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Cheesecake Factory Posts Gain

New restaurants and cost controls help boost quarterly profit 16% to $15.3 million.

July 23, 2003|Karen Robinson-Jacobs | Times Staff Writer

New store openings and cost controls helped Cheesecake Factory Inc. post a 16% gain in net income for the quarter ended July 1, the company said Tuesday.

The $15.3-million profit at the Calabasas Hills-based upscale casual-dining chain met analysts' estimates of 30 cents a share, up from $13.2 million, or 26 cents, a year earlier.

Revenue rose 14.1% to $188.6 million from $165.4 million in the year-earlier quarter, in part because of the addition of two stores. Four restaurants have opened this year, with 10 more planned for the balance of 2003.

Shares of the company -- which operates 67 restaurants, including three under its higher-end Grand Lux Cafe brand -- gained 38 cents Tuesday to $32.90 on Nasdaq. The company's earnings were announced after the market closed.

Cool, damp weather during the spring quarter, especially in East Coast markets, kept diners off the restaurants' patios and held growth of sales at stores open at least a year to 0.3% in the second quarter, the company said.

Although small, the gain marked a return to positive same-store sales from the first quarter's 2% drop -- the first drop in that measure since the company went public in 1992.

Same-store sales growth is seen by many investors as a key indicator of chain health, but Cheesecake Factory faces a challenge in boosting its performance. Most chain restaurants open with modest sales and gradually build sales volume, but Cheesecake Factory restaurants don't require such a breaking-in period.

"New Cheesecakes ... open the doors, and they're mature in terms of sales volume," said Michael D. Smith, a restaurant analyst with Fahnestock & Co., who has a "buy" rating on the stock. "They don't have any unsuccessful stores."

The chain's average sales figure of $1,000 per square foot is "twice the average for the industry," said David Geraty, senior restaurant analyst with New York-based RBC Capital Markets, who rates the company as "outperform."

"In the environment it's operating in, it's a very strong concept," Geraty said.

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