Recent Posts

CAKE (Post-Call): Favorable Tax Rate Doesn’t Prevent Q3 EPS Miss

After today’s (Wednesday’s) market close, The Cheesecake Factory reported adjusted Q3 EPS of $0.65, falling short of our $0.70 forecast and sell-side consensus (according to Consensus Metrix) of $0.70. We would note that Labor Expenses/Total Revenues amounted to 37.1% in Q3, as opposed to our 36.1% projection. In addition, Other Operating Costs/Total Revenues came to 26.7%, as compared to our 26.1% estimate. Management notes that higher-than-expected impacts in Q3 included group medical insurance costs, sick pay, and training expenses.

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6:29 PM

CAKE: Two Growing Opportunities for The Cheesecake Factory

There appear to be at least two growing opportunities for The Cheesecake Factory. First, ghost kitchens seem to be well-aligned with the goals of the company’s bakery business. Second, Europe represents an opportunity. We are likely getting closer than ever to the company’s opening (most probably via a licensed partner) of the first Cheesecake Factory restaurant in Europe. And even if this latter opportunity doesn’t happen any time soon, perhaps there have been some hints that the bakery business — and the “Cheesecake Factory at Home” business — are poised for rapid growth in Europe, too.

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4:56 PM

CAKE (Post-Call): Margins Coming Back as Guests Come Back

After Tuesday’s market close, The Cheesecake Factory reported adjustedQ2 EPS of $0.80, ahead of our $0.63 forecast and sell-side consensus (according to Consensus Metrix) of $0.77. Factors contributing to the Q2 EPS outperformance relative to our forecasts include: (1) Cost of Sales/Revenues 22.0% actual vs. 22.5% projected, (2) Labor Expenses/Revenues 35.7% actual vs. 36.1% projected, and (3) D&A/Revenues 2.9% actual vs. 3.3% projected.

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8:15 PM

CAKE: Updating Our Same-Store Sales and EPS Estimates

With this note, we raise our full-Q2E same-store sales forecast for brand Cheesecake Factory to +149.0% (from +142.5%). Our updated +149.0% projection implies a two-year sales figure of about +7.3% for full-Q2E. As of this writing, sell-side consensus is at +145.3% for the one-year number.

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5:00 PM

CAKE (Post-Call): Off-Premise Holding In as Guests Re-Enter Dining Rooms

After Wednesday’s market close, The Cheesecake Factory reported adjusted Q1 EPS of +$0.20. This surpassed our +$0.05 forecast and sell-side consensus (according to Consensus Metrix) of -$0.07. Factors behind the outperformance relative to our forecast include: (1) Cost of Sales/Revenues (21.7% actual vs. 22.7% forecasted), (2) Labor Expenses/Revenues (36.6% actual vs. 37.7% projected, and (3) D&A/Revenues (3.5% actual vs. 3.8% estimated), partially offset by (1) Other Operating Expenses/ Revenues (28.2% actual vs. 27.7% forecasted), and (2) G&A/Revenues (7.1% actual vs. 6.8% forecasted).

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1:03 PM

Casual Dining Market Share Opportunities for Large Concepts

About six months ago, we published a report examining market-share opportunities within the casual dining sector. In this report, we update our numbers. One of the important changes is that we now look for 8%-20% of the casual dining restaurants in the U.S. that were in operation as of the start of 2020 to be closed permanently by the end of March 2021. (Previously, we were looking for 3%-15% of casual dining restaurants to be closed permanently by the end of December 2020.) Keep in mind that we expect these closures to be heavily weighted toward independents/momand-pops and, to a somewhat lesser degree, smaller (privately-held in nearly all cases) restaurant chains.

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12:00 AM

Updating our Q4E Kalinowski Casual Dining Same-Store Sales Index

With this report, we update our data-driven Kalinowski Casual Dining Index for Q4E to -18.4%. This figure is based on our latest proprietary checks/data as regards samestore sales performance for this segment during October and November. Our implied numbers for these October, November, and December are approximately -14%, -19%, and -22%, respectively.

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12:00 AM

Updating our Q3E Kalinowski Casual Dining Same-Store Sales Index

With this report, we update our data-driven Kalinowski Casual Dining Index for Q3E to -19.6%. This figure is based on our latest proprietary checks/data as regards same-store sales performance for this segment during July, August, and September. Our implied numbers for these three months are about -24%, -19%, and -16%, respectively.

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12:00 AM

CAKE (Post-Call) Brand CAKE Same-Store Sales for July 1-26 about -32%

After today’s market close, The Cheesecake Factory (CAKE; Neutral, $26.57) reported adjusted Q2 EPS of -$0.87, better than our -$1.00 forecast and sell-side consensus (according to Consensus Metrix) of -$1.09. The diluted share count used in the calculation is about 52.8 million, quite different from our 46.4 million estimate and consensus of 46.5 million. The reason for the higher actual “Represents the impact of assuming the conversion of preferred stock into common stock (8,996,851 shares).” Excluding this effect, adjusted Q2 EPS would have been about -$1.05, according to our calculations. CAKE shares were up by about +4.9% in today’s regular trading session, and may give back a bit of that in tomorrow’s trading.

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12:00 AM

CAKE Could Minimum-Wage Increases Hurt More than Usual in 2021

Given risks to The Cheesecake Factory’s (CAKE; Neutral, $20.57) labor costs — as little-to-no states and local municipalities appear willing to budge on planned minimum-wage hikes, despite extraordinary economic challenges facing the U.S. restaurant industry (and especially full-service restaurants) — we lower our 2020E and 2021E EPS estimates for the company by -20 cents and -35 cents, respectively, to -$1.40 and +$1.05. In our coverage list the company most likely to be affected due to the minimum-wage factor remains The Cheesecake Factory, which owns and operates all 200+ of its namesake restaurants in the U.S.

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12:00 AM

CAKE Cheesecake Factory Desserts Available from Multiple Ghost Kitchens

A company called Ghost Kitchens is offering desserts from The Cheesecake Factory (CAKE; Neutral, $19.97) Bakery from at least five different locations in Canada, Kalinowski Equity Research LLC has learned. For example, the following is listed on DoorDash’s website in Calgary, Alberta, Canada:
GHOST KITCHENS PRESENTS CHEESECAKE FACTORY BAKERY

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12:00 AM

CAKE Updating our Same-Store Sales and EPS Estimates for 2020E & 2021E

We lower our U.S. same-store sales estimates for The Cheesecake Factory (CAKE; Neutral) as follows:
Q1E 2020: down by -23 percentage points to -21.0%
Q2E 2020: down by -51.5 percentage points to -50%
Q3E 2020: down by -26.5 percentage points to -25%
Q4E 2020: down by -16.5 percentage points to -15%
Full-year 2020E: down by -29.4 percentage points to -27.8%
Full-year 2021E: up by +8.5 percentage points to +10.0%

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12:00 AM

CAKE Highlights from Our Conference Call Featuring The Cheesecake Factory

This past Thursday afternoon, we hosted the latest in our “Ask the Experts” series of conference calls, this time around with featured speakers from The Cheesecake Factory: Executive Vice President and Chief Financial Officer (CFO) Matt Clark, and Senior Director, Investor Relations Stacy Feit. Here are some brief highlights from this call:

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12:00 AM

CAKE Ask the Experts Call Series The Cheesecake Factory

Kalinowski Equity Research invites you to participate in our latest “Ask the Experts” conference call, to take place on Thursday, March 5th starting at 2:00 PM Eastern time. The featured speakers will be The Cheesecake Factory’s Executive Vice President and Chief Financial Officer (CFO) Matt Clark, and Senior Director, Investor Relations Stacy Feit.

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12:00 AM

CAKE (Post-Call) Lots of Moving Pieces, But the Overall Cake Looks A-OK

Kalinowski Equity Research invites you to participate in our latest “Ask the Experts” conference call, to take place on Thursday, March 5th starting at 2:00 PM Eastern time. The featured speakers will be The Cheesecake Factory’s Executive Vice President and Chief Financial Officer (CFO) Matt Clark, and Senior Director, Investor Relations Stacy Feit.

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12:00 AM

CAKE “Ask the Experts” Call Series The Cheesecake Factory

Kalinowski Equity Research invites you to participate in our latest “Ask the Experts” conference call, to take place on Thursday, March 5th starting at 2:00 PM Eastern time. The featured speakers will be The Cheesecake Factory’s Executive Vice President and Chief Financial Officer (CFO) Matt Clark, and Senior Director, Investor Relations Stacy Feit.

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12:00 AM

CAKE (Post-Call) Baking Up an Evolving Company

After today’s (Tuesday’s) market close, The Cheesecake Factory (CAKE; Neutral) reported adjusted Q3 EPS of $0.59, coming in ahead of our $0.55 forecast and sellside consensus (according to Consensus Metrix) of $0.55. We attribute the betterthan-expected earnings to favorable Cost of Sales/Revenues (22.7% actual vs. 23.4% forecasted).

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12:00 AM

CAKE Updating Introducing EPS Estimates Macau and New Menu Items

With this report, we reduce our Q3E same-store sales forecast for brand Cheesecake Factory (CAKE; Neutral) by -30 basis points, to +0.2%, placing us as the low forecast on the sell-side according to Consensus Metrix data. Our adjustment reflects weak casual-dining sector same-store sales trends for July and August, partially offset by The Cheesecake Factory’s relatively healthier brand (destination status) within casual dining. Our Q3E EPS estimate goes down by $0.01 to $0.55, placing us in line with consensus. We also take down our Q4E EPS estimate by $0.01 (to $0.64), and reduce our full-year 2019E EPS projection by $0.02, to $2.63.

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12:00 AM

Are Protein Costs Poised to Accelerate Over 2019-21

African Swine Fever (ASF) is spreading rapidly not only in China — where it seems as many hogs have been culled from herds in that country as there are born in the entire United States in any given year — but also in other parts of Asia, not to mention parts of Europe. Based on our conversations with suppliers to the restaurant industry, and also with privately-held restaurant companies, we believe that commodity-cost risks over the next 1-3 years from proteins may be higher than the Street currently anticipates. The sources of this are many, including: (1) uncertainty regarding just how massive the ASF issue is in China, (2) the time it will take to replenish swine supplies in China — the time from gestation to slaughter is typically more than 30 months, and (3) the not-zero possibility that ASF could make its way to the United States, although efforts are being made on multiple fronts to prevent that from happening. As many involved note, the situation regarding ASF remains fast-moving and difficult to quantify.

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12:00 AM

Introducing our Q1E19 Kalinowski Casual Dining Index

With this report, we introduce our data-driven Kalinowski Casual Dining Index for Q1E at +1.9%. This figure is based on our latest proprietary checks/data as regards samestore sales performance for this segment during January 2019 and most of February 2019.

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12:00 AM

CAKE (Post-Call) The Compass at the Factory Points Toward North Italia

After today’s (Wednesday’s) market close, The Cheesecake Factory (CAKE; Neutral) reported Q4 2018 adjusted EPS of $0.60, a bit short of our $0.63 forecast and sellside consensus (according to Consensus Metrix) of $0.62. We attribute the shortfall to about $2.1 million in the “Loss on investment in unconsolidated affiliates” line, which on an EPS basis hampered Q4 EPS by about -$0.04.

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12:00 AM

Restaurants The Set-Up into the Print re CAKE, WEN, DIN, DPZ, and PZZA

A number of restaurant companies are scheduled to report quarterly earnings over the February 20-26 time frame, including The Cheesecake Factory (CAKE; Neutral), Wendy’s (WEN; Neutral), Dine Brands (DIN; Buy), Domino’s (DPZ; Buy), and Papa John’s (PZZA; Neutral). In this report, we look at the set-up into the print for each of these five companies:

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12:00 AM

Updating our Q4E19 Kalinowski Casual Dining Same-Store Sales Index (Again)

With this report, we (again) raise our data-driven Kalinowski Casual Dining Index for Q4E, this time around from +2.1% to +3.1%. This 100 basis-point increase is based on our latest proprietary checks/data as regards same-store sales performance for this segment during the second half of November and all of December. (We had previously increased our Kalinowski Casual Dining Index for Q4E from +1.6% to +2.1% back on December 4th.)

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12:00 AM

CAKE Updating Our Q4E Forecasts Ahead of 2.20 Earnings Release

Ahead of The Cheesecake Factory’s (CAKE; Neutral) fourth-quarter earnings release scheduled for after the market close on Wednesday, February 20th, we bump up our Q4 2018 same-store sales forecast for brand Cheesecake Factory by +60 basis points to a new sell-side high projection (according to Consensus Metrix data) of +1.6%. Sell-side consensus as of this writing is at +1.0%.

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12:00 AM

Tidbits re MCD, Luckin Coffee, CAKE, and DNKN

We briefly note the following tidbits regarding McDonald’s (MCD; Buy), privatelyheld Luckin Coffee, The Cheesecake Factory (CAKE; Neutral), and Dunkin’ (owned by Dunkin’ Brands Group [DNKN; Neutral]):

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12:00 AM

Updating our Q4E18 Kalinowski Casual Dining Same-Store Sales Index

With this report, we update our data-driven Kalinowski Casual Dining Index for Q4E from +1.6% to +2.1%. This 50 basis-point increase is based on our latest proprietary checks/data as regards same-store sales performance so far for this segment during October and the first half of November.

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12:00 AM

CAKE Our Meeting with Management in Calabasas

We recently met with The Cheesecake Factory (CAKE; Neutral) — including CFO Matthew Clark; Senior Director, Investor Relations Stacy Feit; and Senior Financial Analyst, Investor Relations Heather Livingston — in Calabasas, California. We thank them for their time! Topics of interest that we asked about include North Italia (an acquisition of which could transform the company quite meaningfully) and wage inflation (particularly important for a company which owns and operates 100% of its U.S. restaurants). We maintain our Neutral rating on CAKE, and note the following:

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12:00 AM

CAKE (Post-Call) Q3 Same-Store Sales a Little Less Fluffy Than Expected

After Tuesday’s market close, The Cheesecake Factory (CAKE; Neutral) reported Q3 adjusted EPS of $0.62, ahead of our $0.57 forecast and the sell-side consensus of $0.58, as measured by Consensus Metrix. By our math, a lower-than-expected tax rate (5.9% actual vs. 12.9% forecasted) helped Q3 EPS by about $0.04-$0.05.

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12:00 AM
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