Q4 2023 Cheesecake Factory Inc Earnings Call
Good afternoon, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the Cheesecake factory fourth quarter and fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and.
Operator: Good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cheesecake Factory fourth quarter and fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, again, press star one. Thank you. I would now like to turn the conference over to Etienne Marcus, Vice President of Finance and Investor Relations. Etienne, you may begin your call. Good afternoon, and welcome to our fourth quarter fiscal 2023 earnings call. On the call with me today are David Overton, our Chairman and Chief Executive Officer, and Matt Clark, our Executive Vice President and Chief Financial Officer. David Gordon, our president, is serving on jury duty and is unable to join us on today's call.
Answer session. If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw your question again press Star one. Thank you I would now like to turn the conference over to Etienne Marquez, Vice President of Finance and Investor Relations at <unk> you may begin your call.
Etienne Marquez: Good afternoon, and welcome to our fourth quarter fiscal 2023 earnings call.
Etienne Marquez: On the call with me today are David Overton, our chairman and Chief Executive Officer, and Matt Clark, Our executive Vice President and Chief Financial Officer.
Etienne Marquez: David Gordon our President is serving on jury duty and is unable to join us on today's call.
Etienne Marcus: Before we begin, let me quickly remind you that during this call, items will 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 be materially different from those stated or implied in forward-looking statements as a result of the factors detailed in today's press release. Additional information is available on our website at investors.thecheesecakefactory.com 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.
Etienne Marquez: Before we begin let me quickly remind you that during this call items will be discussed are not based on historical fact and are considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 995.
Etienne Marquez: Actual results could be materially different from those stated or implied in forward looking statements. As a result of the factors detailed in today's press release, which is available on our website at investors thought the Cheesecake factory Dot com and in our filings with the Securities and Exchange Commission.
Etienne Marquez: All forward looking statements made on this call speak only as of today's date.
Etienne Marcus: The company undertakes no duty to update any forward-looking statements... In addition, during this conference call, when discussing comparable sales, we will be referring to comparable sales on an operating week basis unless specifically stated otherwise. We will also be presenting results on an adjusted basis, excluding impairment of assets and release termination, and acquisition. An explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP appear in our press release and on our website, as previously described. David Overton will begin today's call with some opening remarks, then Matt will provide a business update, review our fourth quarter results in detail, and finish up with some commentary on our outlook for the first quarter and full year 2024, before opening the call up to questions. With that, I'll turn the call over to David Overton.
Etienne Marquez: Company undertakes no duty to update any forward looking statements.
Etienne Marquez: In addition, during this conference call when discussing comparable sales, we will be referring to comparable sales on an operating week basis, unless specifically stated otherwise.
Etienne Marquez: We will also be presenting results on an adjusted basis, which exclude impairment of assets and lease terminations and acquisition related expenses, an explanation of our use of non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures appear in our press release and our website as previously described.
Etienne Marquez: David Overton will begin today's call with some opening remarks, and Matt will provide a business update review our fourth quarter results in detail and finish up with some commentary on our outlook for the first quarter and full year 2024.
Speaker Change: Before opening the call up to questions.
Speaker Change: With that I will turn the call over to David Overton.
David M. Overton: Thank you, Etienne. We finish the year on a strong note with continued improvement across many facets of our business, resulting in solid financial performance, revenues in line with expectations, and better than anticipated.
Matthew E. Clark: At CN, we finished the year on a strong note with continued improvement across many facets of our business, resulting in solid financial performance, including revenues in line with expectations and better than anticipated profit margins.
David M. Overton: Fourth quarter revenues were $877 million, led by comparable sales at the Cheesecake Factory restaurants, up 2.5% from the prior year and 14% 29, once again meaningfully outpacing the casual dining industry and demonstrating the Strength and Consistency of Our Business. To this point, Cheesecake Factory Restaurants delivered the highest average weekly sales in the company's history in the last week of the fourth quarter, top-line performance as a reflection of our steadfast focus. Thank you for attending the Contemporary Design and Décor of our restaurants and delivering exceptional food quality, service, and hospitality.
David M. Overton: Fourth quarter revenues were $877 million led by comparable sales at the Cheesecake factory restaurants up two 5% versus the prior year.
David M. Overton: And 14% versus 2019, once again meaningfully outpacing the casual dining industry and demonstrating the strength and consistency of our brand.
David M. Overton: To this point Cheesecake factory restaurants delivered the highest average weekly sales in the company's history in the last week of the fourth quarter.
David M. Overton: Our topline performance is a reflection of our steadfast focus on menu innovation, maintaining the contemporary design and decor.
Restaurants, and delivering exceptional food quality service and hospitality.
David M. Overton: Further, building on the outstanding execution delivered by our operations, we exceeded our record for Labor Productivity, Food Efficiency, and Wage Management, contributing towards restaurant-level profit of 16.1%., not only exceeding our projections but also surpassing fourth quarter 2019 margin levels. On the development front, successfully opened nine new restaurants during the fourth quarter, including three Cheesecake Factories, three North Italias, and three FRC restaurants. Additionally, two Cheesecake Factory restaurants opened
David M. Overton: Further building on the outstanding execution delivered by our operations team, we exceeded our expectations and labor productivity food efficiency and wage management contributing towards restaurant level profit margin of 16, 1% at the Cheesecake factory.
David M. Overton: Exceeding our projections, but also surpassing fourth quarter 2019 margin levels.
David M. Overton: The development front, we successfully opened nine new restaurants during the fourth quarter, including three cheesecake factories, three north Italia and three FRC restaurants. Additionally, two cheesecake factory restaurants opened internationally under licensing agreements one in China and our first location.
David M. Overton: Licensing, One in China, in our first location at the time. Subsequent to Quarter End, we opened a North Italian restaurant, Flower Child, in the Dallas Market, and One Cheesecake Factory Restaurant International in Mexico, and lastly, this morning, we opened our newest culinary drop-in. We are looking to build on this momentum, and while the development conditions have not yet been fully normalized, we are aiming to further accelerate our unit. At this time, we're planning to open... 24, including as many as three to four Cheesecake Factories and six to seven North Italians. Six to seven flower child.
David M. Overton: In Thailand.
David M. Overton: Subsequent to quarter end, we opened in North Italia restaurant in Houston Flower child in the Dallas market and one Cheesecake factory restaurant internationally under licensing agreement in Mexico.
David M. Overton: And lastly, this morning, we opened our newest culinary dropout and Atlanta.
David M. Overton: We are looking to build on this momentum and while the development conditions have not been fully normalized.
David M. Overton: Aiming to further accelerate our unit growth.
David M. Overton: At this time, we are planning to open as many as 22, new restaurants in 2024, including as many as three to four cheesecake factories, 6% to seven North Italia is six to seven flower child, and 6% to 7% <unk> restaurants.
David M. Overton: 6-7 at the Farsi Restaurant. As we look ahead, we remain intently focused on leveraging Competitive Strength, the scale of our business, our differentiated brand, and Best in Class Operators to drive additional shareholder value and market share. With that, I'll now turn the call over to... Thank you, David.
David M. Overton: As we look ahead, we remain intently focused on leveraging our competitive strength the scale of our business, our differentiated brands and the best in class operators to drive additional shareholder value and market share gains.
With that I'll now turn the call over to Matt.
Matthew E. Clark: Thank you David.
Matthew E. Clark: Let me first provide a high level recap of our fourth quarter results versus our expectations outlined last quarter.
Matthew E. Clark: Let me first provide a high-level recap of our fourth quarter results versus our expectations I outlined last quarter. Total revenues of $877 million finished essentially at the midpoint of the range we provided. Adjusted net income margin of 4.5%. Thank you.
Matthew E. Clark: Total revenues of $877 million finished essentially at the midpoint of the range we provided.
Adjusted net income margin of four 5% exceeded the 4% to 5% guidance we provided.
Matthew E. Clark: And we returned $22.9 million to our shareholders in the form of dividends and stock repurchase. For the year, we delivered total revenues of $3.44 billion, a 6.7% increase over 2022 after excluding the impact of the additional week in fiscal 2022, and adjusted earnings per share of $2.69, a significant improvement over fiscal 2022 and above 2019 adjusted EPS. Now turning to some specific details about the quarter. Fourth quarter total sales at the Cheesecake Factory restaurants were $658 million.
Matthew E. Clark: And we returned $22 $9 million to our shareholders in the form of dividends and stock repurchases.
Matthew E. Clark: For the year, we delivered total revenues of 344 billion.
A six 7% increase over 2022.
Matthew E. Clark: After excluding the impact of the additional week in fiscal 2022.
Matthew E. Clark: And adjusted earnings per share of $2 69.
Matthew E. Clark: A significant improvement over fiscal 2022 and above 2019 adjusted EPS.
Matthew E. Clark: Now turning to some specific details around the quarter.
Matthew E. Clark: Fourth quarter total sales of the Cheesecake factory restaurants were $658 million with comparable sales up two 5% versus the prior year and 14% versus 2019.
Matthew E. Clark: For comparable sales, up 2.5% versus the prior year and 14% versus 2019, a slight increase from the third quarter. Importantly, the improvement was driven by better traffic and menu mix as year-over-year menu pricing declined by four on-premise incident rates remained above 2019 levels and by the same amount as in the third quarter, demonstrating stability even as we continue lapping the heightened spending from the last year. Total sales for North Italia were $67.2 million, with fourth-quarter comparable sales increasing 7% from the prior year and 34% versus 2019, resulting in annualized AUV Restaurant-level profit margin for the adjusted mature North Italia locations was 15.8 percent, up 330 basis points from the previous quarter. The margin improvement was supported by a 3.7% menu price increase in October. Other FRC sales totaled $70.9 million, and sales per operating week were $138,500. Flower Child sales totaled $30.4 million, and sales per operating week were $75,500, and External Bakery Sales were $16.6 million during the fourth quarter of fiscal 2023.
Matthew E. Clark: Slight increase from the third quarter.
Matthew E. Clark: Importantly, the improvement was driven by better traffic and menu mix as year over year menu pricing declined.
Matthew E. Clark: Q4 on premise incident rates remained above 2019 levels.
Matthew E. Clark: And by the same amount as in the third quarter demonstrating stability, even as we continue lapping a heightened spending from last year.
Matthew E. Clark: And off premise sales totaled 22% of sales for the fourth quarter in.
Matthew E. Clark: In line with our full year percentage of sales.
Matthew E. Clark: Total sales for north Italia, or $67 $2 million with fourth quarter comparable sales, increasing 7% from the prior year and 34% versus 2019.
Matthew E. Clark: <unk> and annualized <unk> of $7 9 million.
Matthew E. Clark: Restaurant level profit margin for the adjusted mature North Italia locations was 15, 8% up three.
Matthew E. Clark: 330 basis points from the previous quarter.
Matthew E. Clark: The margin improvement was supported by a three 7% menu price increase in October.
Matthew E. Clark: Other FRC sales totaled $79 million and sales per operating week for $138500.
Matthew E. Clark: Flower child sales totaled $30 4 million in sales per operating week were $75500.
Matthew E. Clark: External bakery sales were $16 6 million during the fourth quarter of fiscal 2023.
Speaker Change: Now moving to year over year expense variance commentary.
Matthew E. Clark: Now, moving to year-over-year expense variance commentary. In the fourth quarter, we continued to realize measurable year-over-year improvement across several key line items in the P&L. Specifically, cost of sales decreased 170 basis points, primarily driven by higher menu pricing than commodity inflation. Labor decreased 50 basis points, supported by pricing leverage and improved staffing levels, partially offset by lapping lower medical insurance expenses. Other operating expenses increased 20 basis points, driven by higher marketing costs, which included the rewards program. GNA decreased 10 basis points.
Speaker Change: In the fourth quarter, we continued to realize measurable year over year improvement across several key line items in the P&L.
Speaker Change: Specifically cost of sales decreased 170 basis points, primarily driven by higher menu pricing than commodity inflation.
Speaker Change: Labor decreased 50 basis points supported by pricing leverage and improved staffing levels, partially offset by lapping lower medical insurance expenses.
Speaker Change: Other operating expenses increased 20 basis points, driven by higher marketing costs, which includes the rewards program.
Speaker Change: G&A decreased 10 basis points, and depreciation decreased 20 basis points as a percent of sales.
Matthew E. Clark: And depreciation decreased 20 basis points as a percent of sales. Pre-opening costs were $9.6 million in the quarter compared to $7.8 million in the prior year period. We opened nine restaurants during the fourth quarter versus eight restaurants in the fourth quarter of 2022. Higher pre-opening costs for the quarter were driven by one more opening. Delays and Opening Dates, and the Mix of Concepts. In the fourth quarter, we recorded a net expense of $35.6 million, primarily related to impairment of assets and lease termination expenses and FRC acquisition-related expenses. Fourth quarter GAAP diluted net income per share was 26 cents, while adjusted diluted net income per share was $0.80. Now turning to our balance sheet and capital allocation. The company ended the quarter with total available liquidity of approximately $293 million, including a cash balance of about $56 million and approximately $236.5 million available on a revolving credit facility. Total debt outstanding was unchanged at $475 million in principal.
Speaker Change: Pre opening costs were $9 6 million in the quarter compared to $7 8 million in the prior year period.
Speaker Change: We opened nine restaurants during the fourth quarter versus eight restaurants in the fourth quarter of 2022.
Speaker Change: Higher preopening costs for the quarter was driven by the one more opening delays.
Speaker Change: Delays in opening days and the mix of concepts.
Speaker Change: And in the fourth quarter, we recorded a net expense of $35 $6 million.
Speaker Change: Primarily related to impairment of assets and lease termination expense and FRC acquisition related expenses.
Speaker Change: Fourth quarter GAAP diluted net income per share was 26.
Speaker Change: Adjusted diluted net income per share was <unk> 80.
Speaker Change: Now turning to our balance sheet and capital allocation.
Speaker Change: The company ended the quarter with total available liquidity of approximately $293 million, including a cash balance of about $56 million and approximately $236 $5 million available on our revolving credit facility.
Speaker Change: Total debt outstanding was unchanged at $475 million in principle.
Speaker Change: Capex totaled approximately $52 million during the fourth quarter for new unit development and maintenance.
Matthew E. Clark: CapEx totaled approximately $52 million during the fourth quarter for new unit development and maintenance. During the quarter, we completed approximately $9.8 million in share repurchase, and returned $13.1 million to shareholders via our dividend. Before I move to our outlook, let me provide a brief update on our Cheesecake Rewards Program. Truly, demand continues to exceed our internal expectations. And we remain encouraged by the level of member activity and engagement we are seeing. However, as we said previously, we are taking a very deliberate approach as we develop the program, and therefore, we do not anticipate seeing a measurable impact on sales for at least the first year or so. We are continuing to test acquisition tactics and activation campaigns to better understand the key elements that are responding with rewards members and most effectively increasing membership enrollment, engagement, and driving pre-credits. Now, let me turn to our outlook. But we will not be providing specific comparable sales and earnings guidance.
Speaker Change: During the quarter, we completed approximately $9 $8 million in share repurchases and returned $13 $1 million to shareholders via our dividend.
Speaker Change: Before I move to our outlook, let me provide a brief update on our Cheesecake rewards program.
Speaker Change: Truly demand continues to exceed our internal expectations.
And we remain encouraged by the level of member activity and engagement we are seeing.
Speaker Change: As we've said previously we are taking a very deliberate approach as we develop the program and therefore do not anticipate seeing a measurable impact to sales for at least the first year or so.
Speaker Change: We are continuing to test acquisition tactics and activation campaigns to better understand the key elements that are resonating with rewards members and most effectively increasing membership enrollment engagement and driving frequency.
Speaker Change: Now, let me turn to our outlook.
Speaker Change: While we will not be providing specific comparable sales and earnings guidance.
Matthew E. Clark: We will provide our updated thoughts on our underlying assumptions for Q1 2024 and full year 2024. For Q1 2024, assuming no material operating or consumer disruptions, we anticipate total revenues to be between $875 and $895 million.
We will provide our updated thoughts on our underlying assumptions for Q1, 2024 and full year 2024.
Speaker Change: For Q1, 2024, assuming no material operating or consumer disruptions, we anticipate total revenues to be between 875 and $895 million.
Matthew E. Clark: This essentially assumes a continuation of fourth-quarter trends as well as the impact from the inclement weather quarter to date. Next, at this time, we expect effective commodity inflation of low single digits for Q1 as our broad market basket continues to stabilize. We are modeling net total labor inflation of mid-single digits when factoring the latest trends in wage rates and minimum wage increases, as well as other components of labor. GDP is estimated to be between $57 million and $58 billion. The depreciation cost is estimated to be between approximately $24 million and $25 million.
Speaker Change: This essentially assumes a continuation of fourth quarter trends as well as the impact from the inclement weather quarter to date.
Speaker Change: Next at this time, we expect effective commodity inflation of low single digits for Q1, as our broad market basket continues to stabilize.
Speaker Change: We are modeling net total labor inflation of mid single digits when factoring in the latest trends in wage rates and minimum wage increases as well as other components of labor.
Speaker Change: G&A is estimated to be between $57 million and 58 billion.
Speaker Change: Depreciation is estimated to be between approximately $24 million and $25 million.
Speaker Change: Based on these assumptions, we would anticipate net income margin to be about three 5% at the midpoint of the sales range.
Matthew E. Clark: Based on these assumptions, we would anticipate net income margin to be about 3.5% at the midpoint of the sales range. This includes higher pre-opening expenses than the prior year period to support our planned restaurant opening, which we expect to be approximately $6 million. Now for the full year. Based on similar assumptions and no material operating or consumer disruptions, we would anticipate total revenues for fiscal 2024 to be approximately $3.6 billion. For sensitivity purposes, we are using a range of plus or minus 1%. We currently estimate total inflation across our commodity baskets, labor, and other operating expenses to be in the low to mid-single-digit range and fairly consistent across the quarters. We are estimating G&A to be about flat year-over-year as a percent of sales and appreciation to be about $100 million for the year.
Speaker Change: This includes higher Preopening expense from the prior year period to support our planned restaurant openings.
Speaker Change: Which we expect to be approximately $6 million.
Speaker Change: Now for the full year.
Speaker Change: Based on similar assumptions and no material operating our consumer disruptions.
Speaker Change: Would anticipate total revenues for fiscal 2024 to be approximately $3 6 billion.
Speaker Change: For sensitivity purposes, we are using a range of plus or minus 1%.
Speaker Change: We currently estimate total inflation across our commodity baskets labor and other operating expenses to be in the low to mid single digit range and fairly consistent across the quarters.
Speaker Change: We are estimating G&A to be about flat year over year as a percent of sales and depreciation to be about $100 million for the year.
Speaker Change: And given our unit growth expectations, we are estimating preopening expenses to be approximately $28 million, which includes support for some early 2025 openings.
Matthew E. Clark: And given our unit growth expectations, we are estimating pre-opening expenses to be approximately $28 million, which includes support for some early 2025 openings. As we have said previously, our goal is to effectively offset inflation with menu pricing to support our margin objective. Assuming we achieve this goal, input costs and consumer trends remain consistent, and there are no other material exogenous factors.
Speaker Change: As we have said previously our goal is to effectively offset inflation with menu pricing to support our margin objectives.
Speaker Change: Assuming we achieve this goal.
Speaker Change: Input costs in consumer trends remain consistent and there are no other material exogenous factors, we would expect full year net income margin of approximately $4 two 5% at the revenue level I provided.
Matthew E. Clark: We would expect a full year net income margin of approximately 4.25% at the revenue level I provided. With regard to development... As David Overton highlighted earlier, we plan to open as many as 22 new restaurants this year across a portfolio of concepts, with approximately three-quarters of the openings occurring in the second half of the year.
Speaker Change: With regard to development as.
Speaker Change: As David Overton highlighted earlier.
Speaker Change: We plan to open as many as 22, new restaurants, this year across our portfolio of concepts.
Speaker Change: With approximately three quarters of the openings occurring in the second half of the year.
And we would anticipate approximately 180 million to $200 million in Capex to support this years and some of next year's unit development as well as required maintenance on our restaurants.
Matthew E. Clark: And we would anticipate approximately $180 million to $200 million in CapEx to support this year's and some of next year's unit development, as well as required maintenance on our restaurants. In closing, our business remains healthy, with top line trends substantially stabilizing. Improving profit margins, normalizing input costs, and solid operational execution. We are looking to build on this momentum and believe we are poised to once again generate our historically consistent operational and financial results and to make meaningful additional steps in 2024 towards our longer-term goals in the key areas of value creation. GROHE RESTAURANT COMPARABLE SALES, expanding restaurant operating margins, and accelerating accretive unit growth. With that said, we'll take your questions. Thank you. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone keypad.
Speaker Change: In closing our business remains healthy with topline trends substantially stabilizing <unk>.
Speaker Change: Improving profit margins normalizing input costs and solid operational execution.
Speaker Change: We're looking to build on this momentum and believe we are poised to once again generate our historically consistent operational and financial results and to make meaningful additional steps in 2024 towards our longer term goals and the key areas of value creation.
Speaker Change: Growing restaurant comparable sales <unk>.
Speaker Change: Expanding restaurant operating margins and accelerating accretive unit growth.
Speaker Change: With that said, we'll take your questions.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Operator: We also ask that you limit yourself to one question and one follow-up, and for any additional questions, please requeue. Your first question comes from the line of Brian Harper from Morgan Stanley. Please go ahead. Yeah, thank you. Good afternoon.
Speaker Change: Also ask that you limit yourself to one question and one follow up and for any additional questions. Please re queue.
Speaker Change: Your first question comes from the line of Brian Harper from Morgan Stanley. Please go ahead.
Brian Harper: Yes. Thank you good afternoon.
Matthew E. Clark: Matt, can you just maybe comment on... The updated annual guidance compared to what you laid out last quarter, is this more just about recent weather trends or anything else changed within your view? Hey Brian, this is Matt.
Brian Harper: Could you just maybe comment on.
Brian Harper: The kind of the updated annual guidance compared to what you laid out last quarter. It is is this more just about kind of recent weather trends or anything else changed within your view.
Brian Harper: Hey, Brian This is Matt certainly I will.
Matthew E. Clark: Certainly, I would say nothing has changed. Obviously, there was a lot of challenging weather in the first part of the year. You've seen it in the industry numbers. But I can tell you that we're still performing equal to or better than the gap to the industry that we hit in the fourth quarter. You know, there are ten and a half months to go for the year.
Matthew E. Clark: I would say nothing has changed obviously there was.
Matthew E. Clark: A lot of challenging weather in the first part of the year.
Speaker Change: <unk> seen it in the industry numbers I can tell you that we're still performing.
Matthew E. Clark: Equal or better than the gap to the industry that we hit in the fourth quarter.
Matthew E. Clark: Theres 10, five months to go for the year, we want to put out numbers that we feel very good about and we feel good about about this and it would represent a meaningful improvement.
Matthew E. Clark: We want to put out numbers that we feel very good about, and we feel good about this. And it would represent a meaningful improvement in restaurant level margins going into this year. It represents a continuation of overall positive comparable sales. If you think about the first quarter only, you know, I think what the math is really in the industry around January, which is, you know, a little bit of tougher comps too, and it's probably one and a half to two percent of impact on the quarter in total revenues. You know, the good news is that we are able to see that very clearly.
Matthew E. Clark: And restaurant level margins going into this year. It represents continuation of overall positive comparable sales have you think about the first quarter only I think what the math is really in the industry around.
Matthew E. Clark: January which is a little bit of tougher comps too.
Matthew E. Clark: Its probably its probably one 5% to 2% of impact on the quarter in total revenues.
Matthew E. Clark: Good news is we are able to see that very clearly, we're able to parse out the weather impacts we've seen very.
Matthew E. Clark: We're able to parse out the weather impacts. We've seen very good, stable trends in February. So, you know, we feel good about the overall guidance. We feel like it's prudent to be, you know, sitting in a range that we feel good about this early in the year. Okay, great.
Matthew E. Clark: Good stable trends in February so we feel good about the overall guidance, we feel like it's prudent to be.
Matthew E. Clark: Sitting in a range that we feel good about this early in the year.
Speaker Change: Okay, Great could you also.
Matthew E. Clark: Can you also maybe comment on the labor side? You've seen some favorability, you know, year over year, although more so on the food cost side, but is there opportunity to drive better labor leverage as you think about 2024 in terms of productivity or anything like that? Sure, sure, Brian. This is Matt again.
Speaker Change: Maybe comment on the labor side.
Speaker Change:
Speaker Change: You've seen some favorability year over year, although more so on the food cost side, but is there opportunity to drive better labor leverage as you think about 2024 from productivity or anything like that.
Speaker Change: Sure Brian This is Matt again, I think that.
Matthew E. Clark: I think that, um... You know, one of the harbingers of labor productivity is retention. And, you know, we continue to see quarter after quarter after quarter last year of improvements in that key metric, both at the hourly and at the manager levels. And we saw tremendous results in January and so far this year. That, for sure, is going to lead itself to productivity, right? We run the most complicated restaurants in the business.
One of the the harbingers of labor productivity.
Matthew E. Clark: Is retention.
Matthew E. Clark: We continue to see quarter after quarter after quarter last year of improvements in that key metric both at the hourly and manager levels and we saw a tremendous results in January and so far this year that for sure is going to lead itself towards productivity.
Matthew E. Clark: We run the most complicated restaurants in the business. The more tenure that we have the more efficient our teams will be unless overtime. There is training. There is so we feel very good I believe we saw some pretty good productivity gains in the fourth quarter and we are expecting that to be able to continue into the <unk>.
Matthew E. Clark: The more tenure that we have, the more efficient our teams will be. The less overtime there is, the less training there is. So we feel very good. I believe we saw some pretty good productivity gains in the fourth quarter, and we are expecting that to be able to continue into the remainder of 2024 as well. Your next question comes from the line of Mary Hodes from Baird. Please go ahead. Good afternoon.
Matthew E. Clark: <unk> 2024 as well.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Mary Hodes from Baird. Please go ahead.
Speaker Change: Okay.
Mary Hodes: Good afternoon. Thanks for taking the question I just want to clarify one how youre running maybe quarter to date as the full quarter to date period running near that level seen in Q4 or is that the level that you bounce back to in February. After you saw some unfavorable weather in January just trying to better understand what you are anticipating for the second half a quarter yes.
Operator: Thanks for taking the question. I just want to clarify, one, how you're running maybe quarter to date. Is the full quarter to date period running near that level seen in Q4 or is that the level that you bounced back to in February after you saw some unfavorable weather in January? Just trying to better understand what you're anticipating for the second half of the quarter here. Sure, Mary, this is Matt.
Mary Hodes: Sure Barry This is Matt I think we're not giving specific quarter to date metrics, but the impact in January is like I said, one 5% to 2% on a total quarter, but what we've been able to do is really see that that was isolated to some specific events and so when we take.
Matthew E. Clark: I think, you know, we're not giving specific quarter-to-date metrics, but the impact in January is, like I said, one and a half to two percent on the total quarter, but what we've been able to do is really see that that was isolated to some specific events, and so when we take that into consideration and what our sort of normalized trends are, it's the combination of those two that gives us the full quarter outlook. Hopefully, that answers the question. Yep, that's helpful. Thank you. And then on one more on the Cheesecake Factory business, could you break out the check and traffic components for the backward booking quarter for Q4? And then I guess I was maybe just wondering if you could walk us through your thoughts on how you're thinking about the components heading into 2024. I think you previously talked about around 4% pricing, and I was just wondering if anything has changed, and maybe what you're focused on in terms of driving traffic for 2024. Sure, I think that's an important question. And it kind of relates a little bit to even Brian's question.
Matthew E. Clark: All that into consideration and what are sort of normalized trends or it's a combination of those two that give us the full quarter outlook hopefully that answers the question.
Speaker Change: Yes, that's helpful. Thank you and then.
Speaker Change: And then one more on that.
Speaker Change: Thank you, but just could you break out the check and traffic components for the backward looking quarter for Q4, and then I guess I was maybe just wondering if you could walk us through your thoughts on how youre thinking about.
Speaker Change: The components heading into 2024, I think you'd previously talked about around 4% pricing.
Speaker Change: Just wondering if anything has changed and maybe what you're focused on in terms of driving traffic for 2020 for sure.
Speaker Change: Sure I think there is an important question.
Speaker Change: It kind of relates a little bit even Brian's question I mean for US things only got better right last year quarter to quarter. So in Q4, the traffic was flat, which represented a 1% improvement over the Q3 metrics was clearly out of the industry.
Matthew E. Clark: I mean, for us, things only got better last year, quarter to quarter. So in Q4, the traffic was flat, which represented a 1% improvement over the Q3 metrics and was clearly ahead of the industry. The negative mix was still there, but it got better.
Speaker Change: The negative mix was still there, but it got better it was it was negative $4 nine versus the $6. One in the third quarter is about one 2% better as we anticipated that negative mix would continue into Q4 Q1 and part of Q2.
Matthew E. Clark: It was negative 4.9 versus a 6.1 in the third quarter, so about 1.2% better. As we anticipated, that negative mix would continue into Q4, Q1, and part of Q2, really stabilizing in the back half of the year. And so that met our expectations and the guidance that we provided. And then, you know, obviously, pricing came down as we exited that one-time extra pricing we did in the prior year, December. So on a weighted average, the fourth-quarter price was 7.3% for Cheesecake, which was down from 9.5% in the third quarter.
Speaker Change: Really stabilizing in the back half of the year and so that met our expectations and the guidance that we provided and then obviously pricing came down as we exited that one time extra pricing we did in the prior year December so on a weighted average to fourth quarter pricing was seven 3% for cheesecake, which was down.
Speaker Change: <unk>.
Speaker Change: From nine 5% in the third quarter, so our comps were slightly better, but really with a lot less pricing as the other metrics improved when we think about the balance of 2024 as I. Just noted we do anticipate that the negative mix will continue but didn't really stabilized Q.
Matthew E. Clark: So, you know, our comps were slightly better, but really with a lot less pricing as the other metrics improved. When we think about the balance of 2024, as I just noted, we do anticipate that the negative mix will continue, but it really stabilized in Q3 to Q4. So with that sort of underlying stability, you know, we do believe that we can maintain that low single-digit positive comps absent the January weather events for the balance of the year. Your next question comes from the line of Catherine Griffin from Bank of America. Please go ahead. Hi, thank you. I wanted to maybe just unpack the negative mix in the quarter. Just curious kind of where you're seeing that show up.
Speaker Change: Three to Q4, so with that sort of underlying stability. We do believe that we can maintain that low single digit positive comps absent the January weather events for the balance of the year.
Speaker Change: Your next question comes from the line of Katherine Griffin from Bank of America. Please go ahead.
Katherine Griffin: Hi, Thank you I wanted to maybe just unpack the negative mix in the quarter, just curious kind of where youre seeing that show up I know in the past you've talked about not really seeing.
Matthew E. Clark: I know in the past you've talked about not really seeing much in the way of, you know, like active check management or less alcohol attached. Just curious if you can help us understand where you saw the source of the negative mix and how that plays into your expectations in terms of the cadence throughout the year. Sure. This is Matt.
Martin: Martin wave.
Katherine Griffin: I can check management or less alcohol attach just curious if you can help us understand where you saw the source of negative mix and how that plays into your expectations.
Katherine Griffin: Expectations in terms of the cadence throughout the year.
Matthew E. Clark: You know, what we saw in 21 and 22 was significantly outsized purchasing behaviors. And I think this has been pretty well documented. And so the preponderance of the mixed negativity is really associated with kind of what we consider to be a return to normal. I would say we are still running slightly above 2019 levels. So it's actually pretty historically relevant.
Matthew E. Clark: Sure This is Matt.
Matthew E. Clark: What we saw is.
Matthew E. Clark: 21, and 'twenty two was significantly outsized purchasing behaviors I think this has been pretty well documented and so the preponderance of the.
Matthew E. Clark: The mix negativity is really associated with kind of what we considered to be a return to normal I would say we are still running slightly above 2019 levels.
Matthew E. Clark: So it's actually pretty historically relevant it was the same basic proportion to 2019.
Matthew E. Clark: It was in the same basic proportion to 2019 in both Q3 and Q4. So it's stable. We saw that shift happen materially in the middle of Q2 and then the back half of last year. So we would anticipate continuing to run in this negative four to five range for the first quarter, maybe three to four negative in the second quarter. And then, you know, hard to say for sure, but relatively stable in the back half of the year. So we've seen very stable consumer behavior over the past six to nine months. It's just slightly different than it was the year before, when we saw some outsized purchasing behavior. Okay, that's helpful.
Matthew E. Clark: In both Q3 and Q4, so it's stable we saw really that shift happen materially in the middle of Q2, and then in the back half of last year. So we would anticipate continuing to run and those negative four to five range for the first quarter, maybe three to four negative in the second quarter and then.
Matthew E. Clark: Hard to say for sure, but relatively stable in the back half of the year. So we've seen very stable consumer behavior over the past six to nine months, it's just slightly different than it was the year before when we saw some outsized purchasing behaviors.
Speaker Change: Okay. That's helpful. And then I think on the last call I mean, <unk> been pretty clear about kind of laying out the expectations for for comp, but just on pricing.
Matthew E. Clark: And then I think on the last call, I mean, yeah, you've been pretty clear about kind of laying out the expectations for comp, but just on pricing, I think, yeah, in the past, the expectation was like one and a half to 2%. Is that still kind of what you're thinking in terms of, you know, the environment you're seeing? Yeah, we will look at that, obviously, multiple times a year and adjust as necessary. I think, as a placeholder for everybody, using 4% for the year at this point in time is a pretty good estimate. And that could, you know, change, it could go down if costs get even better. But right now, that's sort of a good placeholder. Your next question comes from the line of Jeffrey Bernstein from Barclays Capital. Please go ahead. Hi, this is Anisha Dadon on behalf of Jeffrey Bernstein.
Speaker Change: I think in the past you expectation was like one five to two per sign is that still kind of.
Speaker Change: What youre thinking in terms of the environment you're seeing.
Speaker Change: Yes, we will look at that obviously multiple times, a year and adjust as necessary I think is a placeholder for everybody using 4% for the year at this point in time.
A pretty good estimate and that could change it could go down if cost get even better but right now thats sort of a good placeholder.
Speaker Change: Your next question comes from the line of Jeffrey Bernstein from Barclays Capital. Please go ahead.
Speaker Change: Hi. This is Dan you should add on for Jeffrey Bernstein I wanted to ask how youre thinking about recapturing restaurant margins and as we think to 2024, what are you embedding for the restaurant margin.
Matthew E. Clark: I wanted to ask how you're thinking about recapturing restaurant margins, and as we think to 2024, what are you embedding for the restaurant margin? Yeah, we made great progress in 2023 on that trajectory, and then actually, in Q4, Cheesecake Factory specifically, restaurant level margins exceeded 2019. So we feel pretty good about accomplishing the goal that we had set out there.
Dan: We made great progress in 2023 on that trajectory and then actually in Q4 Cheesecake factory, specifically restaurant level margins exceeded 2019, so we feel pretty good about accomplishing the goal that we had set out there.
Matthew E. Clark: You know, there's still seasonality, so you're going to see differences in Q1, Q2, Q3, and Q4 from each other. But overall, we feel like we have the trajectory right now to continue to expand restaurant level margins in 2024 by 50 to 75 basis points. So predominantly driven by productivity and efficiency gains and a little bit of lapping some outsized commodity inflation, particularly in the first half of the year. So we feel like that would be great progress that would really put us back on the footing that we had pre-pandemic across both Cheesecake Factory and the total company. Great, thank you. Your next question comes from the line of Aisling Gruelinger from Piper Sandler. Please go ahead.
Dan: There's still seasonality, so youre going to see differences.
Dan: In Q1, Q2, Q3, and Q4 from each other but overall, we feel like we have the trajectory right now to continue to expand restaurant level margins and 24 by 50 to 75 basis points, so predominantly driven by productivity and efficiency gains, so and a little bit of lapping some of outside.
Dan: Commodities inflation, particularly in the first half of the year. So we feel like Thats, a that would be great progress I would really put us back on the flooding that we had pre pandemic across both cheesecake factory and the total company.
Speaker Change: Great. Thank you.
Speaker Change: Your next question comes from the line of Ashland grew linger from Piper Sandler. Please go ahead.
Operator: Hi, good afternoon, guys. My question is kind of a follow up on Brian's. The revenue guidance for the quarter on the last earnings poll, I believe you guided it slightly higher to $3.7 billion at the high end of the range. I was just wondering your thoughts on guiding it slightly lower? Are you just kind of baking in a little more conservatism with this new guide? Because, you know, with the tough macro environment? Thanks. Sure. This is Matt.
Speaker Change: Hi, Good afternoon, guys my.
Speaker Change: My question is kind of a follow up on Brian the revenue guidance for the quarter on the last earnings call. I believe you guided slightly higher to $3 7 billion at the high end of the range I was just wondering your thoughts on guiding slightly lower or are you just kind of baking in a little more conservatism with this new guide do you think with the tough macro environment.
Speaker Change: Sure. This is Matt I would say look so.
Matthew E. Clark: You know, I would say, look, so the midpoint probably came down about one to one and a half percent. A piece of that is certainly just the January component. And I would just say, look, we have ten and a half months to go.
Speaker Change: The midpoint, probably came down about one to one 5% a piece of that is certainly just the January component.
Matthew E. Clark: Just say look we have 10 five months to go we feel the business is on a great pace everything is going well there are things that sometimes we can't control for example, the timing of openings.
Matthew E. Clark: We feel the business is going at a great pace. Everything's going well. There are things that we can't control, for example, the timing of openings.
Matthew E. Clark: You know, obviously, the last couple of years, you know, outside of our control, there's been a pretty big impact. We thought it was really prudent this time to maybe take a little bit more conservatism at the outset and just put numbers up that would be achievable even with some disruption. No, they're great.
Matthew E. Clark: Obviously, the last couple of years.
Matthew E. Clark: Outside of our control there has been a pretty big impact we thought it was really prudent at this time to maybe take a little bit more conservatism at the outset, just put numbers up that would be achievable, even with some disruption.
Speaker Change: No that's great that makes that makes perfect sense and my second question is I'm sure one of your favorites within the California legislation, even though it's primarily intended to impact <unk> there'll be some spillover in the wage inflation across the board in California, I was just wanting to know your updated thoughts on the impact to the Cheesecake factory's.
Matthew E. Clark: That makes perfect sense. My second question is, I'm sure one of your favorites is the California FAST Act legislation. Even though it's primarily intended to impact QSR, there'll be some spillover into wage inflation across the board in California. I was just wanting to know your updated thoughts on the impact on Cheesecake Factory specifically and what your thoughts are around pricing and just any way to combat any kind of inflation you're seeing. Thanks.
Matthew E. Clark: <unk>.
Matthew E. Clark: What are your thoughts around pricing is in.
Matthew E. Clark: Just any way to combat any kind of inflation you're seeing thanks.
Matthew E. Clark: Sure.
Matthew E. Clark: Sure, well, I think it's still to be determined. I don't know that I can give you a great new perspective. We're obviously well aware; we're reading and seeing dynamics play out on a regular basis. You know, the government in California continues to modify the FAST Act and carve out even more different types of restaurants that may not have to comply with that. So, you know, it is definitely an uncertain situation. As we noted before, given our pay circumstances, we're already very competitive in the marketplace. Many of the California QSR urban locations are already paying 19 and 20.
Speaker Change: Well I think it's still to be determined I don't know that I can give you a great new perspective, we're obviously well aware, we're reading and seeing dynamics play out on a regular basis.
Matthew E. Clark: No.
Matthew E. Clark: The government in California continues to even modify the fast act and carve out even more different types of <unk>.
Matthew E. Clark: Restaurants that may not have to comply with that.
Matthew E. Clark: So it is definitely an uncertain situation.
Matthew E. Clark: As we noted before.
Matthew E. Clark: Evan.
Matthew E. Clark: Our pay circumstances, we're very competitive in the marketplace already many of the California, <unk> urban locations are already paying 19% and $20.
Operator: You know, we believe that's partly why they agreed to do it in the first place. And so those options already exist for most of the people we're recruiting. And certainly, all of our tipped positions make much more than that. You know, we feel like we have sufficient pricing power in California if need be. We're a tremendous value for guests here with our portion sizes and great service. So, you know, I think we can defend our California margins, however that needs to be, lots to be determined. But certainly, we don't believe that it's gonna have the same impact and full service as it is in the QSR realm. Your next question comes from the line of Brian Vacario from Raymond James. Please go ahead. Hi, thanks, and good evening.
Matthew E. Clark: We believe thats, partly why they agreed to do it in the first place and so so those options already exist for most of the people we're recruiting.
Matthew E. Clark: Certainly all of our tipped positions make much more than that.
Matthew E. Clark: We feel like we have sufficient pricing power in California, if need be we're a tremendous value for guests here with our portion sizes and great service. So.
Matthew E. Clark: I think we can defend our California margins, however that needs to be lots to be determined but certainly we don't believe that it's going to be the same impact in full service as it is in the <unk>.
Matthew E. Clark: Your next question comes from the line of Brian Vaccaro from Raymond James. Please go ahead.
Brian Vaccaro: Hi, Thanks, and good evening.
Matthew E. Clark: Matt, can we just circle back on the fourth quarter cheesecake comps, and can you help us with the mix component specifically? How much of that negative mix is due to the off-premise mix coming down versus actual sort of changes in order behavior in store through the beverage and app incidents? And if you adjust for the off-premise or isolate for off-premise, what did dine-in traffic look like in the fourth quarter year on year? So on the mix, Brian. This is Matt.
Brian Vaccaro: Can we just circle back on the fourth quarter Cheesecake comps and can you help us with the mix components, specifically, how much of that negative mix due to the off premise mix coming down versus actual sort of changes in order behavior in store sort of the beverage and app incidents.
Brian Vaccaro: Just for the off premise or isolate for off premise what did dine in traffic looked like in the fourth quarter year on year.
Brian Vaccaro: So on the mix Brian This is Matt.
Most of that is.
Matthew E. Clark: Most of that is purchase behavior, maybe as much as 1% of the off-prem mix, right? So, but I think it's important to think about it more sequentially than year over year. So, that was the same mix that we saw in the third quarter.
Matthew E. Clark: Purchase behavior, maybe it was up 1% on the off Prem mix right. So, but I think it's important to think about it.
Matthew E. Clark: More sequentially than year over year. So that was the same mix that we saw in the third quarter and we knew that there was going to be this because we had seen throughout the 2023 calendar year people buying just one less strength than they did in 'twenty to 'twenty, one, but there is still also importantly buying.
Matthew E. Clark: And, you know, we knew that there was going to be this because we had seen throughout the 2023 calendar year, people buying just one less drink than they did in 22 and 21, but they're still, importantly, buying as much, if not a little bit more, than in 2019. I think it's just sort of more of a return to normal behaviors in that regard. So, that was well within our expectations and, I think, baked in appropriately to all of our expectations going forward. With respect to the on-premise, I don't think it's changed much.
Matthew E. Clark: As much if not a little bit more than in 2019, I think it is just sort of a more of a return to normal behaviors in that regard so that was well within our expectations and I think baked in appropriately to all of our expectations going forward.
Matthew E. Clark: With respect to the on premise I don't think it's changed much I mean, certainly traffic overall at flat we feel good about year over year I think that in fact, the off premise percent versus prior year. It was about the same.
Matthew E. Clark: I mean, certainly, traffic overall at flat, we feel good about year over year. I think that, in fact, the off-premise percent versus prior year was about the same, you know, as really close. So, you know, I don't have the data in front of me, but that would basically substantiate that year over year on-premise traffic was basically flat. Okay, all right, great. That's helpful. And sorry if I missed it earlier, the pricing, can you level set it? What do you have in your menu right now?
Matthew E. Clark: Really close so so I don't have the data in front of me, but that would just basically substantiate our year over year on premise traffic was basically flat.
Speaker Change: Okay, Alright, great Thats helpful and sorry, if I missed it earlier the pricing can you can you level set what do you have in the menu right now and I believe the last three and a.
Matthew E. Clark: And I believe you will reach three and a quarter percent sometime soon. What do you intend to replace it with? Maybe just level set us where effective pricing could be here in the first quarter and how you're thinking about that. Yeah, we're going to be at about four and a half for the quarter with a little bit of the waiting coming in to higher, but we would anticipate for the year about 4%. So a little bit higher in the first quarter, but kind of 4% for the year. Brian, this is Etienne.
Speaker Change: A quarter percent, sometimes soon what do you intend to replace it with maybe just level set us where effective pricing could be here in the first quarter and how youre thinking about that.
Speaker Change: Yes, we're going to be at about four and a half for the quarter with a little bit of the weighting coming in are higher but we would anticipate for the year about 4%, so a little bit higher in the first quarter, but kind of 4% for the year.
Speaker Change: Brian This is Ed we're dropping off three 5%, replacing that with a two 5% price increase here in the middle of the quarter.
Etienne Marcus: We're dropping off three and a half percent, replacing that with two and a half. Your next question comes from Lauren Silberman from Deutsche Bank. Please go ahead. Thank you very much.
Speaker Change: Your next question comes from Lauren Silberman from Deutsche Bank. Please go ahead.
Lauren Silberman: Thank you very much I wonder if that the fourth quarter can you just give a little bit more color on the cadence of transfer at the quarter and if theres any way to quantify the benefit from the holiday shift as well.
Operator: I wonder about the fourth quarter. Can you just give a little bit more color on the cadence of trends throughout the quarter and if there's any way to quantify the benefit from the holiday shift as we think through underlying trends? Sure, Lauren. This is Matt.
Speaker Change: Two underlying trends.
Speaker Change: Sure Lauren this is Matt.
Matthew E. Clark: It was a really strong quarter from start to finish, to be honest. I mean, we saw pretty consistent comps month to month. And I would say, interestingly, the holiday shift wasn't too material. Maybe it was 50 basis points, but it wasn't, you know, it wasn't a big driver.
Matthew E. Clark: It was a really strong quarter from start to finish to be honest I mean, we saw pretty consistent.
Matthew E. Clark: Comps month to month, and I would say interestingly.
Matthew E. Clark: The holiday shift wasn't too material, maybe it was 50 basis points, but it wasn't it wasn't a big driver, but interestingly December was the strongest overall month, and then have much less pricing because we dropped off about 3%. So the underlying business I think just got better and better but.
Matthew E. Clark: But interestingly, December was the strongest overall month, and it had much less pricing because we dropped off at 3%. So the underlying business, I think, just got better and better. But, you know, I would say the operators were in full control throughout the quarter, driving sales, and managing costs. It was very predictable and, you know, overall right on track.
Matthew E. Clark: I'd say the operators were in full control throughout the quarter driving sales managing costs. It was very predictable.
Matthew E. Clark: Overall right on track.
Matthew E. Clark: Great. Very helpful. And then just a question on restaurant margin. Nice improvement this quarter. You spoke of the 50 to 75 basis points of expansion this year. Is that fairly consistent in terms of year-over-year expansion throughout the year? Are there any moving pieces per quarter we should be thinking about? Thank you. Yeah. I mean, give or take 25 basis points because anything can happen.
Speaker Change: Great very helpful. And then just a question on restaurant margin Nice improvement. This quarter you spoke to the 50 to 75 basis points of expansion. This year is that fairly consistent in terms of year over year expansion through the throughout the year are there any moving pieces per quarter, we should be thinking about thank you.
Speaker Change: I mean give or take 25 basis points, because anything can happen I think it's fairly consistent.
Matthew E. Clark: I think it's fairly consistent. You know, there's not – I mean, we saw last year pretty stable overall. So, you know, relatively speaking, we would think that would be true as well. Thank you. Your next question comes from the line of Jim Sanderson from North Coast Research. Please go ahead.
Speaker Change: There is not I mean, we saw last year pretty stable overall, so relatively speaking we would we would think that would be true as well.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Jim Sanderson from Northcoast Research. Please go ahead.
Operator: Hey, thanks for the question. I wanted to go back to the unit growth plan for 2024. Are there any closures baked into that that would reduce the benefit of that new unit growth in 2024? We do have two relocations, Jim, this is Matt, in that, so I think on a net basis, that would be, you know, impacted in terms of the revenue contribution. You know, we believe those will be pretty seamless, essentially, very similar trade areas with some lease expirations that were just moving sites. All right, and can you walk through the price mix for North Italy for the quarter as well?
James Jon Sanderson: Hey, Thanks for the question I wanted to go back to the unit growth planned for 2024 are there any closures baked into that that would.
James Jon Sanderson: Reduce the benefit of that new unit growth in 2024.
James Jon Sanderson: We do have two relocations Jim this is Matt in that so I think on a net basis.
Matthew E. Clark: That would be impacted.
Matthew E. Clark: Impacted in terms of the revenue contribution.
Matthew E. Clark: We believe those will be pretty seamless essentially very similar trade areas with some lease expirations that were just moving sites.
Speaker Change: Alright, and can you walk through the price mix for North Italia for the quarter as well.
Matthew E. Clark: Yeah, let me pull that up here give me a quick second.
Matthew E. Clark: Yeah, let me pull that up here. 8% Yeah, pricing is 8%. I don't think we track mix the same way as we do at Cheesecake Factory, but it's slightly negative, and traffic was slightly positive. The net of traffic is just slightly negative.
Matt Clark: Okay.
Matt Clark: Okay.
Yeah.
Matt Clark: 8%, yes pricing is 8%.
Matt Clark: Alright, I don't think we track mix the same way as we do with Cheesecake factory, but.
Matt Clark: It's slightly negative and traffic was slightly positive, but the net of traffic in Texas just slightly.
Matthew E. Clark: And last question for me, I just wanted to better understand the sequential improvements to our margin at North Italia. I think you called out Cheesecake, but there was a meaningful improvement. There as well; is that primarily the utilities or? Yeah, we what we rolled out pricing in the middle quarter. And so in the fourth quarter, we were able to capture the full benefit of that. That's the predominant driver of the improvement and margins. Jim, essentially for North, they were one cycle behind Cheesecake Factory.
Speaker Change: And last question for me I, just wanted to better understand the sequential improvement store margin at North Italia. Thank you called out Cheesecake, but there was a meaningful improvement there as well is that primarily the utilities are.
Speaker Change: Yes.
Speaker Change: We rolled out pricing in the middle of a quarter and so in the fourth quarter, we were able to capture the full benefit of that.
Speaker Change: The predominant driver of the improvement.
Speaker Change: And margins, Jim essentially for North they were one cycle behind Cheesecake factory and so this was kind of our last call.
Matthew E. Clark: And so this was kind of our last catch up, if you will, from all the pandemic inflation to kind of get back to a more normalized level. Your next question comes from the line of John Tower from Citigroup. Please go ahead.
Speaker Change: Got you out there if you will from all of the pandemic inflation to kind of get back to a more normalized level.
Speaker Change: Your next question comes from the line of Jon Tower from Citigroup. Please go ahead.
Operator: Great. Thanks for taking the question. A couple, if I may. First, I'm curious. So it's encouraging to see the unit growth continue to pick up. I'm just curious in terms of
John William Ivankoe: Alright, thanks for taking the question.
John William Ivankoe: A couple if I may 1st here.
John William Ivankoe: Curious so it's encouraging to see the unit growth.
John William Ivankoe: They need to tick higher I'm, just curious in terms of.
Matthew E. Clark: You know, what you're seeing with landlords and developers. I know that for the past several years, there have been a lot of delays in terms of getting stores opened because of things outside of your control. Has that improved at all such that, and I know your outlook for this year is three-quarters or so of the development in the back half of the year, but has this kind of stickiness gotten less sticky, and therefore, you know, you have greater visibility into those coming into the year than maybe years past? John, this is Matt.
John William Ivankoe: What youre seeing with landlords and developers.
John William Ivankoe: For the past several years, there's been a lot of delays in terms of getting stores opened because of things outside of your control has has that improved at all such that and I know your outlook for this year is three quarters or so of the development in the back half of the year.
John William Ivankoe: But has this kind of stickiness gotten less sticky and therefore, you have greater visibility into those coming into the year.
John William Ivankoe: And then maybe yours.
Matthew E. Clark: Look, I think there are two things. One, it's maybe incrementally better, right? It's definitely the long tail of all of this, but incrementally. But more importantly, we just took control of the situation a little bit more, right? We made a very definitive strategic move to push some of the locations into the first quarter. We've opened those restaurants already.
John William Ivankoe: <unk>.
John William Ivankoe: Hi, Joe This is Matt I think Theres two things one is maybe incrementally better right. It's definitely the long tail of all of this but it's incrementally but more importantly, we just took control of the situation a little bit more right. We made a very definitive strategic move to push some of the locations into the.
John William Ivankoe: Our first quarter, we've opened up those restaurants already so that just enabled us to have better predictability over the remainder of our pipeline I think it was just an important shift for us to really reset that and understand so that we can assure ourselves and our investors that we can get those restaurants opened this year. So we feel really good about where.
Matthew E. Clark: So that just enabled us to have better predictability over the remainder of our pipeline. I think it was just an important shift for us to really reset that and understand it so that we can assure ourselves and our investors that we can get those restaurants open this year. So we feel really good about where we're sitting there.
John William Ivankoe: We're sitting there we have a much bigger pipeline than than.
Matthew E. Clark: We have a much bigger pipeline than we're committing to, to give ourselves even more breathing room. And so I think mostly it's just that we took more definitive action to kind of realign that, slightly augmented by a better scenario. That's great. And in terms of, you know, I'm assuming many of these stores are already open. Concrete support, etc. You know, are you guys putting the final touches on the 22 or so stores that you're targeting this year? How many of them have already got broke and are kind of ready to rock?
John William Ivankoe: And then we're committing to to give ourselves even more breathing room and so I think mostly it's just that we took more definitive action to kind of realign that.
John William Ivankoe: Slightly augmented by a better scenario.
Speaker Change: That's great and in terms of.
Speaker Change: I'm, assuming many of these stores are already.
Speaker Change: Concretes port et cetera.
Guys, putting the final final touches or I guess, better said of the 22 or so stores that you're targeting this year, how many of them have already got.
Speaker Change: That broke in and kind of ready to rock.
Matthew E. Clark: Well, we've opened three already, not including the one international. I think we'll have another one this quarter that will open, and the preponderance of the rest of them are moving along. So we're right on track. Okay, and then just on the marketing plans for this year, I know obviously you're spending a decent amount of time, you know, getting customer acquisition into the rewards program. But outside of that, given some of the noise that's taking place with the consumer right now, certainly in the lower income cohort, which you guys don't necessarily have great exposure to, but you know, how are you thinking about marketing spend for 2024 or the tactics that you're using in terms of communicating with your consumers versus years past?
Speaker Change: Well, we opened three already not including the one international I think we'll have another one this quarter or that will open in the preponderance of the rest of them are moving along so we're right on track.
Speaker Change: Okay, and then just on the marketing plans for this year I know, obviously youre spending a decent amount of time.
Speaker Change: Getting customer acquisition into the rewards program, but outside of that given some of the noise. That's taking place with the consumer right now certainly in the lower income cohort, which you guys don't necessarily have great exposure to but.
Speaker Change: How are you thinking about marketing spend for 2024 or the tactics that you're using in terms of communicating with your consumers versus years past.
Speaker Change: Okay.
Matthew E. Clark: You know, we are centrally focused on the rewards program. That said, we did shift a little bit of the spend towards off-premise. You know, doing some promotions with Delivery and Olo, and so we're focusing a little bit on that end, a little bit more than we have in the past. Your next question comes from the line of Brian Vicario from Raymond James. Please go ahead.
Speaker Change: Our centrally focused on the rewards program that said, we did shift a little bit of the spend towards off premise.
Speaker Change: Doing some some promotions with delivery and although until we're focusing a little bit on that in a little bit more than we have in the past.
Speaker Change: Your next question comes from the line of Brian Vaccaro from Raymond James. Please go ahead.
Brian Vaccaro: Hi, Thanks for the quick follow up I just wanted to go back to the labor cost line for a second if we could you noted some improvements in later labor productivity and waste management and I understand the natural benefits of lower turnover hiring and training et cetera, but could you just elaborate on some of the other dynamics that are benefiting that line changes you've made et cetera.
Operator: Hi, thanks for the quick follow-up. I just wanted to go back to the labor cost line for a second, if you don't mind. And you noted some improvements in labor productivity and wage management. And I understand the natural benefit to lower turnover, hiring, and training, etc. But could you just elaborate on some of the other dynamics that are benefiting that line, changes you've made, etc. Thank you. Yeah, Brian, this is Matt.
Speaker Change: Thank you.
Speaker Change: Yes, Brian This is Matt I mean, I think one fundamentally the labor environment has just been much more stable, so with lower turnover and lower asking wages for new hires relatively has created.
Matthew E. Clark: I mean, fundamentally, the labor environment has just been much more stable. So with lower turnover and lower asking wages for new hires, relatively, this has created an inflationary rate that has just reduced over time to even slightly below pre-pandemic levels, right? So that's another benefit of retention. And it's also driving, we just, we brought basically the overtime and training much closer to historical levels. We've also been able to take the opportunity to, as an example, bring a one-star cook up to a two-star to a three-star because of that retention, right? So the longer that we're keeping people, the more that we can train them on multiple stations, the more that they can handle, you know, the big volume of the Cheesecake Factory restaurants. So a lot of it is driven by that initial retention piece and then our ability to leverage that operationally once we're there.
Matthew E. Clark: An inflationary rate that is just reduced over time to even slightly below pre pandemic right. So that's another benefit of retention and its also driving we just re brought basically.
Matthew E. Clark: Overtime and training much closer to historical levels. We've also been able to take the opportunity to as an example, bringing on one star hook up to us to start to a three star because of that retention. So the longer that we're keeping people the more that we can train them on multiple stations more than they can handle that.
Matthew E. Clark: Big volume of the Cheesecake factory restaurants, so a lot of it is driven by that initial retention piece and then our ability to leverage their operationally once we're there.
Speaker Change: And we have no further questions in our queue at this time and with that that does conclude today's conference call. Thank you for your participation and you may now disconnect.
Operator: We have no further questions in our queue at this time. And with that, that does conclude today's conference call. Thank you for your participation, and you may now disconnect. The Bulletproof Executive, 2013
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