Cheesecake Factory earnings miss, same-store sales boosted by higher menu prices
Cheesecake Factory (CAKE) posted Q4 2022 earnings on Wednesday, February 22, that missed expectations, sending shares lower after market close.
Results from the restaurant chain, which is behind brands Cheesecake Factory, North Italia, and Flower Child, came in lower than analysts expected as consumers' continue to feel the sting of inflation yet remain eager to spend at restaurants. Same-store sales for the quarter increased by 4%. Other areas of interest to analysts this quarter include off-premise sales (digital and delivery), labor improvements, and menu pricing, among others.
Here's what Cheesecake Factory reported, compared to Wall Street estimates, per Bloomberg consensus estimates:
Revenue: $892.8 million versus $901.86 million expected
Adjusted earnings per share: $0.56 versus $0.59 expected
Chairman and CEO David Overton called the fourth-quarter's performance overall a "solid finish to a challenging year marked by persistent inflation, volatility and a dynamic operating environment."
In the quarter, the company opened 8 new restaurants, including two Cheesecake Factories, two North Italia, and two Flower Child locations. Flower Child also opened a new concept, Pushing Daises, in Nashville, Tennessee, and Cheesecake Factory opened a location in Mexico under a licensing agreement.
He added, "We believe the strong consumer demand we experienced at our new restaurant openings and continued positive sales trends following our pricing actions demonstrate the strength and resilience of our concepts."
Prior to the pandemic, the company saw sales at The Cheesecake Factory restaurants increase by 11.4%. So far in the first-quarter of 2023, same-store sales are up nearly 9.5% year-over-year and 17.0% compared to 2019.
Overton said in the release that company plans to "remain intently focused on effectively managing through higher costs and potential macro headwinds" with the momentum from strong consumer demand "to protect our longterm sales and margins."
Year-to-date shares are up 25.4% despite multiple downgrades from Wall Street analysts.
Last month, Citi downgraded shares of The Cheesecake Factory from a Buy to Neutral rating. In a note to investors, "Hold The Dessert – D/G To Neutral from Buy - Altering Our Alpha Diet for 2023," analyst Jon Tower said that inflation and "no incremental plans" to tackle these higher costs make it hard to gauge how the casual chain plans to grow its bottom line.
This quarter Tower, who has a price target of $39.00, is keeping an eye the high-income consumer that may be looking to trade down at their next outing, pointing to recent strength from competitor Darden International's recent quarter report, which saw "record sales for Season’s 52 and Fine Dining over Thanksgiving."
Steadying inflation, particularly in dairy, is in focus for Tower too. "Dairy prices are off the boil with Class I/Class III Milk/Butter down mid-teens, ~20% and ~25% (respectively) from highs," he said in a note.
Another ding came from UBS analyst Dennis Geiger, who downgraded shares from Neutral to Sell.
—
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
