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Cheesecake Factory Rises More Than 7% on Business Update

Zacks Equity Research
·3 min read

The Cheesecake Factory Incorporated CAKE recently announced a business update, sending its shares up 7.4% during after-hours trading on Jun 2.

The company announced that approximately 25% of its restaurants across its concepts have reopened dining rooms with limited capacity in accordance with local mandates. Notably, the restaurants have recaptured approximately 75% of prior-year sales levels (on average), reflecting continued strength in off-premise sales and dine-in business. Currently, the company is generating weekly off-premise sales on average of nearly $4 million per unit, on an annualized basis.

Going forward, the company expects to reopen 65% of Cheesecake Factory dining rooms across its concepts, with limited capacity, by mid-June. This includes an anticipated 124 Cheesecake Factory restaurants. However, the re-openings are subject to any closures caused by further demonstrations and other factors related to the ongoing global crisis.

However, the restaurant industry has been facing declining traffic for quite some time now. We believe the coronavirus outbreak will further hurt traffic and sales in the coming quarter. The company announced that comps since the start of the second quarter through May 31, 2020 were down 63%. The downside was due to the full or partial closure of 87 restaurants across the United States to contain the spread of the virus.

Last month, it reported preliminary first-quarter fiscal 2020 results, wherein both the top and the bottom line beat the Zacks Consensus Estimate. However, the metrics declined sharply year over year due to the coronavirus pandemic. Moreover, in view of the ongoing crisis, the company has suspended its share repurchase activity, dividend payment program and new unit developments.

So far this year, shares of Cheesecake Factory have plummeted 46%, compared with the industry’s decline of 6.7%.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Retail-Wholesale sector are Sprouts Farmers Market, Inc. SFM, Domino's Pizza, Inc. DPZ and Yum China Holdings, Inc. YUMC. Sprouts Farmers sports a Zacks Rank #1, while Domino's and Yum China carry a Zacks Rank #2 (Buy).

Sprouts Farmers has a three-five year earnings per share growth rate of 4.4%.

Domino's has a trailing four-quarter positive earnings surprise of 12.7%, on average. The company’s earnings beat the Zacks Consensus Estimate in the last four quarters.

Earnings in 2021 for Yum China are expected to surge 79.2%.

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Click to get this free report Dominos Pizza Inc (DPZ) : Free Stock Analysis Report The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report Yum China Holdings Inc. (YUMC) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research