CALABASAS HILLS Calif. The Cheesecake Factory Inc. reported a 34.8-percent decline in fourth-quarter earnings while slashing its plans for new restaurant openings in light of what company officials described Tuesday as a “challenging economy.”
In announcing financial results for the fiscal 2007 fourth quarter ending Jan. 1, David Overton, Cheesecake Factory's chairman and chief executive, said the company plans to open between seven and nine restaurants this year, including six to eight of the namesake brand and the new concept Rock Sugar Pan Asian Kitchen, which is scheduled to open in Los Angeles. No new units of the company’s secondary Grand Lux Cafe are expected to open in fiscal 2008.
At the end of the third quarter, company officials had announced plans to open 17 restaurants in 2008, including 12 to 13 Cheesecake Factory and three to four Grand Lux Cafe units, in addition to Rock Sugar. During fiscal 2007, the company opened 21 restaurants.
Reducing the number of new openings will drive free cash flow of about $80 million to $90 million this year, which the company expects to use for additional share repurchases.
In December, the board authorized a 5 million share increase in share repurchase authorization for a total of 21 million shares. About 13.5 million have been repurchased, and the company returned about $250 million of capital to shareholders during fiscal 2007.
The company also plans to increase menu prices by 1.5 percent with the rollout of the winter menu later this month.
Consolidated same-store sales for the quarter dropped 0.4 percent, which company officials blamed on slower traffic and the impact of severe weather in some states. Same-store sales for the Cheesecake Factory brand dropped 0.6 percent, but increased about 1.9 percent for Grand Lux Cafe.
Net income for the period fell 34.8 percent to $13.3 million, or 19 cents per share, from $20.4 million, or 26 cents per share, during the same period a year ago. Revenue was up 13 percent during the quarter to $406.3 million, from $360.7 million a year ago.
The company lowered its full-year forecast, expecting revenue growth of between 10 percent and 12 percent in fiscal 2008, and diluted earnings per share growth in the range of 10 percent to 12 percent. In October, Cheesecake Factory forecast revenue growth of 14 percent to 15 percent and earnings per share growth of 22 percent to 24 percent.
During the fourth quarter, the company also recorded one-time, pre-tax charges totaling $2.6 million related to the settlement of various legal matters.
Cheesecake Factory operates 139 namesake units and 13 Grand Lux Cafes.