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Cheesecake Factory (CAKE) Q1 Earnings Top, Sales Lag Estimates

Zacks Equity Research

The Cheesecake Factory Incorporated CAKE reported mixed first-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues fell short of the same. While the bottom line outpaced the estimate after missing the same in fourth-quarter 2018, the top line lagged the consensus mark for the third consecutive quarter.

Adjusted earnings came in at 62 cents per share, exceeding the Zacks Consensus Estimate of 60 cents. The bottom line also improved 10.7% from the prior-year quarter number.

Earnings and revenues in the quarter under review were driven by comps growth at the Cheesecake Factory restaurants. The company’s sales-building initiatives as well as cost containment also provided a boost to the company’s quarterly results.

Shares of the company increased 4.2% in the after-hours trading, following Cheesecake Factory’s performance in the first quarter of 2019.

Let’s take a closer look at the numbers.

Detailed Revenue Discussion

Total revenues of $599.5 million in the reported quarter missed the consensus estimate of $602 million. However, the top line improved 2.5% year over year on the back of increased comparable sales.

While comps at Cheesecake Factory restaurants increased 1.3%, the same rose 2.1% in the year-ago quarter.

The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise

The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise | The Cheesecake Factory Incorporated Quote

Costs in Detail

Cost of sales ratio decreased 30 basis points (bps) year over year to 22.7%. Meanwhile, labor expense ratio was 36.2%, up 40 bps from the year-ago quarter.

Other operating costs were 25.6% of revenues, up 80 bps from the year-ago quarter. General and administrative (G&A) expenses accounted for 6.5% of revenues, down 20 bps from the prior-year quarter. Notably, pre-opening expenses increased 20 bps year over year to 0.4% in the first quarter.

Balance Sheet

As of Apr 2, 2019, cash and cash equivalents totaled $22.5 million compared with $26.6 million as of Jan 1, 2019.

In the first quarter of 2019, Cheesecake Factory repurchased approximately 246,000 shares of its common stock for $11.1 million. In 2018, the company bought back approximately 2.3 million shares of its common stock for $109.3 million.

The company’s board of directors declared a quarterly cash dividend of 33 cents per share of the common stock. The dividend is payable May 29, 2019, to its shareholders of record at the close of business on May 16, 2019.

Development Details

In fiscal 2019, Cheesecake Factory is likely to open six Cheesecake Factory restaurants, which include an opening in Oxnard, CA, during April.

Q2 Outlook

For the second quarter, adjusted earnings per share are estimated to be 80-84 cents based on anticipated comps of 1.5-2.5% at Cheesecake Factory restaurants. Comps are expected to have a positive impact of about 50 bps from the shift of Easter and the associated spring break vacations. The Zacks Consensus Estimate for second-quarter earnings is pegged at 77 cents.

Fiscal 2019 Guidance

Cheesecake Factory expects earnings of $2.58-$2.70 per share for 2019. The Zacks Consensus Estimate for current-year earnings is pegged at $2.62, below the midpoint of the company’s guided range. Meanwhile, the company expects comps to grow 1-2%.

Food and wage inflations in 2019 are expected to be up 1-2% and 6%, respectively.

For 2019, Cheesecake Factory continues to expect capital expenditure between $90 million and $100 million.

Zacks Rank & Peer Releases

Cheesecake Factory has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Darden DRI reported third-quarter fiscal 2019 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.80 per share beat the Zacks Consensus Estimate of $1.75. The bottom line also increased 5.3% year over year on the back of higher revenues.

Chipotle CMG reported better-than-expected results in the first quarter of 2019. Adjusted earnings of $3.40 per share surpassed the Zacks Consensus Estimate of $3.01 by 13%. The bottom line also grew 59.6% from the year-ago quarter figure backed by increased revenues and lower food costs.

Domino’s DPZ reported mixed first-quarter 2019 financial numbers, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $2.20 per share surpassed the Zacks Consensus Estimate of $2.07 and increased 10% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.

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