Cheesecake Factory Beats

The Cheesecake Factory Incorporated (CAKE: 23.81 +0.17 +0.72%) recently reported better-than-expected fourth-quarter 2009 results on the heels of effective cost management. Cost savings of over $7 million were realized during the quarter.

 

The quarterly earnings of 28 cents a share outstripped the Zacks Consensus Estimate of 24 cents and surged 86.7% from 15 cents delivered in the prior-year quarter. The boost was helped by a 5.7% drop in cost of sales, a 3.3% slide in labor expenses, and a 2.1% dip in other operating costs and expenses.

 

Management now expects first-quarter 2010 earnings between 23 cents and 25 cents a share. The current Zacks Consensus Estimate for the first quarter is 23 cents. Over the last 30 days, the Zacks Consensus Estimate has shown a substantial increase of 15% where 11 out of 28 analysts covering the stock raised their estimates.

 

The company’s earnings surprise history for the last four quarters (including the fourth-quarter), when compared to the Zacks Consensus Estimate, varies between 12.5% and 70%, with the average being 33.1%.

 

For fiscal year 2010, earnings are expected in the range of $1.16 to $1.24 per share. The current Zacks Consensus Estimate for the year is $1.18. In the last 30 days, the Zacks Consensus Estimate has climbed 4.4% as 15 out of 28 analysts covering the stock have raised their estimates.

 

On a reported basis, including one-time items, Cheesecake posted a net loss of $13,000 or nil per share for the quarter compared to net earnings of $7.1 million or 12 cents a share delivered in the prior-year quarter.

 

Cheesecake’s top-line showed a sluggish growth of 0.1% year-over-year to $400.6 million. Comparable-store sales fell 0.9% in the quarter compared to a decline of 7.1% in the year-ago quarter. By concept, comps dipped 0.7% and 3.9% at the Cheesecake Factory and Grand Lux Cafe, respectively. For first-quarter 2010, management expects comps to be flat to positive 1%.

 

Cheesecake, the operator of 161 full-service, casual dining restaurants, said it realized cost savings of $27 million during fiscal year 2009, generated free cash flow of $160 million and lowered its debt by $175 million.

 

Restaurants in the casual dining segment have been experiencing sagging comps and declining traffic with cash-strapped consumers shifting to low-priced dining options or eating at home. Other operators in the segment are California Pizza Kitchen Inc. (CPKI: 14.01 +0.28 +2.04%), Red Robin Gourmet Burgers Inc. (RRGB: 20.32 +0.39 +1.96%), Cosi Inc. (COSI: 0.83 +0.07 +9.21%) and Brinker