The Cheesecake Factory (NASDAQ:CAKE) Reports Sales Below Analyst Estimates In Q3 Earnings, Stock Drops
Restaurant company Cheesecake Factory (NASDAQ:CAKE) fell short of analysts' expectations in Q3 FY2023, with revenue up 5.89% year on year to $830.2 million. Turning to EPS, The Cheesecake Factory made a non-GAAP profit of $0.39 per share, improving from its loss of $0.03 per share in the same quarter last year.
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The Cheesecake Factory (CAKE) Q3 FY2023 Highlights:
Revenue: $830.2 million vs analyst estimates of $842.3 million (1.43% miss)
EPS (non-GAAP): $0.39 vs analyst expectations of $0.42 (6.97% miss)
Gross Margin (GAAP): 40.2%, up from 37.4% in the same quarter last year
Same-Store Sales were up 2.4% year on year (miss vs. expectations of up 3.7% year on year)
Store Locations: 323 at quarter end, increasing by 9 over the last 12 months
“Our third quarter results reflect positive sales trends, as we continued to outperform the broader casual dining industry led by solid comparable sales growth at The Cheesecake Factory restaurants,” said David Overton, Chairman and Chief Executive Officer.
Celebrated for its delicious (and free) brown bread, gigantic portions, and delectable desserts, Cheesecake Factory (NASDAQ:CAKE) is an iconic American restaurant chain that also owns and operates a portfolio of separate restaurant brands.
Sit-Down Dining
Sit-down restaurants offer a complete dining experience with table service. These establishments span various cuisines and are renowned for their warm hospitality and welcoming ambiance, making them perfect for family gatherings, special occasions, or simply unwinding. Their extensive menus range from appetizers to indulgent desserts and wines and cocktails. This space is extremely fragmented and competition includes everything from publicly-traded companies owning multiple chains to single-location mom-and-pop restaurants.
Sales Growth
The Cheesecake Factory is one of the larger restaurant chains in the industry and benefits from a strong brand, giving it customer mindshare and influence over purchasing decisions.
As you can see below, the company's annualized revenue growth rate of 9.84% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new restaurants and grew sales at existing, established dining locations.
This quarter, The Cheesecake Factory's revenue grew 5.89% year on year to $830.2 million, missing analysts' expectations. Looking ahead, the analysts covering the company expect sales to grow 5.75% over the next 12 months.
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Number of Stores
When a chain like The Cheesecake Factory is opening new restaurants, it usually means it's investing for growth because there's healthy demand for its meals and there are markets where the concept has few or no locations. The Cheesecake Factory's restaurant count increased by 9, or 2.87%, over the last 12 months to 323 locations in the most recently reported quarter.
Over the last two years, The Cheesecake Factory has opened new restaurants and averaged 3.25% annual growth in new locations, higher than other restaurant businesses. Comparisons, however, should be taken with a grain of salt as the industry is quite mature. Analyzing a restaurant's location growth is important because expansion means The Cheesecake Factory has more opportunities to feed customers and generate sales.
Same-Store Sales
A company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.
The Cheesecake Factory's demand has outpaced the broader restaurant sector over the last eight quarters. On average, the company has grown its same-store sales by a robust 9.24% year on year. With positive same-store sales growth amid an increasing number of restaurants, The Cheesecake Factory is reaching more diners and growing sales.
In the latest quarter, The Cheesecake Factory's same-store sales rose 2.4% year on year. This growth was an acceleration from the 1.1% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from The Cheesecake Factory's Q3 Results
Revenue missed by a bit but alternate topline metric ARR beat. Profitability was also better. With regards to guidance, revenue guidance for next quarter and next year were slightly below, but the company raised its net income forecast for the year, which is a positive. Overall, this was a mixed quarter for SEMrush. The stock is up 1.97% after reporting and currently trades at $7.76 per share.
The Cheesecake Factory may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
