The Cheesecake Factory Earnings: Margin Resilience Offsets Soft Comps
- 2 days ago
- 4 min read
TL;DR
Revenue Strength: Q4 revenue rose 4% year-over-year to $961.6 million, supported by unit growth and gift card breakage.
Margin Trends: Adjusted earnings per share of $1.00 reflected disciplined cost control and 60 basis points of restaurant-level margin expansion at the flagship brand.
Forward Outlook: Management guides to ~5% net income margin in 2026 with ~26 new units planned, signaling confidence in durable profitability.
Business Overview
The Cheesecake Factory Incorporated operates 371 company-owned restaurants across four primary platforms: The Cheesecake Factory (218 units), North Italia (48), Flower Child (part of the “Other” segment), and Other Fox Restaurant Concepts (FRC) brands (56), alongside a bakery division and 35 international licensed locations.
The Cheesecake Factory brand remains the economic engine, generating over 70% of quarterly revenue. North Italia and Flower Child represent the company’s contemporary growth vehicles, each operating at restaurant-level margins in the high-teens range. The FRC portfolio continues to scale with strong new-unit volumes.
Channel mix remains balanced, with off-premise accounting for 22% of Cheesecake Factory sales in Q4, demonstrating durable digital and delivery adoption without overwhelming dine-in economics.
Cheesecake Factory Earnings Performance
Revenue
Fourth quarter fiscal 2025 revenue totaled $961.6 million, up from $921.0 million in the prior-year period. The quarter included $17.3 million in gift card breakage revenue tied to updated redemption patterns. Excluding this benefit, revenue was $944.3 million, within management’s expected range .
By segment (Q4):
The Cheesecake Factory restaurants: $681.4 million (+2% YoY)
North Italia: $88.2 million (+8%)
Other FRC: $99.4 million (+17%)
Other (including Flower Child, bakery, CPG): $92.5 million
Comparable restaurant sales declined:
Cheesecake Factory: –2.2%
North Italia: –4%
Management attributed softness to broader industry deceleration, weather impacts, holiday shifts, and cannibalization effects at North Italia.
Margins & Profitability
On a GAAP basis:
Net income: $28.8 million
Diluted EPS: $0.60
The company recorded a $24.6 million pre-tax net expense related to impairments, lease terminations, FRC acquisition items, and gift card adjustments .
Excluding these items:
Adjusted net income: $48.3 million
Adjusted diluted EPS: $1.00
Cost structure showed disciplined execution:
Food & beverage costs improved 70 basis points year-over-year (partially breakage-related).
Labor declined 40 basis points as a percentage of sales.
Restaurant-level margins at The Cheesecake Factory expanded 60 basis points year-over-year to 17.6% for the full year .
Chairman and Chief Executive Officer David Overton summarized the quarter:
“Margins and adjusted diluted net income per share finished toward the higher end of our expectations, reflecting the resilience of our business and strong operational execution.”
Full-year fiscal 2025 revenue reached $3.75 billion, up 5% year-over-year, with adjusted diluted earnings per share rising 10% to $3.77 .
Forward Guidance
For Q1 2026:
Revenue: $955–$970 million
Adjusted net income margin: ~5% at midpoint
Commodity inflation: low single digits
Labor inflation: low to mid-single digits
For full-year 2026:
Revenue midpoint: ~$3.9 billion (±1%)
Net income margin: ~5%
~26 new restaurant openings planned
~$210 million in capital expenditures
Overton emphasized confidence in development:
“Looking ahead, we expect to open as many as 26 restaurants this year, and with a strong pipeline in place we remain confident in our ability to achieve our development goal.”
Risks & Opportunities
Key variables include:
Weather volatility (Q1 modeled at ~1% negative impact).
Ongoing industry traffic pressure.
Labor and medical cost inflation.
Execution risk around accelerated unit growth in the back half of 2026.
Commodity exposure remains favorable given dairy softness partially offsetting elevated beef costs.
Operational Performance
Execution quality remains the central story.
Management highlighted retention and productivity gains. Overton noted operators delivered improvements in “labor productivity, wage management, hourly staff and manager retention, and guest satisfaction”.
North Italia’s mature adjusted restaurant-level margin reached 17.5% in Q4, while Flower Child delivered 17.5% margin in the quarter and 18.5% for the full year .
FRC continues to scale effectively, with new units posting annualized volumes above $8.7 million.
Despite comparable sales pressure, the four-wall economics across brands remain intact and in many cases expanding.
Consumer Demand, Pricing, and Category Dynamics
Industry traffic slowed sequentially in Q4, with the Black Box Casual Dining Index declining 410 basis points from Q3 . Cheesecake Factory comps of –2.2% reflected relative stability versus broader casual dining trends.
Management continues to engineer demand through:
Menu innovation (bites and bowls platform).
Lower effective pricing (targeting ~3% pricing in 2026).
Loyalty investment, including a dedicated rewards app launching in Q2 2026 .
Importantly, pricing plus mix suggests effective net pricing closer to 2%, below industry food-away-from-home inflation. This signals a proactive value posture rather than defensive discounting.
Category takeaway: Traffic is pressured, but Cheesecake Factory’s high-average-unit-volume model and menu breadth are insulating check erosion while preserving margin.
Strategic Initiatives
Unit Growth: 25 openings in 2025 (~7% growth), targeting up to 26 in 2026 .
FRC Integration: Management described the acquisition as “one of the most successful restaurant acquisitions” and continues to layer operational expertise .
Loyalty & Digital: Dedicated rewards app in Q2 to enhance frequency and personalization.
Menu Strategy: Continued expansion of accessible price-point offerings without eroding brand positioning.
The sequencing remains clear: expand high-return concepts while protecting four-wall margin integrity.
Capital Allocation
Cash: $215.7 million
Revolver availability: $366.5 million
Total debt principal: $644 million
Capital returns increased:
$206+ million returned to shareholders in 2025 .
5.0 million-share increase to repurchase authorization .
Quarterly dividend raised to $0.30 per share .
Overton underscored this posture:
“These decisions reflect our disciplined approach to capital allocation and our ongoing commitment to returning capital to shareholders while continuing to invest thoughtfully in the long-term growth of our company.”
The Bottom Line
Margins are holding despite traffic pressure. Restaurant-level economics remain in the 17%–18% range across core brands.
Growth is accelerating into 2026. With ~26 units planned and 75% weighted to the second half, earnings leverage is back-end loaded.
Value positioning is deliberate, not reactive. Lower effective pricing and loyalty investments suggest strategic share capture rather than discounting.
If 2026 delivers stabilization in consumer trends, the operating model appears positioned for incremental margin expansion and earnings leverage.
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