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Cheesecake Factory (CAKE) Outruns Industry in Past 6 Months

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The Cheesecake Factory Incorporated (CAKE - Free Report) continues to benefit from its off-premise business model and strategic investments in digital technology efforts. Notably, the company continues to benefit from a robust delivery channel. This along with focus on initiatives like contactless menu, operational changes and other technology upgrades bodes well.

In the past six months, shares of Cheesecake Factory have gained 63.4% compared with the industry’s 11.1% rise. Moreover, an upward revision in earnings estimates for fiscal 2021 reflects analysts’ optimism regarding the company’s growth potential. Over the past 30 days, the Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 42.6% to $2.09 per share.

Factors Driving Growth

Cheesecake Factory is consistently focusing on boosting sales to stay afloat in the competitive environment. Apart from menu innovation and digitalization, the company intends to add new Super Food items and the famous indulgences of The Cheesecake Factory to its menu. The Super Foods program has increased consumer awareness of brands. Meanwhile, the company launched its Timeless Classics special menu card nationally.

Moreover, the company is witnessing robust comps growth. During the first quarter of 2021, comps at Cheesecake Factory (across all operating models) increased approximately 220% year over year. Moreover, comps rose 7% from 2019 levels. The company is planning to open 14 restaurants in 2021. On the international front, it anticipates opening three Cheesecake Factory locations under licensing agreements.

Even after a year of closing its acquisition, Fox Restaurant Concepts or FRC has not only reinforced its confidence and strength amid the pandemic but has also paved the way for long-term growth. FRC is planning to launch a pop-up virtual concept (inspired by the Dilbert menu) through the off-premise channel in the Phoenix market. It also launched a Flower Child pop-up in early 2021. These are likely to offer streamlined menus focused on the off-premise channel and limited indoor seating capacity. Also, testing of some digital initiatives are in the pipeline. The company is optimistic about customers’ response toward these initiatives.

Cheesecake Factory’s focus on digitally-enabled initiatives and implementation of technology are doing well according to the feedbacks on its mobile payment app, CakePay. The company has inked an exclusive national delivery partnership with DoorDash. It expects to benefit from these collaborative marketing opportunities. The company is also witnessing incremental sales from its delivery service, which continues to be rolled out nationwide. It continues to improve its to-go business, including online ordering capability. During the first quarter of fiscal 2021, off-premise represented approximately 43% of total Cheesecake Factory’s restaurant sales. It also continues to perform well in the delivery channel. In order to boost consumer convenience, the company has implemented operational changes and technology upgrades, which include contactless menu and payment technology, and text paging.

 

Zacks Rank & Other Key Picks

Cheesecake Factory carries a Zacks Rank #2 (Buy).

A few other stocks which warrant a look in the same industry are Bloomin' Brands, Inc. (BLMN - Free Report) , BJ's Restaurants, Inc. (BJRI - Free Report) and Chuy's Holdings, Inc. (CHUY - Free Report) . Bloomin' Brands and Chuy's Holdings sport a Zacks Rank #1 (Strong Buy), while BJ's Restaurants carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bloomin' Brands, Chuy's Holdings and BJ's Restaurants’ 2021 earnings are expected to rise 372.5%, 72.6% and 110.6% year over year, respectively.

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