Cheesecake Factory profit, sales rise in 1Q

The Cheesecake Factory Inc. reported Wednesday a 22-percent increase in net income for the first quarter, saying its brands benefited from an early Easter and spring break.

David Overton, The Cheesecake Factory Inc.’s chair and chief executive, said sales growth has remained consistent, despite storms in the Northeast earlier this year and volatility reported by others in the industry.

“This first quarter marks our 13th consecutive quarter of positive [same-store] sales,” he said. “We again outperformed the casual-dining industry in spite of the impact of the storms in the Northeast, and we achieved the high end of our expectation.”

For the April 2-ended quarter, the company recorded net income of $25.3 million, or 47 cents per share, compared with $20.7 million, or 37 cents per share, a year ago.

The recent quarter included pre-tax charges of about $644,000 related to the previously announced closure of three Grand Lux Café units, which decreased earnings by about 1 cent per share.

Revenues grew 6 percent to $463 million, compared with $435.8 million a year ago.

Same-store sales rose 1.6 percent for The Cheesecake Factory brand, but declined 0.9 percent at sister brand Grand Lux Café. Systemwide, same-store sales rose 1.4 percent, which included 1.8 percent in menu price increases.

Traffic levels fell 0.4 percent. Without the impact of the blizzard that hit the Northeast, however, traffic would have been flat to slightly positive for the quarter, resulting in same-store sales that would have risen 2 percent, said Douglas Benn, the company’s chief financial officer and executive vice president.

The Cheesecake Factory is recapturing traffic lost after the recession, and the company is looking for ways to build guest counts during the “shoulder” dayparts between lunch and dinner and later in the evenings, Benn said.

Overton, however, said the recession may have changed things for good in terms of consumer behavior — which is why the company is more focused on the bottom line “versus worrying so much about every guest.”
 
“Credit has dried up. People are using cash. They’re not living on credit that they think they’re going to get out of their house," he said. "It may always been a little bit different, unless that changes.”  

Overton continued, “So, to get your profit level up and to run your business well, I think, is more important than worrying about the peak traffic levels, because the economy has changed.”

Over the past four years, The Cheesecake Factory Inc. has improved operating margins by 2.6 percent, or 260 basis points, Benn said, and the company is expecting to return to peak margin levels this year with help from the strength of international units showing higher-than-expected volumes and improved cost of sales.

The company said commodity inflation is expected to rise 2.5 percent for 2013, lower than the 3 percent previously projected. Still, the company is working on improving food efficiencies by reducing waste, Benn said.

The chain’s international expansion will also likely play a bigger role in margin expansion than previously thought, Benn said. The company recently announced an agreement to bring 12 locations to Mexico and Chile over eight years, which could open the brand to more countries in South America.

The three units in the Middle East are performing well, said Overton, and another three are expected to open internationally this year. The company plans to open eight to 10 restaurants domestically in 2013.

For the second quarter, the company is projecting earnings per share between 55 cents and 57 cents, based on a projected same-store-sales increase of between 1 percent and 2 percent.

For the year, earnings estimates are $2.12 to $2.18, with same-store sales expected to increase between 1.5 percent and 2.5 percent. Earlier, the company had estimated earnings for the year between $2.10 and $2.18.

In addition to the 162 Cheesecake Factory locations in the U.S. and 11 Grand Lux Cafes, the company operates one RockSugar Pan Asian Kitchen.

Contact Lisa Jennings at [email protected].
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