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Cheesecake Factory (CAKE) Q1 Earnings Top Estimates, Rise Y/Y

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The Cheesecake Factory Incorporated (CAKE - Free Report) reported solid first-quarter fiscal 2021 results, with earnings and revenues beating the Zacks Consensus Estimate as well as increasing on a year-over-year basis.

Notably, the company benefitted from the easing of COVID-19 dining restrictions and improving consumer spending trends. This along with pent-up demand in dining and off-premise sales volumes contributed to the fiscal first-quarter performance. Following the results, shares of the company moved up 8.2% during after-hour trading session on Apr 28.

Earnings & Revenue Discussion

In the quarter under review, adjusted earnings per share came in at 20 cents that beat the Zacks Consensus Estimate of a loss of 15 cents by 233.3%. Moreover, the bottom line surged 53.8% year over year from 13 cents reported in the prior-year quarter. The upside was primarily driven by improvements in labor and other operating expenses.

 

During the fiscal first quarter, total revenues of $627.4 million surpassed the Zacks Consensus Estimate of $598 million by 5%. Also, the top line increased 2% on a year-over-year basis. The upside can be primarily attributed to the easing of COVID-19 restrictions, solid off-premise sales and pent up dining demand.

During the reported quarter, comps at Cheesecake Factory restaurants increased 2.8% year over year. In the prior-year quarter, the company’s comps had fallen 12.9% year over year.

Costs in Detail

Cost of sales, as a percentage of revenues, declined 120 basis points (bps) year over year to 21.7% in the fiscal first quarter. Labor expenses, as a percentage of total revenues, was 36.6%, down 200 bps from the year-ago quarter’s levels.

Other operating costs contributed 28.9% to revenues compared with 27.3% in the prior-year quarter. General and administrative (G&A) expenses accounted for 7.1% of revenues, thereby remaining at par with the prior-year quarter’s levels. In the fiscal first quarter, pre-opening expenses accounted for 0.6% of revenues, up 10 bps year over year.

Balance Sheet

As of Mar 30, 2021, Cheesecake Factory’s cash and cash equivalents totaled $181.3 million compared with $154.1 million as of Dec 29, 2020. During the fiscal first quarter, long-term debt came in at $280 million, remaining unchanged compared with Dec-end 2020 levels.

On Mar 31, 2021, the company paid out a cash dividend worth $5.1 million (for the fiscal first quarter) to its convertible preferred stockholders.

Developmental Details

As of Apr 28, the company reopened indoor dining rooms with limited capacity across majority of its restaurants (which includes 206 Cheesecake Factory locations). Notably, the restaurants are operating at an average of 60% indoor capacity. While one Cheesecake Factory location is operating in an off-premise only model, two locations have been closed due to the pandemic. The company expects to reopen the closed locations by the end of the fiscal second quarter.

During the fiscal first quarter, the company opened a restaurant in Washington, D.C.. It also opened North Italia restaurants in Birmingham and Alabama along with a Blanco store in Nashville. Subsequent to quarter-end, the company opened a one Cheesecake Factory restaurant in Shanghai under a licensing agreement. It also opened North Italia store in Miami.

Other Business Updates

Since the start of the fiscal second quarter to Apr 27, 2021, comps at Cheesecake Factory (across all operating models) increased approximately 220% year over year. Moreover, comps increased 7% from 2019 levels. Notably, easing of pandemic-led restrictions coupled with solid off-premise sales contribution, clearly benefitted the company.

Zacks Rank & Peer Releases

Cheesecake Factory currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include Darden Restaurants, Inc. (DRI - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and FAT Brands Inc. (FAT - Free Report) . Darden sports a Zacks Rank #1, while Chuy's Holdings and FAT Brands carry a Zacks Rank #2.

Darden has three-five-year earnings per share growth rate of 10%.

Chuy's Holdings has a trailing four-quarter earnings surprise of 126.5%, on average.

FAT Brands 2021 earnings are expected to surge 197.3%.

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