Cheesecake Factory Inc. 's ( CAKE ) earnings of 47
cents per share in the first quarter of 2013 beat the Zacks
Consensus Estimate by a nickel and also increased 27.0% year over
year. Improvement in top-line coupled with margin expansion boosted
earnings during the quarter.
Cheesecake's revenues nudged up 6.3% year over year to $463.0
million, surpassing the Zacks Consensus Estimate of $457 million by
1.3%. Amid a sluggish industry sales environment, the
company's positive comparable restaurant sales (comps) growth and
higher global demand drove top line in the quarter.
Revenues in the quarter also gained from Cheesecake's
better-than-expected volume growth in three new restaurants in the
Inside the Headline Numbers
Comps grew 1.4% in the reported quarter offsetting the adverse
impact of 60 basis points (bps) owing to the storm that hit the
Northeast in early February.
However, excluding this weather impact, comps increased 2.0%.
Better menu offerings and higher productivity boosted the comps in
the quarter. Further, Cheesecake also gained from the early Easter
and spring breaks. In 2012, the Easter and spring breaks fell in
the second quarter of the year.
Comps increased 1.6% at Cheesecake Factory restaurant concept
but slid 0.9% at the company's another concept Grand Lux Cafe.
Operating margin in the first quarter expanded 100 bps year over
year to 7.9%, buoyed by its cost controlling initiatives. Cost of
sales, as a percentage of revenues, remained flat year over year to
24.7% as lower seafood and fish costs and cost efficiency gain was
completely neutralized by the adverse impact from the bakery mix
shift. Other operating costs were down 30 bps due to lower
At the end of the first quarter of 2013, the company operated
174 restaurants. This year, management aims to open as many as 8 to
10 new company-owned restaurants
For the second quarter of 2013, earnings per share (EPS) are
guided between 55 cents - 57 cents. The Zacks Consensus Estimate
for second quarter is 76 cents per share. Comparable store sales
are expected to be up 1%-2%. Comps in the quarter are expected to
be affected by the shift of the spring breaks to the first
For 2013, the company raised its lower end guidance for EPS from
$2.10 to $2.12. Currently, EPS are expected in the range of
$2.12-$2.18 while comps growth is projected in the range of
1.5%-2.5%. Management expects 2013 to be strong, marking the fourth
year of consistent increases in comps.
Cheesecake is also on its way to attain historically peak margin
levels in 2013 driven by international expansion, strong
performance of its three new Middle East units and lower food
costs. Management now projects food cost inflation to be about 2.5%
in 2013, down from the previous estimate of 3%.
Cheesecake's focus on cost containment efforts, relatively
benign food cost inflation, international expansion as well as
higher margin gains is quite encouraging. However, the comps
underperformance by Grand Lux Cafe during the past two quarters
remains a major concern.
Another restaurateur McDonald's Corporation 's
( MCD )
first-quarter 2013 earnings and revenues missed the Zacks Consensus
Cheesecake currently carries a Zacks Rank #2 (Buy). Some
restaurateurs that are worth a look at this point include
Red Robin Gourmet Burgers Inc. ( RRGB ) and
Buffalo Wild Wings Inc. ( BWLD ). While Red
Robin carries a Zacks Rank #1 (Strong Buy), Buffalo Wild Wings
carries a Zacks Rank #2 (Buy).BUFFALO WLD WNG (BWLD): Free Stock Analysis
ReportCHEESECAKE FACT (CAKE): Free Stock Analysis
ReportMCDONALDS CORP (MCD): Free Stock Analysis
ReportRED ROBIN GOURM (RRGB): Free Stock Analysis
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