We came across a bullish thesis on The Cheesecake Factory Incorporated on Stock Picker's Journey’s Substack by Gregg Jahnke. In this article, we will summarize the bulls’ thesis on CAKE. The Cheesecake Factory Incorporated's share was trading at $49.15 as of December 16th. CAKE’s trailing and forward P/E were 14.94 and 12.29 respectively according to Yahoo Finance. Pixabay/Public Domain The Cheesecake Factory Incorporated operates and licenses restaurants in the United States and Canada. CAKE, led by fo ...

Financial Data and Key Metrics Changes - The company provided guidance for FY 2026, expecting revenue growth of 4%-5%, supported by a low single-digit comp growth of 1%-2% and new unit contributions leading to approximately 5% net income growth [2][27] - The average check at Cheesecake Factory is approximately $30 for all occasions, with lunch checks being about 20%-30% less [44][46] Business Line Data and Key Metrics Changes - Flower Child, the fast casual brand, continues to show strength and is differentiated from traditional fast casual dining, contributing positively to the overall portfolio [7][12] - North Italia has been experiencing some volatility but maintains an average unit volume (AUV) of roughly $8 million, with new openings exceeding sales expectations [73] Market Data and Key Metrics Changes - The company has observed a stable consumer environment, with slightly slower spending but no significant pressure on any specific demographic cohort [7][8] - The industry has seen a pullback in alcoholic beverage sales, but total beverage rates have remained stable, indicating continued consumer interest in dining out [25] Company Strategy and Development Direction - The company plans to open 26 new restaurants in FY 2026, continuing its growth trajectory across its portfolio [28] - The rewards program is a key focus, with efforts to drive guest engagement and increase visit frequency through personalized marketing [29][41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current operating environment, citing strong P&L resiliency and predictability of sales [8] - The company believes that experiential dining will remain a priority for consumers, particularly among younger demographics [18] Other Important Information - The company is developing a new app to enhance guest experience, allowing for easier reservations and order placements, which is expected to launch in the first half of FY 2026 [30] - The international portfolio consists of 35 restaurants, with plans to open 3-5 additional locations annually, indicating a positive outlook for international growth [77] Q&A Session Summary Question: How is the company positioned in the pricing debate versus food at home? - Management believes that their experiential dining model differentiates them from food at home, and they do not see significant trade-offs affecting their business [14][15] Question: What is the average frequency of visits for guests? - The average guest visits Cheesecake Factory four to six times a year, with the goal of increasing this through the rewards program [33] Question: How does the company plan to address the performance of North Italia? - Management is implementing a price-fixed lunch menu to attract more guests while maintaining the core concept [72] Question: What is the outlook for international growth? - The company anticipates opening 3-5 international restaurants per year, with strong performance from existing partners [77] Question: How does the company view its capital allocation strategy? - The company plans to maintain a CapEx range of $200 million-$210 million for FY 2026, balancing dividends and share repurchases while maintaining a strong cash flow [78]

Financial Data and Key Metrics Changes - The company expects 4%-5% revenue growth for FY 2026, supported by a low single-digit comp growth of 1%-2% and new unit contributions leading to approximately 5% net income growth [2][28] - The Cheesecake Factory's current four-wall margins are projected to be in the mid-17% range, with total company margins expected to be just under 16% for the year [56][60] Business Line Data and Key Metrics Changes - Flower Child, the fast casual brand, continues to show strength and is differentiated from traditional fast casual dining, contributing positively to the overall portfolio [7][12] - North Italia is experiencing some challenges with comp sales but has opened new locations that are exceeding sales expectations, indicating potential for recovery [70][73] Market Data and Key Metrics Changes - The company has observed stable consumer behavior with slightly slower spending, but no significant volatility indicating pressure on the consumer [7][8] - The competitive landscape includes challenges from food at home due to menu pricing increases across the industry, but the company believes its experiential dining model mitigates this risk [14][63] Company Strategy and Development Direction - The company plans to open 26 new restaurants in FY 2026, continuing its growth trajectory across its portfolio [29][49] - The focus on menu innovation, particularly with the introduction of Bites and Bowls, aims to enhance customer experience and drive traffic [30][81] Management's Comments on Operating Environment and Future Outlook - Management expresses confidence in navigating the current economic environment, citing strong P&L resiliency and the ability to adapt to input cost changes [8][54] - The company is optimistic about the rewards program, which has shown strong engagement and aims to increase customer visits [30][40] Other Important Information - The company is exploring international growth opportunities, with plans to open 3-5 international restaurants annually [77] - Capital expenditures for FY 2026 are projected to be between $200 million and $210 million, with a focus on maintaining a strong balance sheet and cash flow [78][79] Q&A Session Summary Question: How does the company view consumer trends across different demographics? - Management notes that there is stability in consumer spending across demographics, with Flower Child showing continued strength despite broader industry challenges [6][7] Question: What initiatives are being taken to address the performance of North Italia? - The company has introduced a price-fixed lunch menu to attract customers and is committed to maintaining the core concept while addressing current market conditions [72][73] Question: How does the company plan to leverage its rewards program? - The rewards program is designed to enhance customer engagement and drive additional visits, with a focus on personalized marketing strategies [30][40]

CALABASAS HILLS, Calif.--(BUSINESS WIRE)--The Cheesecake Factory® (NASDAQ: CAKE) known for its extensive menu, generous portions and legendary desserts, is bringing back its Peppermint Stick Chocolate Swirl Cheesecake for the holidays. This festive flavor features peppermint swirled with white and dark chocolate cheesecake all on a delicious mint chocolate brownie, and is now available at all The Cheesecake Factory restaurants nationwide. Additionally, The Cheesecake Factory is featuring a spec. ...

Core Viewpoint - Cheesecake Factory's recent earnings report shows mixed results, with earnings exceeding estimates while revenues fell short, leading to concerns about future performance [3][4]. Financial Performance - For Q3 fiscal 2025, Cheesecake Factory reported adjusted earnings per share (EPS) of 68 cents, surpassing the Zacks Consensus Estimate of 60 cents, and up from 58 cents in the prior year [4]. - Quarterly revenues reached $907.2 million, missing the consensus estimate of $913 million by 0.6%, but reflecting a year-over-year increase of 4.8% [4]. Comparable Sales - Comparable sales at Cheesecake Factory restaurants rose by 0.3% year-over-year, a decline from the 1.6% increase reported in the previous year [5]. - North Italia's comparable sales decreased by 3% year-over-year, contrasting with a 2% growth in the prior year [5]. Cost Structure - The cost of food and beverage as a percentage of revenues decreased by 80 basis points to 21.8% [6]. - Labor expenses as a percentage of total revenues fell by 30 basis points to 35.6% [6]. - Other operating costs increased by 50 basis points to 28.2% of total revenues, while general and administrative expenses remained flat at 6.5% [6]. Balance Sheet - As of September 30, 2025, cash and cash equivalents totaled $190 million, up from $84.2 million at the end of 2024 [7]. - Long-term debt stood at $629.2 million, an increase from $452.1 million as of December 31, 2024 [7]. - Total available liquidity was reported at $556.5 million, including an undrawn revolving credit facility [7]. Shareholder Returns - A quarterly cash dividend of 27 cents per share was declared, payable on November 25, 2025, to shareholders of record as of November 11 [8]. - During the quarter, approximately 18,900 shares were repurchased for $1.2 million [8]. Expansion Plans - In Q3 fiscal 2025, the company opened two new FRC restaurants and two Cheesecake Factory locations in Mexico under licensing agreements [10]. - For fiscal 2025, Cheesecake Factory plans to open up to 25 new restaurants, including four Cheesecake Factory units, six North Italia locations, six Flower Child restaurants, and nine FRC concepts [10]. Market Sentiment - Recent estimates for Cheesecake Factory have trended downward, with a consensus estimate shift of -11.35% [11]. - The company currently holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [13]. Industry Comparison - Within the Zacks Retail - Restaurants industry, Domino's Pizza has seen a 2.4% gain over the past month, reporting revenues of $1.15 billion for the quarter ended September 2025, reflecting a year-over-year change of +6.2% [14].

Revenue Growth - Revenues increased by 4.8% to $907.2 million for the fiscal quarter ended September 30, 2025, compared to $865.5 million for the same period last year, driven by new restaurant openings and increased comparable restaurant sales [106]. - Revenues increased 4.9% to $2,790.2 million for the first nine months of fiscal 2025 compared to $2,660.7 million for the same period in fiscal 2024 [121]. - North Italia sales increased 16.1% to $83.5 million for Q3 fiscal 2025, compared to $71.9 million in Q3 fiscal 2024 [108]. - Flower Child sales increased 31.4% to $48.1 million for Q3 fiscal 2025, compared to $36.6 million in Q3 fiscal 2024 [111]. - Other FRC sales increased 16.5% to $78.0 million for Q3 fiscal 2025, compared to $67.0 million in Q3 fiscal 2024 [112]. - North Italia sales increased 18.1% to $257.7 million for the first nine months of fiscal 2025, compared to $218.3 million in the same period of fiscal 2024 [123]. - Flower Child sales increased 30.9% to $139.8 million for the first nine months of fiscal 2025, compared to $106.8 million in the same period of fiscal 2024 [124]. Comparable Sales and Customer Traffic - The Cheesecake Factory Restaurants sales rose by 0.6% to $651.4 million in Q3 fiscal 2025, with average sales per restaurant operating week increasing by 0.4% to $231,971 [107]. - Comparable sales for The Cheesecake Factory increased by 0.3%, or $2.1 million, primarily due to a 2.8% increase in average check, despite a 2.5% decrease in customer traffic [107]. Cost Management - Total costs and expenses represented 95.9% of revenues for the thirteen weeks ended September 30, 2025, with food and beverage costs at 21.8% and labor expenses at 35.6% [105]. - Food and beverage costs as a percentage of revenues decreased to 21.8% in Q3 fiscal 2025 from 22.6% in Q3 fiscal 2024 [114]. - Labor expenses as a percentage of revenues decreased to 35.6% in Q3 fiscal 2025 from 35.9% in Q3 fiscal 2024 [115]. - Other operating costs and expenses increased to 28.2% of revenues in Q3 fiscal 2025 from 27.7% in Q3 fiscal 2024 [116]. Profitability - Net income for the thirteen weeks ended September 30, 2025, was $31.9 million, an increase from $30.0 million for the same period in 2024, representing a growth of 6.3% [135]. - Adjusted net income for the thirty-nine weeks ended September 30, 2025, was $134.7 million, compared to $116.9 million for the same period in 2024, reflecting a year-over-year increase of 15.2% [135]. - EBITDA for the thirteen weeks ended September 30, 2025, was $65.1 million, up from $59.6 million in the prior year, indicating an increase of 9.1% [139]. Capital Expenditures and Investments - The company opened 18 new restaurants in the first nine months of fiscal 2025, compared to 14 in the same period of fiscal 2024, with plans to open up to 25 new restaurants in fiscal 2025 [146]. - Capital expenditures for new restaurants were $62.7 million for the first nine months of fiscal 2025, down from $76.1 million in the same period of fiscal 2024 [145]. - Future capital allocation will focus on new restaurant investments, managing debt levels, and returning capital to shareholders through dividends and share repurchases [102]. Shareholder Returns - Common stock dividends paid in the first nine months of fiscal 2025 totaled $39.4 million, slightly down from $39.8 million in the same period of fiscal 2024 [151]. - Cumulatively, the company has repurchased 59.7 million shares of common stock at a total cost of $1,972.4 million through September 30, 2025 [152]. - The company aims to offset share dilution from equity compensation and enhance earnings per share through its share repurchase program, which has no expiration date and is subject to Board discretion based on various financial factors [153]. Financial Position and Liquidity - Cash provided by operating activities increased by $52.1 million to $226.4 million for the thirty-nine weeks ended September 30, 2025, compared to $174.3 million in 2024 [143][144]. - The company repaid $110.0 million on its revolving credit facility in the first quarter of fiscal 2025, leaving a net availability for borrowings of $366.5 million as of September 30, 2025 [147]. - The company issued $575.0 million in convertible senior notes on February 28, 2025, with net proceeds of approximately $558.5 million after deducting issuance costs [149]. - The company expects adequate liquidity for the next 12 months from cash, cash equivalents, and operational cash flows, along with available borrowings under the Revolving Facility [154]. Operational Challenges - The company’s operating results have been impacted by geopolitical and macroeconomic events, leading to supply chain challenges and increased commodity and wage inflation, which began returning to historical levels in fiscal 2024 [159]. - The company is negotiating contracts for key food and non-food supplies for fiscal 2026, but these efforts may not yield intended benefits [160]. - The company is evaluating hedging vehicles to manage risks associated with commodity price fluctuations, but as of September 30, 2025, had no hedging contracts in place [160]. Accounting and Financial Estimates - The company’s critical accounting estimates have not materially changed from those reported in the Annual Report for the fiscal year ended December 31, 2024 [156]. - A hypothetical 1% increase in food costs would have negatively impacted cost of sales by $2.0 million for both the third quarter of fiscal 2025 and 2024 [161]. - A hypothetical 1% rise in interest rates would have increased interest expense by $1.1 million annually based on outstanding borrowings at December 31, 2024 [162]. - A 10% decline in the market value of the deferred compensation asset would have resulted in a net income decline of $3.2 million and $2.9 million at September 30, 2025, and December 31, 2024, respectively [163].

Core Viewpoint - The investment thesis for The Cheesecake Factory (CAKE) is centered on the growth potential from the restaurants acquired from the Fox Group, particularly North Italia and Flower Child, which is not currently reflected in the stock price [1]. Group 1 - The Cheesecake Factory's main concept focuses on long-term investment opportunities within the restaurant sector [1].

Group 1 - The Q3 earnings season is characterized by high stakes as investors are nervous about all-time market highs [1] - Consumer-facing businesses continue to provide insights into market trends, reflecting ongoing challenges and opportunities [1] - Gary Alexander has extensive experience in technology and startup sectors, contributing to the understanding of current industry themes [1]

Core Insights - The Cheesecake Factory reported a net income of $31.89 million for Q3 2025, reflecting a 6.3% increase from $29.99 million in the same quarter last year [1] - Total revenues for the quarter reached $907.22 million, marking a 4.8% year-on-year growth [1] - The company operates 365 restaurants across the US and Canada under various brands, including The Cheesecake Factory, North Italia, and Flower Child [1] Revenue Composition - Revenue sources for the quarter included $651.37 million from The Cheesecake Factory, $83.48 million from North Italia, and $78.01 million from other FRC and related operations [2] - An $800,000 pre-tax charge was incurred, primarily related to costs from acquiring FRC [2] - Adjusted net income for Q3, after accounting for the pre-tax charge, was $33.2 million, or $0.68 per diluted share [2] Operational Performance - Comparable restaurant sales at The Cheesecake Factory increased by 0.3% year-on-year during the quarter [2] - The company's chairman and CEO highlighted the positive sales results amid a competitive environment, showcasing the strength of the brand [3] - Improvements in labor productivity, wage management, and staff retention contributed to healthy margin performance [4] Expansion Plans - The company opened two new FRC outlets and two licensed Cheesecake Factory locations in Mexico during Q3 [4] - Following the quarter, one additional FRC location was opened, with plans to open up to 25 restaurants in fiscal 2025, including multiple brands [5] - A quarterly dividend of $0.27 per share was announced [5]

Core Insights - The Cheesecake Factory reported mixed results for Q3, with earnings per share of 68 cents exceeding the analyst consensus estimate of 60 cents, while sales of $907.226 million fell short of the expected $912.784 million [1][2]. Financial Performance - Quarterly earnings were 68 cents per share, beating the analyst consensus estimate of 60 cents per share [1]. - Quarterly sales amounted to $907.226 million, missing the analyst consensus estimate of $912.784 million [1]. Management Commentary - CEO David Overton highlighted solid results, with revenue within guidance and earnings exceeding expectations, driven by strong performance at The Cheesecake Factory restaurants [2]. - The company achieved year-over-year improvements in labor productivity, wage management, and staff retention, contributing to healthy margins [2]. - Two new restaurant openings in Q3 are on track to meet the unit growth objective for the year [2]. Market Reaction - Following the earnings announcement, Cheesecake Factory shares declined by 4.8%, trading at $51.73 [2]. Analyst Ratings and Price Targets - Stephens & Co. analyst Jim Salera maintained an Overweight rating but lowered the price target from $70 to $64 [5]. - B of A Securities analyst Katherine Griffin maintained a Neutral rating and reduced the price target from $61 to $56 [5].