A month has gone by since the last earnings report for Cheesecake Factory (
CAKE Quick Quote CAKE - Free Report) . Shares have added about 16.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cheesecake Factory due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Cheesecake Factory Q4 Earnings Miss Estimates, Fall Y/Y
The Cheesecake Factory reported fourth-quarter fiscal 2020 results, with earnings and revenues missing the Zacks Consensus Estimate as well as declining on a year-over-year basis.
Earnings & Revenue Discussion
In the quarter under review, adjusted loss per share came in at 32 cents, wider than the Zacks Consensus Estimate of a loss of 9 cents. In the prior-year quarter, the company had reported adjusted earnings of 58 cents per share. The downside was primarily caused by rise in labor and other operating expenses.
During the fiscal fourth quarter, total revenues of $554.6 million missed the Zacks Consensus Estimate of $604 million by 8.2%. Also, the top line declined 20.1% on a year-over-year basis. The decline was primarily attributed to additional dining room closures and capacity restrictions stemming from a rise in COVID-19 cases. During the reported quarter, comps at Cheesecake Factory restaurants declined 19.5% year over year. Costs in Detail
Cost of sales, as a percentage of revenues, increased 10 basis points (bps) year over year to 22.9% in the fiscal fourth quarter. Labor expenses, as a percentage of total revenues, was 39.3%, up 310 bps from the year-ago quarter’s levels.
Other operating costs represented 30.2% of revenues compared with 26% in the prior-year quarter. General and administrative (G&A) expenses accounted for 7.3% of revenues, up 50 bps from the prior-year quarter’s levels. In the fiscal fourth quarter, pre-opening expenses accounted for 0.5% of revenues, down 40 bps year over year. Balance Sheet
As of Dec 29, 2020, Cheesecake Factory’s cash and cash equivalents totaled $154.1 million compared with $58.4 million as of Dec 31, 2019.
During the fiscal fourth quarter, the company made payment-in-kind dividend worth $5 million to its convertible preferred stockholders. Long-term debt totaled $280 million in the fiscal fourth quarter compared with $290 million as on Dec 31, 2019. Developmental Details
As of Feb 17, the company reopened indoor dining rooms with limited capacity across 80% of its restaurants (which includes 166 Cheesecake Factory locations). Notably, the restaurants are operating at 50% capacity.
Approximately 17% of the company’s restaurants (which includes 39 Cheesecake Factory locations) are operating with reopened patios and social-distancing protocols. While one Cheesecake Factory location is operating in an off-premise only model, three locations have been closed owing to the pandemic. During the fiscal fourth quarter, the company opened a restaurant in Clearwater, FL. It also opened a culinary dropout and Blanco at additional locations in Arizona. Internationally, the company opened a restaurant in Mexico under a licensing agreement. Other Business Updates
Since the start of the fiscal first quarter to Feb 16, 2021, comps at Cheesecake Factory (across all operating models) declined approximately 18%. However, for restaurants with reopened indoor dining rooms, comps are down 9% year over year.
Total revenues in 2020 came in at $1,983.2 million compared with $2,482.7 million in 2019.
General and administrative expenses in 2020 came in at $157.6 million compared with $160.2 million in 2019. In 2020, adjusted loss per share came in at $1.49 against earnings of $2.61 in the previous year. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -3554% due to these changes.
Currently, Cheesecake Factory has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Cheesecake Factory has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.