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Cheesecake Factory (CAKE) Q3 Earnings Lag Estimates, Stock Down

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The Cheesecake Factory Incorporated (CAKE - Free Report) reported third-quarter fiscal 2021 results, with earnings and revenues missing the Zacks Consensus Estimate. However, the top and the bottom line increased on a year-over-year basis. Following the announcement, shares of the company fell 3.2% during the afterhours trading session on Nov 3.

Earnings & Revenue Discussion

In the quarter under review, adjusted earnings per share (EPS) came in at 65 cents missing the Zacks Consensus Estimate of 70 cents. In the prior-year quarter, the company had reported an adjusted loss of 33 cents per share. The upside was primarily driven by improvements in labor and other operating expenses.

During the fiscal third quarter, total revenues of $754.5 million missed the Zacks Consensus Estimate of $760 million by 0.8%. The top line surged 45.7% on a year-over-year basis. The upside can be primarily attributed to solid off-premise sales growth. Quarter-to-date (through Nov 2), the off-premise model contributed 28% to total sales. Off-premise average weekly sales have doubled compared with fiscal 2019 levels.

 

During the reported quarter, comps at Cheesecake Factory restaurants increased 41.1% year over year. In the prior-year quarter, comps had fallen 23.3% year over year. Nevertheless, the metric is up 8.3% compared with 2019 levels.

Costs in Detail

Cost of sales, as a percentage of revenues, declined 30 basis points (bps) year over year to 22.5% in the fiscal third quarter. Labor expenses, as a percentage of total revenues, was 37.1%, down 160 bps from the year-ago quarter’s levels. Other operating costs (as a percentage of total revenues) came in at 26.7%, down 400 bps from the prior-year quarter’s levels.

General and administrative (G&A) expenses accounted for 6.1% of revenues compared with 7.3% in the prior-year quarter. In the fiscal third quarter, pre-opening expenses accounted for 0.4% of revenues, down 10 bps year over year.

Balance Sheet

As of Sep 28, 2021, Cheesecake Factory’s cash and cash equivalents totaled $131 million compared with $154.1 million as of Dec 29, 2020. During the fiscal third quarter, long-term debt (net of issuance costs) came in at $465.5 million compared with $280 million as of Dec 29, 2020.

Developmental Details

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. It also opened a Cheesecake Factory restaurant in Shanghai under a licensing agreement. Subsequent to quarter-end, the company opened the North Italia store in the Orlando area, Blanco and Culinary Dropout in Denver and one Cheesecake Factory restaurant in Huntsville, AL. During the quarter, the company achieved its development objective of opening 14 new restaurants (across its concepts) in fiscal 2021.

Other Business Updates

Since the start of fiscal fourth quarter to Nov 2, 2021, comps at Cheesecake Factory (across all operating models) increased approximately 20% year over year. Comps also increased 10.5% from 2019 levels. Solid off-premise sales were a primary contributor to the company’s performance.

Zacks Rank & Peer Releases

Cheesecake Factory currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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