On Jun 27, we issued an updated research report on The Cheesecake Factory Incorporated CAKE.
The company operates through two segments, The Cheesecake Factory and Other (includes Grand Lux cafe, outside bakery sales, international licensing).
Notably, Cheesecake Factory restaurants have posted positive comps in 25 consequent quarters. Going forward, various initiatives to boost sales and traffic volumes like roll out of an improved server training program and its mobile payment app coupled with menu innovation should aid in keeping up the trend of positive comps.
Meanwhile, despite challenging economic conditions, Cheesecake Factory has been expanding in the domestic as well as international markets. In 2016, the company plans to open eight company-owned restaurants along with four to five restaurants internationally under licensing agreements.
Also, the company recently launched a Cheesecake Factory outlet at the Shanghai Disney Resort – marking the company’s entry into China, East Asia, a region known for its economic growth and healthy investment returns. The region boasts a relatively younger population and a growing middle class with higher disposable income. Therefore, entry into this market will further boost traffic and comps.
Moreover, the company is evaluating different approaches to limit its costs and has installed a cost management system a few years ago to help analyze usage and waste, which should boost margins. Further, Cheesecake Factory continuously returns wealth to shareholders via dividends and share repurchases.
However, as the company strives to expand its presence worldwide, pre-opening expenses would raise costs and hurt margins. Moreover, soft consumer spending and continued sluggish performance of theGrand Lux café brand raise concern.
Zacks Rank & Stocks to Consider
Cheesecake Factory currently has a Zacks Rank #2 (Buy). Other stocks worth considering in this sector include Dave & Buster's Entertainment, Inc. PLAY, Famous Dave's of America Inc. DAVE and Carrols Restaurant Group, Inc. TAST. All the three stocks sport a Zacks Rank #1 (Strong Buy).
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