity, including $195.2 million in cash. The company repaid the remaining $69 million principal on convertible senior notes due in June 2026. Its remaining debt consisted of $575 million in 2% convertible senior notes due in 2030.

The company spent approximately $43 million on capital expenditures during the quarter, repurchased about $9.3 million of stock and paid $15.7 million in dividends, returning a combined $25 million to shareholders.

Outlook and Restaurant Development

For the third quarter, Cheesecake Factory expects total revenue of $980 million to $990 million. The company expects low-single-digit commodity inflation, low- to mid-single-digit labor inflation, general and administrative expense of $63 million to $64 million, and pre-opening expense of $10 million to $11 million for six planned openings. At the midpoint of its sales range, management expects adjusted net income margin of about 4.3%.

For fiscal 2026, the company now expects approximately $4 billion in revenue at the midpoint of its estimates and full-year net income margin of about 5.4%. Clark clarified during the call that 5.4% was the correct figure after an error in the company’s slide deck showed a lower number.

The company remains on track to open as many as 26 restaurants in 2026, consistent with its longer-term goal of approximately 7% annual unit growth. The plan includes five to six Cheesecake Factory locations, six to seven North Italia restaurants, seven Flower Child restaurants and as many as seven additional Fox Restaurant Concepts locations. Full-year cash capital expenditures are expected to total approximately $210 million.

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.