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Cheesecake Factory Widens Presence With Restaurant in Lynnwood
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In a bid to expand its footprint in domestic market, The Cheesecake Factory Incorporated (CAKE - Free Report) announced the opening of a restaurant in Lynnwood, WA. The restaurant offers over 250 menu items along with more than 50 cheesecakes and desserts.
Currently, the company operates 215 full-service company-owned restaurants — 199 under The Cheesecake Factory brand, 14 under the Grand Lux café brand and two under the RockSugar Pan Asian Kitchen brand.
Cheesecake Factory is also foraying into the lucrative markets of the Middle East, North Africa, Central and Eastern Europe, Russia, Turkey, Mexico, Kuwait, Lebanon and Chile. Notably, this initiative is in line with the company’s strategy to keep up with industry peers like Buffalo Wild Wings, Inc. and Brinker International Inc. (EAT - Free Report) . In 2018, it plans to open six company-owned restaurants. Under licensing agreement, the company intends to launch three more international restaurants in the current year.
Higher Costs: A Possible Headwind
Of late, Cheesecake Factory’s profits have been under pressure due to rising wage rates. Moreover, pre-opening costs of outlets, given the company’s unit expansion plans and expenses related to sales initiatives, are adding to the costs and might hurt profits. In the second quarter of 2018, labor expense ratio was 35.8%, up 190 bps from the year-ago quarter. The metric was primarily driven by higher hourly labor, including more wages, overtime and training costs. Notably, pre-opening expenses were 0.3% of total revenues, up 10 bps from the prior-year quarter number.
In a month’s time, shares of Cheesecake Factory have declined 11.8% against the industry’s 2.6% growth. The decline can be primarily attributed to lower-than-expected earnings for the two straight quarters. In the second quarter, adjusted earnings of 65 cents per share missed the Zacks Consensus Estimate of 81 cents by 19.8%.
Moreover, downward earnings estimate revisions raise questions over the stock’s future earnings potential. For 2018, the consensus mark moved south 8.9% over the past 30 days.
Zacks Rank & Stocks to Consider
Cheesecake Factory has a Zacks Rank #5 (Strong Sell).
Dine Brands Global reported better-than-expected earnings in the trailing four quarters, with an average beat of 8.1%.
Darden Restaurants delivered better-than-expected earnings in the preceding four quarters.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Cheesecake Factory Widens Presence With Restaurant in Lynnwood
In a bid to expand its footprint in domestic market, The Cheesecake Factory Incorporated (CAKE - Free Report) announced the opening of a restaurant in Lynnwood, WA. The restaurant offers over 250 menu items along with more than 50 cheesecakes and desserts.
Currently, the company operates 215 full-service company-owned restaurants — 199 under The Cheesecake Factory brand, 14 under the Grand Lux café brand and two under the RockSugar Pan Asian Kitchen brand.
Cheesecake Factory is also foraying into the lucrative markets of the Middle East, North Africa, Central and Eastern Europe, Russia, Turkey, Mexico, Kuwait, Lebanon and Chile. Notably, this initiative is in line with the company’s strategy to keep up with industry peers like Buffalo Wild Wings, Inc. and Brinker International Inc. (EAT - Free Report) . In 2018, it plans to open six company-owned restaurants. Under licensing agreement, the company intends to launch three more international restaurants in the current year.
Higher Costs: A Possible Headwind
Of late, Cheesecake Factory’s profits have been under pressure due to rising wage rates. Moreover, pre-opening costs of outlets, given the company’s unit expansion plans and expenses related to sales initiatives, are adding to the costs and might hurt profits. In the second quarter of 2018, labor expense ratio was 35.8%, up 190 bps from the year-ago quarter. The metric was primarily driven by higher hourly labor, including more wages, overtime and training costs. Notably, pre-opening expenses were 0.3% of total revenues, up 10 bps from the prior-year quarter number.
In a month’s time, shares of Cheesecake Factory have declined 11.8% against the industry’s 2.6% growth. The decline can be primarily attributed to lower-than-expected earnings for the two straight quarters. In the second quarter, adjusted earnings of 65 cents per share missed the Zacks Consensus Estimate of 81 cents by 19.8%.
Moreover, downward earnings estimate revisions raise questions over the stock’s future earnings potential. For 2018, the consensus mark moved south 8.9% over the past 30 days.
Zacks Rank & Stocks to Consider
Cheesecake Factory has a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the same space are Dine Brands Global, Inc. (DIN - Free Report) and Darden Restaurants, Inc. (DRI - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dine Brands Global reported better-than-expected earnings in the trailing four quarters, with an average beat of 8.1%.
Darden Restaurants delivered better-than-expected earnings in the preceding four quarters.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >