雅虎香港財經 Here's Why You Should Retain Cheesecake Factory (CAKE) Stock
The Cheesecake Factory Incorporated CAKE is likely to benefit from strong comps growth, its rewards program and FRC-related differentiated concepts. The focus on unit-expansion efforts bodes well. However, uncertain macroeconomic environments are a concern.
Let us discuss the factors that highlight why investors should retain the stock for now.
Factors Driving Growth
Cheesecake Factory is benefiting from impressive comps performance. In the fiscal fourth quarter, comps at Cheesecake Factory restaurants rose 2.5% year over year (lower than our expectation of 4% growth) compared with 4% in the prior-year quarter. Comps rose 14% from 2019 levels. The upside was driven by improved traffic and a favorable menu mix. North Italia comps rose 7% year over year compared with 9% in the year-ago quarter. The metric increased 34% compared with 2019 levels. For the 52-week ended Jan 2, 2024, comps at Cheesecake Factory restaurants increased 3% year over year compared with 7% growth reported a year ago. Given the elevated incident rates and traffic improvements, the momentum is likely to continue in the upcoming period.
Increased focus on the Cheesecake rewards program bodes well. During the fiscal fourth quarter, the company reported increased member activity and engagement levels. The company stated progress in terms of the development of the program. Ongoing tests are being conducted on acquisition strategies and activation campaigns to discern the elements resonating with reward members. The company is optimistic and anticipates the initiatives to boost membership enrollment and engagement and drive frequency in the upcoming periods.
The company emphasizes FRC-related differentiated concepts and emerging brands to drive growth. The company's Culinary Dropout and Blanco serve collectively as an ecosystem for talent, menu and design enhancement. There are 41 other FRC locations in operation. On average, sales per location for the fiscal 2023 stood at $6.5 million for other FRC restaurants. The company targets an average FRC unit size ranging from 3,500 to 15,000 square feet, with total construction costs averaging around $650 per interior square foot, depending on the specific concept. The company aims for an average annual unit growth of 10-15% for the entire other FRC portfolio, supplemented by market tests for potential growth concepts.
Cheesecake Factory continues to focus on the development front to drive growth. During fourth-quarter fiscal 2023, the company opened nine new restaurants and registered solid demand. The openings included three Cheesecake Factory restaurants, three North Italia restaurants and three FRC restaurants. Internationally, the company opened two Cheesecake Factory restaurants under licensing agreements in China and Thailand. Subsequent to quarter-end, the company opened one North Italia restaurant, one Flower Child, one Culinary Dropout and one Cheesecake Factory restaurant (internationally under a licensing agreement in Mexico).
For the fiscal 2024, the company intends to open up to 22 new restaurants. This includes the potential opening of three to four Cheesecake Factory outlets, six to seven North Italia establishments, six to seven Flower Child locations and six to FRC restaurants.
Concerns
Image Source: Zacks Investment Research
Cheesecake Factory’s shares have declined 4.7% in the past three months against the industry’s growth of 1.6%. A volatile macroeconomic environment primarily caused the downside.
During the fiscal fourth quarter, the company’s performance was impacted by lingering macroeconomic challenges. During the quarter, the company reported delays in opening new restaurants due to supply chain challenges and delays in permitting, construction, landlord readiness and equipment availability. This and commodity inflation added to the negatives. The company is cautious about the ongoing uncertain macroeconomic environment. It anticipates these headwinds to persist for some time.
Zacks Rank & Key Picks
Cheesecake Factory currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Brinker International, Inc. EAT sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have surged 30.7% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) indicates 4.9% and 30.7% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. TXRH carries a Zacks Rank #2 (Buy). It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 45.3% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14% and 25.1%, respectively, from the year-ago period’s levels.
Shake Shack Inc. SHAK carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. SHAK’s shares have surged 91.7% in the past year.
'The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.
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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
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Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
