Cheesecake Factory: 2Q traffic slump tied to weather

The Cheesecake Factory Inc. said on Wednesday that this summer’s heat wave and heavy rains in some regions hindered use of the chain’s patios, which contributed to traffic declines in the second quarter.

Choppiness in industrywide sales also may have been a factor, according to officials.

The company downgraded its outlook for the year, projecting a same-store-sales increase of between 1 percent and 1.5 percent, compared with estimates of an increase between 1.5 percent and 2.5 percent projected earlier.

In a call with Wall Street analysts following the report of somewhat flat earnings for the July 2-ended quarter, Cheesecake Factory officials said the chains’ systemwide same-store sales rose 0.8 percent despite a 1-percent decline in traffic. That decline was offset by a 1.8-percent increase in average check resulting in part from menu price increases earlier in the year.

Company executives said industrywide same-store sales appeared to have decreased 2 percent in June, though The Cheesecake Factory’s sales remained positive that month, beating industry trends.

Still, Douglas Benn, the company’s chief financial officer and executive vice president, noted that the economic softness appears to be temporary and economists are predicting a stronger second half of the year.

“Consumers, at least temporarily, are cautious about spending their discretionary dollars, at least for now,” he said. “However, they are buying cars. They are buying houses. We think it’s more of a blip. So we are not going to overreact to anything that we see going on in the industry in the short term.”

Meanwhile, The Cheesecake Factory is continuing to grow its business overseas.

In addition to eight to 10 new restaurants planned in the U.S. and Puerto Rico, including two relocations, the company expects to add a fourth licensed unit in the Middle East this year, and the first restaurant in Mexico City is under construction.

Though some analysts downgraded their expectations for the Calabasas Hills, Calif.-based chain, Stephen Anderson of Miller Tabak + Co. LLC expects a rebound in the second half of the year.

“In our view, The Cheesecake Factory is not immune to the June-July slowdown in casual dining, but we think it will continue to fare better than its peers,” he wrote in a report Thursday, noting that both The Cheesecake Factory and sister brand Grand Lux Café performed better than the Knapp-Track index, which tracks same-store sales in the casual-dining segment.

Anderson said the continued decline in unemployment rates, perhaps more than other indicators, would result in acceleration in same-store restaurant sales. “We still contend the combination of market-share gains and traffic increases from an improved macroeconomic environment will result in an acceleration of comps into the 2 percent to 3 percent range before the end of 2013,” he wrote.

Contact Lisa Jennings at [email protected].
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