The Cheesecake Factory Incorporated CAKE reported third-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom lines increased from the prior-year quarter’s figures.
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During the quarter, CAKE stated benefits from strong demand and sales performance of new restaurant openings. The brand’s comparable sales and traffic surged past industry averages, outperforming the Black Box casual dining index by 310 and 380 basis points, respectively. Record-high guest satisfaction scores across both dine-in and to-go services further boosted sales and traffic. Operational gains - including better-than-expected flow through, increased labor productivity, effective overtime and wage management and reduced food waste - contributed to healthier restaurant-level margins.
Following the results, the company’s shares increased 5.7% during the after-hour trading session on Oct. 29.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share (EPS) of 58 cents, beating the Zacks Consensus Estimate of 47 cents by 23.4%. In the year-ago period, the company reported adjusted EPS of 39 cents.
The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise
The Cheesecake Factory Incorporated price-consensus-eps-surprise-chart | The Cheesecake Factory Incorporated Quote
Quarterly revenues of $865.5 million missed the consensus estimate by 0.06%. The top line increased by 4.2% on a year-over-year basis.
Q3 Comps
In the reported quarter, comps at Cheesecake Factory restaurants inched up by 1.6% year over year compared with a 2.4% rise reported in the prior-year quarter. We projected comps to increase 1.1% year over year.
North Italia comps rose 2% year over year compared with 8% growth reported in the year-ago quarter. Our model suggested the metric to rise 2.5% year over year.
Costs in Detail
The cost of food and beverage, as a percentage of revenues, contracted 90 basis points (bps) year over year to 22.6% in the fiscal third quarter. We expected the metric to be 22.7% of revenues in the quarter.
Labor expenses, as a percentage of total revenues, amounted to 35.9%, down 40 bps year over year. We expected the metric to be 36.1% of revenues in the quarter.
Other operating costs, as a percentage of total revenues, were 27.7%, up 10 bps from the prior-year quarter’s level. In the quarter, we anticipated the metric to be 27.6% of revenues.
General and administrative expenses accounted for 6.5% of revenues, flat year over year. Our model predicted the metric to be 6.6% of revenues in the fiscal third quarter.
In the fiscal third quarter, pre-opening expenses accounted for 0.8% of revenues, flat year over year.
Balance Sheet
As of Oct. 1, 2024, Cheesecake Factory’s cash and cash equivalents totaled $52.2 million compared with $56.3 million as of Jan. 2, 2024. Long-term debt (net of issuance costs) was $471.6 million compared with $470 million as of Jan. 2, 2024. As of Oct.1, the company had a total available liquidity of $288.7 million compared with $277.2 million reported in the previous quarter.
Management declared a quarterly cash dividend of 27 cents per share. The dividend will be payable on Nov. 26 to shareholders of record as of Nov. 13, 2024. In the fiscal third quarter, CAKE repurchased approximately 29,450 shares for $1.1 million.
Store Developments
In the quarter under review, the company opened four new restaurants. The openings included three Fox Restaurant Concepts restaurants and one Flower Child location. Following the quarter's end, additional openings included three North Italia locations, a Blanco in Phoenix and the debut of the first Flower Child in Salt Lake City.
With 17 new restaurants opened so far, CAKE remains on track to achieve its 2024 target of up to 22 new locations. In 2025, the company anticipates accelerating its growth by adding up to 24 new restaurants across its portfolio.
CAKE’s Zacks Rank & Key Picks
Cheesecake Factory currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include CAVA Group, Inc. CAVA, Shake Shack Inc. SHAK and Yum China Holdings, Inc. YUMC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CAVA Group has a trailing four-quarter earnings surprise of 257.7%, on average. The stock has gained 336.8% in the past year. The Zacks Consensus Estimate for CAVA’s 2024 sales and EPS indicate 33.8% and 83.3% growth, respectively, from the year-earlier actuals.
Shake Shack has a trailing four-quarter earnings surprise of 39.6%, on average. SHAK’s shares have risen 102.7% in the past year. The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicate 14.1% and 17.7% growth, respectively, from the year-earlier actuals.
Yum China has a trailing four-quarter earnings surprise of 26.6%, on average. YUMC’s shares have risen 4.8% so far this year. The Zacks Consensus Estimate for YUMC’s 2024 sales and EPS indicate 5.7% and 15.3% growth, respectively, from the prior-year figures.
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