Cheesecake Factory (CAKE) down 24% in 6 months: is a renewal likely? – January 5, 2022


The past six months have been difficult for The incorporated cheesecake factory (CAKE Free report). At the same time, the company’s shares fell 23.8%, compared to a 0.5% gain for the industry. The coronavirus pandemic, high costs, low traffic and rising cost of selling inflation impacted the performance of the company.

However, a robust off-site business model, menu innovation, a contactless menu, operational changes and other technology upgrades bode well. Let’s dig deeper and analyze the reasons why investors should choose Cheesecake Factory.

Factors likely to stimulate growth

Cheesecake Factory is committed to increasing sales to stay afloat in a competitive environment. Innovation in menus and advanced digital capabilities are the main strengths of the company. In the future, he intends to continue menu innovation by adding new Super Food products and the famous indulgences from The Cheesecake Factory. The Super Foods program has increased brand awareness among consumers. Meanwhile, the company launched its special Timeless Classics menu card nationwide.

During the first, second and third quarters of fiscal 2021, Cheesecake Factory mixes (for all operating models) increased by approximately 220%, 150% and 41.1%, respectively, by an average of 220%, 150% and 41.1%, respectively. year over year. The first, second and third quarter lineups increased by 7%, 7.8% and 8.3% respectively from 2019 levels. Strong off-premises sales significantly contributed to the performance of the company.

The company’s strong comp performance in the first, second and third quarters of fiscal 2021 continues into the fourth quarter. From the start of the fiscal fourth quarter through November 2, 2021, Cheesecake Factory mixes (across all operating models) have grown by around 20% year over year. Comps improved by 10.5% from 2019 levels.

Even though the company has reopened the majority of dining rooms with limited capacity, offsite operations continue to act as positive winds for overall sales. Off-premises sales contributed approximately 45% and 40% of the Company’s restaurant sales in the third and fourth quarters of fiscal 2020, respectively. In the first, second and third quarters of fiscal 2021, off-premises activities contributed approximately 43%, 27% and 28%, respectively, to total Cheesecake Factory restaurant sales. The company said the composition of off-site sales (in Q3 FY2021) remains high from the pre-pandemic level of 15% (Q3 FY2019).

Zacks Rank # 3 (Hold) company focused on expansion efforts. During the fiscal third quarter, the company opened four new restaurants, including North Italia and Flower Child in Phoenix, North Italia in Nashville and Blanco in Chicago. She opened a Cheesecake Factory restaurant in Shanghai under a licensing agreement. After the quarter ended, the company opened a North Italia store in the Orlando area, Blanco and Culinary Dropout in Denver and a Cheesecake Factory restaurant in Huntsville, AL. Despite the pandemic and the associated challenges, the company achieved its development objective of opening 14 new restaurants (through its concepts) during fiscal year 2021.

Image source: Zacks Investment Research

Choice of keys

Some higher ranked actions in the same space include Chuy’s Holdings, Inc. (CHUY Free report), Arcos Dorados Holdings Inc. (ARCO Free report) and McDonald’s Company (MCD Free report).

Chuy’s Holdings currently holds a Zacks Rank # 2 (Buy). CHUY reported better-than-expected earnings in each of the past four quarters, with the average surprise being 52.7%. The company’s shares have risen 13.1% so far this year.

Zacks ‘consensus estimate for Chuy’s Holdings’ sales and EPS for the current year suggests growth of 23.8% and 115.5%, respectively, from a year ago levels. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Arcos Dorados wears a Zacks Rank # 2. ARCO shows long-term profit growth of 42.9%. The company’s shares have risen 13.1% so far this year.

Zacks ‘consensus estimate for Arcos Dorados’ current year sales and EPS suggests growth of 31% and 112.5%, respectively, from the previous year‘s levels.

McDonald’s has a Zacks Rank # 2. A strong driving presence and investments in delivery and digitization over the past few years have helped the company weather the pandemic. The company has a surprise earnings for the last four quarters of 6.8% on average.

Zacks’ consensus estimate for current year sales and McDonald’s EPS suggest growth of 20.9% and 55.7%, respectively, from the previous year’s levels. MCD has grown 28% over the past year.

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