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 Flower Child performance, its rewards program and unit-expansion efforts. This and the focus on FRC concepts and emerging brands bode well. However, labor and commodity inflation is a concern.
Let us discuss the factors that highlight why investors should retain the stock for now.
Factors Driving Growth
Cheesecake Factory focuses on Flower Child restaurants to drive growth. In the fiscal first quarter, the company reported strong comparable sales and demand trends at newer locations for Flower Child. In the past 18 months, the company successfully implemented several operational and supply chain improvements to enhance the guest experience and drive cost efficiencies. The improvements include the introduction of a kitchen display system across all restaurants (leading to better order throughput and operational efficiencies) and the replacement of the loyalty platform with a more scalable solution.
During the fiscal first quarter, Flower Child sales increased 10.2% year over year to $34.5 million. Given the strong consumer demand, an attractive unit economic profile and solid infrastructure support, the company is optimistic about accelerating growth in upcoming periods.
Increased focus on the Cheesecake rewards program bodes well. During the reported quarter, the company registered increased member activity and engagement levels. CAKE 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 upcoming periods.
Cheesecake Factory continues to focus on the development front to drive growth. Subsequent to the quarter-end, the company opened one Cheesecake Factory restaurant internationally under a licensing agreement in Asia. In the fiscal 2024, the management expects to open 22 new restaurants. This includes three to four Cheesecake factories, six to seven North Italia's, six to seven Flower Child and six to seven FRC restaurants.
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. The company targets an average FRC unit size ranging from 3,500 to 15,000 square feet. It aims for an average annual unit growth of 10-15% for the entire other FRC portfolio, supplemented by market tests for potential growth concepts.
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In the past three months, Cheesecake Factory’s shares have increased 7.1% against the industry’s 6.4% fall.
Concerns
Cheesecake Factory has been bearing the brunt of high expenses for quite some time. During the said quarter, labor costs came in at $320.9 million compared with $311.5 million reported in the prior-year quarter. General and administrative expenses during the quarter came in at $60.4 million compared with $54 million reported in the prior-year quarter. The company anticipates cost pressures to persist for some time.
For second-quarter fiscal 2024, the company anticipates commodity to be in the low-single-digit range and labor inflation in the mid-single-digit range. The company expects general and administrative expenses in the fiscal first quarter to be approximately $58 million.
Zacks Rank & Key Picks
Cheesecake Factory currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Wingstop Inc. WING sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter negative earnings surprise of 21.4%, on average. The stock has surged 93.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WING’s 2024 sales and earnings per share (EPS) suggests a rise of 27.5% and 36.7%, respectively, from the year-ago levels.
Brinker International, Inc. EAT carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 213.4%, on average. EAT’s shares have risen 82.1% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates 5% and 39.2% growth, respectively, from the year-earlier actuals.
El Pollo Loco Holdings, Inc. LOCO carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 19.4%, on average. LOCO’s shares have risen 13.6% in the past year.
The Zacks Consensus Estimate for LOCO’s 2025 sales and EPS indicates 3.8% and 9.4% growth, respectively, from the prior-year figures.
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Wingstop Inc. (WING) : Free Stock Analysis Report
