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Cheesecake Factory (CAKE) Down 34% in a Year: Is the Worst Over?

The past year has been a tough one for The Cheesecake Factory Incorporated CAKE. In the past year, the company’s shares have declined 33.8% compared with the industry’s fall of 16.7%. Supply chain disruptions and high costs have negatively impacted the company’s performance.

However, sales-building efforts and robust digitalization are likely to drive the company’s performance. Let’s delve deeper and analyze the factors as to why investors should retain Cheesecake Factory.

Factors Likely to Drive Growth

This Zacks Rank #3 (Hold) company is continuously focusing on menu innovation and advanced digital capabilities to drive growth. During the second quarter of fiscal 2022, the company initiated a new summer menu rollout to drive incremental sales.

It is also benefiting from robust comps growth. During the second quarter of fiscal 2022, comps at Cheesecake Factory restaurants increased 4.7% from the second quarter of fiscal 2021 and 13.1% from the second quarter of fiscal 2019. The increase was primarily driven by higher customer traffic (of 5.7%), partially offset by a decline in average checks (1.0%). Solid off-premise sales and sequential improvements in food efficiencies, labor productivity, hourly staff and manager retention also contributed to the company’s performance.

The company is also focusing on expansion efforts. In fiscal 2022, the company anticipates opening 15 new restaurants, comprising four Cheesecake Factory restaurants, four North Italia restaurants and seven FRC restaurants (including three Flower Child locations). It also anticipates opening a Cheesecake Factory restaurant internationally under a licensing agreement. To this end, the company set aside $150 million in capex to support unit development and maintenance of its restaurants. With a strong pipeline, the company anticipates achieving unit growth of 7% in the upcoming year.

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Zacks Investment Research


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Cheesecake Factory’s technology-enabled initiatives are doing well with feedback on its mobile payment app, CakePay, being positive. The company signed an exclusive national delivery partnership with DoorDash. It expects to reap the benefits from these collaborative marketing opportunities. The company is also witnessing incremental sales from its delivery service, which is being rolled out nationwide. It continues to improve its to-go business, including its online ordering capability. This is a major contributor to the growth of the company’s strong off-premise sales channels.

Even though the company has reopened the majority of dining rooms with limited capacity, off-premise operations continue to be a driving factor for overall sales. Off-premise sales contributed approximately 25% of the company’s restaurant sales during second-quarter fiscal 2022. Also, the off-premise sales mix remains elevated versus the pre-pandemic level of 16% (in the second quarter of fiscal 2019).

Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. TGLS, Cracker Barrel Old Country Store, Inc. CBRL and Arcos Dorados Holdings Inc. ARCO.

Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 3.5% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.

Cracker Barrel carries a Zacks Rank #2 (Buy). Cracker Barrel has a long-term earnings growth of 6.9%. Shares of the company have decreased 25.1% in the past year.

The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2. Arcos Dorados has a long-term earnings growth of 34.4%. Shares of the company have risen 32.6% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.


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