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Cheesecake Factory Reports a Profit

February 05, 2003|Karen Robinson-Jacobs | Times Staff Writer

An aggressive growth strategy helped Cheesecake Factory Inc. post earnings of $13.2 million, or 26 cents a share, for its fourth quarter, a gain of 20%, the company said Tuesday.

Revenue climbed 17% to $174.4 million.

For its fiscal year ended Dec. 31, the company saw earnings grow by 25% to $49.1 million, or 96 cents a share -- a penny shy of analysts' estimates. Revenue for the year increased by 21% to $652 million.

Shares of Cheesecake Factory fell 50 cents Tuesday to $31.60 on Nasdaq. Earnings were released after the market closed. Shares had dropped $2.54, or about 7%, to $33.86 on Jan. 10, a day after the company released fourth-quarter and full-year revenue figures that disappointed analysts.

Last year, the Calabasas-based company opened 12 new restaurants, including five in the fourth quarter. Up to 14 new outlets are planned for fiscal 2003, the company said.

But analysts questioned whether the company's 60 upscale casual-dining restaurants, known for high-calorie desserts and stylish settings, would be able to maintain that growth clip.

"Their expansion has always been our long-term concern," said Hil Davis, an analyst with San Francisco-based Thomas Weisel Partners. "Relative to opening, say, an Applebee's or Chili's, the Cheesecake Factory is such an elaborate unit to open, as opposed to drop and plop."

He and other analysts said growth could be hindered by a lack of appropriate sites and talent.

And growth in store count is crucial for a company that has little room to increase customer counts at the existing stores, which typically are filled to overflowing, said Stephen E. Spence, an analyst with Kenny Securities Corp. in St. Louis.

Gerald W. Deitchle, Cheesecake Factory's president and chief financial officer, said he believed there was room for at least 200 restaurants nationwide.

"With 200 units domestically, we see a substantial period of profitable growth ahead of us," Deitchle said in a conference call with analysts.

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