Q4 2023 Cheesecake Factory Inc Earnings Call

Participants

Mary Hodes; Analyst; Robert W. Baird & Co. Incorporated

Aisling Grueninger; Analyst; Piper Sandler & Co.

Brian Michael Vaccaro; Analyst; Raymond James & Associates, Inc.

Lauren Danielle Silberman; Analyst; Deutsche Bank AG

Jim Sanderson; Analyst; Northcoast Research Partners, LLC

Jon Michael Tower; Analyst; Citigroup Inc.

Presentation

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. 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 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 STN. mark is Vice President of Finance and Investor Relations.

At the end, you may begin your 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.
Before we begin, let me quickly remind you that during this call, items will be discussed that are not based on historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and 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 dot Cheesecake Factory.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. 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, 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, 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 before opening the call up to questions. With that, I'll turn the call over to David Overton.
Thank you.

At the end, 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.
Fourth quarter revenues were $877 million led by comparable sales at The Cheesecake Factory restaurants, up 2.5% versus the prior year and 14% versus 2019, once again, meaningfully outpacing the casual dining industry and demonstrating the strength and consistency of our brands. At this point, Cheesecake Factory restaurants delivered the highest average weekly sales in the Company's history in the last week of the fourth quarter. Our top-line performance is a reflection of our steadfast focus on menu innovation, maintaining the contemporary design, the core of our restaurants and delivering exceptional food quality, service and hospitality. Further building on the outstanding execution delivered by our operations team. We exceeded our expectations in labor productivity, food efficiency and wage management, contributing towards restaurant-level profit margin of 16.1% at The Cheesecake Factory, not only exceeding our projections, but also surpassing Fourth Quarter 2019 margin levels.
On 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 open internationally under licensing agreements, one in China in our first location in Thailand, subsequent to quarter end, we opened a North Italia restaurants in Houston, a Flower Child in the Dallas market and one Cheesecake Factory restaurant internationally under licensing agreement in Mexico.
And lastly, this morning, we opened our newest culinary dropout in Atlanta. We are looking to build on this momentum. And while the development conditions have not been fully normalized, we are aiming to further accelerate our unit growth. At this time, we're planning to open as many as 22 new restaurants in 2024, including as many as three to four Cheesecake Factories, six to seven North Italia, six to seven Flower Child and six to seven FRC restaurant.
As we look ahead, we remain intently focused on leveraging our competitive strengths. 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.

Thank you, David. 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% exceeded the 4.25% guidance we provided, and we returned $22.9 million to our shareholders in the form of dividends and stock repurchases.
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 around the quarter. Fourth quarter total sales of The Cheesecake Factory restaurants were $658 million with 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. Therefore, 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 a heightened spending from last year. And off-premise sales totaled 22% of sales for the fourth quarter, in line with a full-year percentage of sales. 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 AUVs of $7.9 million. Restaurant-level profit margin for the adjusted mature North Italia locations was 15.8%, up 330 basis points from the previous quarter 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 of external bakery sales were $16.6 million during the fourth quarter of fiscal 2023.
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 includes the rewards program. G&a decreased 10 basis points 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 was driven by the one more opening delays in opening days and the mix of concepts. And in the fourth quarter, we recorded a net expense of $35.6 million, primarily related to impairment of assets and lease terminations expense and FRC acquisition related expenses. Fourth quarter GAAP diluted net income per share was $0.26. Adjusted diluted net income per share was $0.8.
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 our revolving credit facility. Total debt outstanding was unchanged at $475 million. In principle, 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 repurchases and returned $13.1 million to shareholders.
There are dividend.
Before I move to our outlook, let me provide a brief update on our G. steak rewards program. Clearly, demand continues to exceed our internal expectations, and we remain encouraged by the level of member activity and engagement we are seeing. As we said previously, we are taking a very deliberate approach as we developed the program and therefore do not anticipate seeing a measurable impact to sales for at least the 1st year or so. 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.
Now let me turn to our outlook while we will not be providing specific comparable sales and earnings guidance, 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 million and $895 million it 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 expected 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. G&a is estimated to be between $57 million and $58 billion. Depreciation is estimated to be between approximately $24 million, $25 million. 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 expense than the prior year period to support our planned restaurant openings, 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. It will 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 basket, 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 depreciation to be about $100 million for the year. And given our unit growth expectations. We are estimating preopening 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 objectives. Assuming we achieve this goal, input costs and consumer trends remain consistent and there are no other material exogenous factors we would expect 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 our portfolio of concepts 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 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 and the key areas of value creation, growing restaurant comparable sales, expanding restaurant operating margins and accelerating accretive unit growth. With that said, we'll take your questions.

Question and Answer Session

Operator

Thank you. As a reminder, if you would like to ask a question, please press star followed by the number one on your telephone. We also ask that you limit yourself to one question and one follow-up. And for any additional questions, please re-queue.
Your first question comes from the line of Brian Harbor from Morgan Stanley.
Please go ahead.

Yes, thank you.
Good afternoon.
But can you just maybe comment on the kind of the updated annual guidance compared to what you laid out last quarter. Is this more just about kind of recent weather trends or anything else changed within your view?
This is Matt. 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. I can tell you that we're still performing equal or better than the gap to the industry that we hit in the fourth quarter. There's 10.5 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 in restaurant-level margins going into this year, it represents 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 to and is probably it's probably 1.5 to 2 percentage of impact on the quarter in total revenues the good news is we are able to see that very clearly, we're able to parse out the weather impacts. We've seen very good, good stable trends in February. So we feel good about the overall guidance. We feel like it's prudent to be now sitting in a range that we feel good about this early in the year, so.
Okay, great. Can you also maybe comment on the labor side. 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?
Sure. Rises that again, I think that one of the harbingers of labor productivity, it is retention and 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 tremendous results in January and so far this year that for sure, is going to lead itself towards productivity, right? We run the most complicated restaurants in the business, the more tenure that we have, the more efficient, our teams will be less overtime. There is 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 it the remainder of 2024 as well.

Operator

Your next question comes from the line of Mary Hodes from Baird.
Please go ahead.

Mary Hodes

Good afternoon. Thanks for taking the question. I 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 bounce 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, Stuart Weitzman in order doing specific quarter to date metrics. But the impact in January is, like I said, 1.5% 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 that into consideration and what our sort of normalized trends are it's the combination of those two that give us the full quarter outlook. Hopefully that answers the question.
Yes, that's helpful. Thank you. And then one more on The Cheesecake Factory business. 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 you're thinking about the components heading into 2024? I think you'd previously talked about around 4% pricing. And just wondering if that anything has changed and maybe what you're focused on in terms of driving traffic for 2024 through?
Or is it a very important portion from ERGO kind of relates a little bit to 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 Q. three metrics and was clearly ahead of the industry. The negative mix was still down, but it got better was it was negative 4.9 versus 6.1 in the third quarter is 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 into that met our expectations and the guidance that we provided. And I 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 to fourth quarter pricing was 7.3% for cheese Cheesecake, which was down from 9.5% 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 it really stabilized Q3 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.
Your next question comes from the line of Katherine 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 on I know in the past you've talked about not really seeing on margin with like active check management or on 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 in terms of the cadence throughout the year?
Sure, David, this is Matt. What we saw is video in 21 and 22 was significantly outsized purchasing behaviors. I think this has been pretty well documented. And so the preponderance of that the mix 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 pre historically relevant. It was the same basic proportion to 2019 in both Q2 three and Q4.

So it's stable.
We saw really that shift happen materially in the middle of Q2 and into 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, it's 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 is just slightly different than it was the year before when we saw some outsized purchasing behaviors.
Okay. That's helpful. And then I think on the last call, I mean, you've been pretty clear about kind of laying out the expectations for for comp, but just on pricing, I think, yes, in the past, the expectation was like 1.5 to 2 per ton. Is that still kind of what you're thinking in terms of the environment you're seeing?
Yes, we will look at that obviously come 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 change. It could go down if cost 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 Denis. I should add on for Jeffrey Bernstein.
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 we made great progress in 2023 on that trajectory.
And 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. The, um, 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 24 by 50 to 75 basis points. So predominantly driven by productivity and efficiency gains. So a little bit of lapping some outsized commodities inflation, particularly in the first half of the year. So we feel like that's going to be great progress. I would really put us back on the footing that we had pre-pandemic across both Cheesecake Factory and the total company.
Okay.
Thank you.

Operator

Your next question comes from the line of Ashley group lender from Piper Sandler.
Please go ahead.
Hi, good afternoon, guys.

Aisling Grueninger

My question is kind of a follow-up on Brian's 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 kind of baking in a little more conservatism with this new guide because you know with the tough macro environment?
Thanks.
Sure. As Matt, you know, I would say like so the the midpoint probably came down about 1% to 1.5%. A piece of that is certainly just the January component. And I would just say, look, we have 10.5 months to go. We feel the business is on a great pace. Everything's going well, there are things that we can't control. For example, timing of openings, 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, there would be achievable even with some disruption.
No, that's great.

That makes that makes perfect sense. My second question is I'm sure one of your favorites with only 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 to The Cheesecake Factory specifically and what your thoughts around pricing is? And just any way to combat any kind of inflation you're seeing?
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. We know that the government in California continues to even modify, but FAST Act and carve out even more different types of restaurants that may not have to comply with that. So it is definitely an uncertain situation as we noted before, given our pay circumstances, we're very competitive in the marketplace already. And many of the California QSR urban locations are already paying 19 and $20. We believe that's 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. And certainly all of our positions make much more than that. We feel like we have sufficient pricing power in California if need be where tremendous value for guests here with our portion sizes and great service. So you know, I think 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 and full service as it is in the QSR room.

Operator

Your next question comes from the line of Brian Vaccaro from Raymond James.
Please go ahead.

Brian Michael Vaccaro

Hi, thanks and good evening. But 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 and put the dine-in traffic looked like in the fourth quarter year on year?
So on the mix, Brian, this is Matt. On most of that is on purchase behavior, maybe of 1% on the off-prem mix, right? So but I think it's important to think about it more sequentially then 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 22 and 21, but there's still also 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 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 was about the same, you know, is really closer to I don't have the data in front of me, but that would just basically substantiate a year over year on-premise traffic was basically flat file.
Okay. All right. Great.
That's helpful. And some if I missed it earlier, the pricing, can you can you level set what you have in the menu right now, and I believe you lap 3.25% 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?
Yes, we're going to be at about 4.5 for the quarter with a little bit of the weighting coming in so 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.

And Brian, this is Ed hit for dropping off 3.5%, replacing that with a 2.5% price increase.
You're in the middle of the quarter.

Operator

Your next question comes from Lauren Silberman from Deutsche Bank.
Please go ahead.

Lauren Danielle Silberman

Thank you very much. I wanted to ask about the fourth quarter. Can you 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.
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 from 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, in December was the strongest overall month and in a much less pricing because we dropped off at 3%. So the underlying business, I think just got better and better. But the I would say the operators were in full control throughout the quarter, driving sales managing costs. It was very predictable and overall right on track.
Great.
Very helpful. And then just a question on restaurant margin. Nice improvement this quarter, you spoke to 50 to 75 basis points of expansion this year. Is that fairly consistent in terms of year-over-year expansion through the drought? The are there any moving pieces per quarter we should be thinking about Thank you.
Yes, there were two story Barbie's performance because there isn't enough room for deferral in terms of sort of, you know, there's not I mean, we saw a larger pretty stable overall. So relatively speaking, we would we would think that would be true as well.
Thank you.

Operator

Your next question comes from the line of Jim Sanderson from Northcoast Research.
Please go ahead.

Jim Sanderson

Thanks for the question. I wanted to go back to the unit growth. The 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 will be impacted and in terms of the revenue contribution, we believe those will be pretty seamless, essentially very similar trade areas with some lease expirations that were just moving sites only.
And can you walk through the price mix for North Italia for the quarter as well?

Yes.

Let me pull that up here.

Give me a quick second going to have it 8%.

Yes, pricing is 8%.
I don't think we track mix the same way as we do with Cheesecake Factory, but it's slightly negative and traffic was slightly positive and negative traffic and taxes just like you.

And last question from me, I just wanted to better understand the sequential improvements to a merchant in North Italia. I think you called out Cheesecake, but there is a meaningful improvement there as well. Is that primarily the utilities are Yes.

We rolled out pricing in the middle quarter and the fourth quarter, we were able to capture the full benefit of that.
That's the predominant predominant driver of the improvement in that and margins, Jim, essentially for North, they were one cycle behind Cheesecake Factory. And so this was kind of our last catch up there, if you will, from are the pandemic inflation to kind of get back to a more normalized level.

Operator

Your next question comes from the line of John tower from Citigroup.
Please go ahead.
Great.

Jon Michael Tower

Thanks for taking the question. I have a couple if I may. First curious, so it's encouraging the unit growth, can it tick higher I'm just curious in terms of what you're seeing with landlords and developers. I know 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 that improved at all such that I know your outlook for this year is three quarters or so of that develop in the back half of the year, but has this kind of stickiness gotten less sticky and therefore you have greater visibility into those coming into the year and then maybe years past, Joel, this is Matt.
I think there's two things.

One is maybe incrementally better, right?
It's definitely the long tail of all of this.
But incrementally But absent any more importantly, we just took control of the situation a little bit more right.
We made a very definitive strategic move to for some of the locations into the 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 open this year. So we feel really good about where we're sitting there. We have a much bigger pipeline, then you know that 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. In terms of, yes, I'm assuming many of these stores are already on concrete support, et cetera. Are you 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 it broke and kind of ready to rock.
We 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. We are 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 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, you know, we are centrally focused on the rewards program.

That said, we did shift a little bit of the spend towards off-premise, and I'm doing some some promotions with delivery and Olo and so we're focusing a little bit on that and a little bit more than we have in the past.

Operator

Your next question comes from the line of Brian Vaccaro from Raymond James.
Please go ahead.
Hi.

Brian Michael Vaccaro

Thanks for the quick follow up. I just wanted to go back to the labor cost line for a second, if we could and you noted some improvements in the later Labor productivity and wage management. And I understand the natural benefit to 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?

Thank you very much.
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 an inflationary rate that is just reduced overtime to even slightly below pre-pandemic rates. So that's another benefit. Our retention is 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 two, as an example, bring a one star capital to start to a three star because of that retention, the longer that we're keeping people the more that we can train them on multiple stations, the more that they can handle the big volume of The Cheesecake Factory restaurants. So a lot of that is driven by that initial retention piece and then our ability to leverage that operationally once we're there.
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 mean for me, no.