Cheesecake Factory (CAKE) Q2 Earnings Top, Revenues Lag
The Cheesecake Factory Incorporated CAKE reported second-quarter fiscal 2023 (ended Jul 4) results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same.
The bottom and the top lines increased year over year. An increase in comparable restaurant sales backed by the improving consumer demand and new restaurant openings drove the company’s performance.
However, the company is facing restaurant opening delays due to construction challenges and permit approval delays, which is likely to increase its expenses. Also, ongoing macroeconomic challenges add to the headwinds.
Following the results, the shares of the company declined 1.4% in the after-hours trading session on Aug 2.
Earnings & Revenue Discussion
In the quarter under review, the company reported adjusted earnings per share of 88 cents, beating the Zacks Consensus Estimate of 81 cents by 8.6%. The reported figure represented a 69.2% year-over-year increase.
The Cheesecake Factory Incorporated Price, Consensus and EPS Surprise
The Cheesecake Factory Incorporated price-consensus-eps-surprise-chart | The Cheesecake Factory Incorporated Quote
Total revenues of $866.2 million missed the consensus estimate of $881 million by 1.7%. However, the top line increased 4% on a year-over-year basis.
In the reported quarter, comps at Cheesecake Factory restaurants increased 1.5% year over year, compared with a rise of 4.7% in the prior-year quarter. Comps grew 14.1% from the 2019 level. Our model predicted comps at Cheesecake Factory restaurants for the quarter to increase 3.4% year over year.
Costs in Detail
The cost of food and beverage, as a percentage of revenues, decreased 130 basis points (bps) year over year to 23.2% in the fiscal second quarter. Our model predicted the metric to be 23.3% of revenues in the reporting quarter.
Labor expenses, as a percentage of total revenues, amounted to 35.3%, down 130 bps from the year-ago quarter’s levels. We expected the metric be 36.1% of revenues in the quarter.
Other operating costs, as a percentage of total revenues, were 26.2%, down 10 bps from the prior-year quarter’s level. In the quarter, we anticipated the metric to be 25.3% of revenues.
General and administrative expenses, accounted for 6.4% of revenues, up 40 bps year over year. Our model predicted the metric to be 6.2% of revenues in the fiscal second quarter.
In the fiscal second quarter, pre-opening expenses accounted for 0.7% of revenues, up 30 bps year over year.
Balance Sheet
As of Jul 4, Cheesecake Factory’s cash and cash equivalents totaled $91.6 million, compared with $115 million at the fiscal 2022 end. Long-term debt (net of issuance costs) was $475 million, on par with the fiscal 2022-end value. As of Jul 4, the company had total available liquidity of $330.1 million.
Management declared a quarterly cash dividend of 27 cents per share. The dividend will be payable on Aug 29, to shareholders of record as of Aug 16. In the fiscal second quarter, CAKE also repurchased 280,400 shares for $9.3 million.
Store Developments
In the quarter under review, Cheesecake Factory opened three new restaurants. Management expects to open 20 restaurants in fiscal 2023 along with two-three international restaurants under licensing agreements.
Zacks Rank
Cheesecake Factory currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Few Recent Retail-Wholesale Releases
Builders FirstSource BLDR reported second-quarter 2023 results wherein earnings and net sales surpassed the Zacks Consensus Estimate. However, the metric decreased on a year-over-year basis. A more stable housing environment, a strong value-added product portfolio and the positive impact of operational initiatives implemented in recent years backed the uptrend, which was partially offset by declining single-family starts and commodity deflation.
The company’s consistent focus on operational excellence, the strength of its product portfolio, continued investments in value-added products, productivity initiatives and digital solutions are expected to help navigate the challenging macroeconomic conditions.
YUM! Brands, Inc. YUM reported mixed second-quarter 2023 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same. The top and bottom lines increased on a year-over-year basis.
The company’s quarterly results reflect robust same-store sales and unit growth, resulting in the increase in revenues across its operating divisions. Worldwide system sales — excluding foreign currency translation — rose 13% year over year, with Taco Bell, KFC and Pizza Hut rising 7%, 19% and 7% year over year, respectively.
Starbucks Corporation SBUX reported mixed third-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same. The top and bottom lines increased on a year-over-year basis.
The company’s focus on the progress in the Reinvention Plan and innovative beverage and equipment rollouts bode well. Also, solid recovery in China added to the uptrend. These, in turn, resulted in growth in comparable store sales and net-new store on a year-over-year basis.
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