Core Insights - The Cheesecake Factory has seen a 20.7% increase in shares over the past three months, contrasting with a 0.9% decline in the industry, driven by strong comparable sales performance, expansion efforts, and rewards programs [1] Financial Performance - In the fiscal third quarter of 2024, comparable sales at Cheesecake Factory restaurants increased by 1.6% year over year, down from a 2.4% rise in the same quarter the previous year [2] - The company reported labor expenses of $949.2 million for the first nine months of fiscal 2024, an increase from $919.3 million in the prior-year period [5] Growth Strategy - The company plans to open 22 new restaurants in fiscal 2024, with eight openings scheduled for the fourth quarter, including three Cheesecake Factory locations and six North Italia restaurants [3] - The Cheesecake Rewards program has shown high levels of member activity and engagement, contributing positively to customer visits and brand growth [4] Cost Management - Increased costs remain a concern, with pre-opening costs, higher labor expenses, and additional cleaning costs expected to impact profits [5] - For the fourth quarter of fiscal 2024, the company anticipates commodity inflation in the low-single digits and net total labor inflation in the mid-single digits [12] Operational Enhancements - The company has implemented operational and supply chain improvements, including a kitchen display system and a new loyalty platform, aimed at enhancing guest experience and driving cost efficiencies [11]

Group 1: Mall Industry Trends - U.S. shopping malls have seen a significant decline from 2,500 in the 1980s to approximately 700 today, largely due to the rise of online shopping and the decline of department stores [2] - Despite predictions of their demise, many Gen Z consumers prefer in-person shopping experiences, leading to a resurgence in mall popularity [3] - Developers are creatively repurposing empty department stores into housing and increasing the space allocated to restaurants and bars, which are now major attractions [3][6] Group 2: Shift in Consumer Behavior - The traditional shopping experience has shifted, with dining options now driving foot traffic to malls rather than shopping itself [4] - Yelp's report indicates that 17 of the 25 most popular mall brands are restaurants, highlighting the growing importance of food in the mall experience [4] - Restaurants now account for 20% to 30% of the total leasing area in some malls, a significant increase from 5% to 10% a decade ago [5][6] Group 3: Restaurant Dynamics - Malls are increasingly featuring upscale dining options, with a focus on "contemporary casual" restaurants that offer a higher quality experience [9] - The pandemic has made malls more attractive to restaurateurs, as foot traffic in suburban malls has rebounded above pre-pandemic levels [11] - Emerging restaurant chains are capitalizing on mall locations for rapid expansion, with examples like Din Tai Fung planning new openings in malls [12][13] Group 4: Food Halls vs. Food Courts - Food halls are becoming a popular alternative to traditional food courts, offering a more upscale dining experience with local vendors [15][16] - Eataly, a notable example, has successfully integrated into malls, providing a unique cultural experience alongside dining options [18][19] - Despite the rise of food halls, traditional food courts still perform well, with chains like Chick-fil-A showing strong sales [20] Group 5: Performance of Key Restaurant Brands - The Cheesecake Factory remains a top-performing mall brand, with shares rising 43% this year, outperforming the S&P 500 [24] - The chain has managed to avoid bankruptcy, unlike other mall staples, and is seen as a valuable tenant for mall landlords [25][26][27] - The presence of The Cheesecake Factory in malls correlates with better financial performance for those malls, as indicated by a Moody's Analytics report [26][27]

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It has been about a month since the last earnings report for Cheesecake Factory (CAKE) . Shares have added about 6.7% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is Cheesecake Factory due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. Cheesecake Factory Q3 Earnings ...

Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. However, it isn't easy to find a great growth stock.That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.However, the Zacks Growth Style Score (part of the Zacks Style Scores system), whic ...

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks. Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe ar ...

Company Performance - Cheesecake Factory shares have increased by 24.9% over the past month, reaching a new 52-week high of $50.75, and have gained 41.1% since the start of the year [1] - The company reported EPS of $0.58 in its last earnings report, exceeding the consensus estimate of $0.47, although it missed the revenue estimate by 0.06% [2] - For the current fiscal year, Cheesecake Factory is expected to post earnings of $3.30 per share on revenues of $3.57 billion, reflecting a 22.68% change in EPS and a 3.88% change in revenues [3] Valuation Metrics - Cheesecake Factory has a Value Score of A, a Growth Score of C, and a Momentum Score of B, resulting in a VGM Score of B [6] - The stock trades at 15X current fiscal year EPS estimates, below the peer industry average of 24.3X, and at 11.2X trailing cash flow compared to the peer group's average of 12.4X [7] - The stock has a PEG ratio of 1.36, indicating it is not among the top echelon of stocks from a value perspective [7] Zacks Rank - Cheesecake Factory holds a Zacks Rank of 2 (Buy) due to rising earnings estimates, which suggests potential for further price appreciation [8][9] Industry Comparison - The Retail - Restaurants industry is positioned in the top 29% of all industries, indicating favorable conditions for companies like Cheesecake Factory and Yum China [12]

Revenue Growth and Financial Performance - Revenues increased 4.3% to $865.5 million for the fiscal quarter ended October 1, 2024 compared to $830.2 million for the comparable prior year period[85] - Net income increased to 3.5% of revenues in Q3 2024 from 2.2% in Q3 2023[84] - Adjusted net income for the thirteen weeks ended October 1, 2024, was $28.18 million, compared to $19.03 million for the same period in 2023[117] - The company anticipates total revenue for fiscal 2024 to be approximately $3.57 billion, with a net income margin of approximately 4.5%[112][113] - Total revenues for Q4 fiscal 2024 are expected to be between $905 million and $915 million, with a net income margin of 4.8% to 4.9%[115] - Fiscal 2025 total revenue is anticipated to be approximately $3.75 billion, with a net income margin of around 4.75% at the mid-point of the estimated revenue[116] Restaurant Operations and Expansion - The company operates 344 restaurants in the US and Canada, including 215 The Cheesecake Factory locations, 40 North Italia locations, and 35 Flower Child locations[73] - The company plans to continue expanding The Cheesecake Factory, North Italia, and Flower Child concepts, with a focus on premier locations[75] - The company targets annual unit growth of 7% across its concepts, combined with comparable sales growth[81] - The company plans to open up to 22 new restaurants in fiscal 2024, including 3 The Cheesecake Factory, 6 North Italia, 6-7 Flower Child, and 8 Other FRC locations, with anticipated cash capital expenditures of $180 to $200 million[114] - The company expects to open up to 24 new restaurants in 2025, with cash capital expenditures of $190 to $210 million[118] - Preopening costs were $7.0 million in Q3 2024, with one Flower Child and three Other FRC locations opened during the quarter[98] Cost Management and Margins - Food and beverage costs decreased to 22.6% of revenues in Q3 2024 from 23.5% in Q3 2023[84] - Labor expenses decreased to 35.9% of revenues in Q3 2024 from 36.3% in Q3 2023[84] - Food and beverage costs as a percentage of revenues decreased to 22.6% in Q3 2024 from 23.5% in Q3 2023, primarily due to menu price increases exceeding inflation[92] - Labor expenses as a percentage of revenues decreased to 35.9% in Q3 2024 from 36.3% in Q3 2023, driven by menu price increases exceeding wage rate inflation[93] - The company has implemented menu price increases above historical levels to offset inflationary cost pressures, with future pricing actions potentially remaining above historical norms[78] Sales Performance by Concept - The Cheesecake Factory sales increased 3.1% to $647.8 million in Q3 2024 compared to $628.1 million in Q3 2023, with comparable sales up 1.6% driven by a 2.4% increase in average check[86] - North Italia sales increased 15.2% to $71.9 million in Q3 2024, with comparable sales up 2% driven by a 4% increase in average check, despite a 2% decline in customer traffic[87] - Flower Child sales increased 13.7% to $36.6 million in Q3 2024, with sales per restaurant operating week up 6.5% to $85,225[89] - Other FRC sales increased 14.3% to $67.0 million in Q3 2024, despite a 4.4% decline in average sales per restaurant operating week to $116,493[90] Financial Position and Liquidity - Cash flows from operations increased by $23.8 million in the first nine months of fiscal 2024 compared to the same period in 2023, primarily due to higher net income and increased accounts payables[121] - Capital expenditures for new restaurants in the first nine months of fiscal 2024 were $76.1 million, compared to $61.6 million in the same period in 2023[122] - The company repurchased 0.5 million shares at a cost of $17.5 million in the first nine months of fiscal 2024, compared to 1.1 million shares at a cost of $36.3 million in the same period in 2023[129] - The company had net availability for borrowings of $236.5 million under the Revolver Facility as of October 1, 2024[126] - The company believes its cash and cash equivalents, combined with expected cash flows from operations and available borrowings, will provide adequate liquidity for the next 12 months and the foreseeable future[131] Commodity and Supply Chain Risks - The company is negotiating short-term and long-term agreements for principal commodities like dairy and poultry, but these efforts may not yield intended benefits for fiscal 2025[138] - A hypothetical 1% increase in food costs would negatively impact cost of sales by $2.0 million in Q3 2024 and $1.9 million in Q3 2023[139] - Commodities not under contract are subject to significant supply and cost fluctuations, especially those regulated by governments like dairy and corn[139] - International market purchases are susceptible to cost and availability fluctuations due to currency values, trade disputes, tariffs, and geopolitical unrest[139] - The company may lack the ability to adjust menu prices or items in response to food commodity price increases[139] - Operating results in fiscal 2024 continue to be impacted by supply chain challenges and increased commodity and wage inflation[137] - Climate change may exacerbate factors like labor availability, weather, and natural disasters, further impacting product and service costs[137] Financial Risks and Hedging - A hypothetical 1% rise in interest rates would increase annual interest expense by $1.3 million based on outstanding borrowings as of October 1, 2024, and January 2, 2024[140] - A hypothetical 10% decline in the market value of deferred compensation assets would reduce net income by $2.8 million as of October 1, 2024, and $2.4 million as of January 2, 2024[140] - The company has no hedging contracts in place as of October 1, 2024[138] Tax and Impairment - The effective income tax rate increased to 5.8% in Q3 2024 from -5.5% in Q3 2023, primarily due to higher forecasted income before taxes[99] - The company recorded impairment of assets and lease terminations income of $3.5 million in Q3 2024, compared to an expense of $48,000 in Q3 2023[96]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, with the aim of buying high and selling higher, capitalizing on established price movements [1] Company Summary: Cheesecake Factory (CAKE) - CAKE currently holds a Momentum Style Score of A, indicating strong momentum characteristics [2] - The company has a Zacks Rank of 2 (Buy), suggesting it is positioned for potential outperformance in the market [3] - Over the past week, CAKE shares increased by 8.99%, significantly outperforming the Zacks Retail - Restaurants industry, which rose by only 0.49% [5] - In a longer time frame, CAKE shares have increased by 28.2% over the past quarter and 47.38% over the last year, while the S&P 500 only moved 5.48% and 36.89% respectively [6] - The average 20-day trading volume for CAKE is 1,245,898 shares, indicating a bullish sign with rising stock prices [7] - Earnings estimates for CAKE have shown positive revisions, with 9 estimates moving higher in the past two months, raising the consensus estimate from $3.21 to $3.29 [9]

Momentum investing is essentially the opposite of the tried-and-tested Wall Street adage -- "buy low and sell high." Investors following this investing style typically avoid betting on cheap stocks and waiting long for them to recover. They believe instead that one could make far more money in lesser time by "buying high and selling higher." Everyone likes betting on fast-moving trending stocks, but it isn't easy to determine the right entry point. These stocks often lose momentum when their future growth p ...