Even in the midst of a pandemic, The Cheesecake Factory met its goal in the opening of new restaurants last year.
The Calabasas casual dining and fast-casual restaurant chain opened 14 new locations across its brands, which includes flagship Cheesecake Factory, as well as North Italia and Fox Restaurant Concepts.
“This is a marked achievement considering the pandemic environment and the associated challenges we have been operating with throughout 2021,” said Chief Executive David Overton during a conference call with analysts in November to discuss third quarter financials.
During the quarter, the company opened new locations of North Italia in Gilbert, Arizona and Franklin, Tennessee and a Flower Child restaurant in Gilbert. It also opened a Blanco restaurant in Chicago, a first for that concept and the broader Fox Restaurant Concepts, or FRC, brand, Overton said.
“Blanco is a very differentiated offering in this market and has received a very warm welcome from guests so far,” Overton added.
Blanco is a casual Mexican food concept with a menu featuring soups, salads, tacos and burritos.
Since the start of the fourth quarter, Cheesecake has opened one of its flagship restaurants in Huntsville, Alabama; a North Italia location in Orlando; and Blanco and Culinary Dropout restaurants in Denver, he said, adding that on the international front, the third Cheesecake Factory location in Shanghai opened in early November under a licensing agreement.
This year, the company plans to open as many as 20 new restaurants, spread across its portfolio of concepts, said Matthew Clark, chief financial officer.
“For modeling purposes at this point, we would expect at least five Cheesecake Factory restaurants, seven North Italias, four Flower Child locations and four other FRC restaurants,” Clark said during the conference call. “We would anticipate approximately $150 million in capex (capital expense) to support this level of unit development as well as required maintenance on our restaurants.”
‘Positive view’
On Nov. 3, the company reported adjusted net income of $33.2 million (65 cents a share) for the quarter ending Sept. 28, compared to an adjusted net loss of $17.7 million (-33 cents) in the same period a year earlier. Revenue increased by 46 percent to nearly $755 million.
Fourth quarter earnings will be released Feb. 16.
Cheesecake shares have lost about 16 percent of their value in the past 52 weeks through Jan. 20 when shares closed at $35.92. The stock closed at $36.30 on Jan. 26.
Analysts who follow Cheesecake had mixed opinions on the third quarter results.
David Tarantino, restaurant analyst with Robert W. Baird & Co., wrote in a research note from November that the firm was maintaining its neutral position on Cheesecake’s stock.
“We continue to have a positive view of (Cheesecake’s) long-term fundamentals, but with some external risk factors that could keep a lid on investor sentiment heading into 2022, we continue to consider near-term risk/reward on the shares balanced,” Tarantino wrote in the report.
Nicole Miller Regan, senior research analyst at Piper Jaffray & Co., downgraded Cheesecake shares in a report from early this month. She put the shares in the “neutral” category from “overweight,” or anticipated to outperform relative to the median of the group of stocks that Regan covers.
She said the firm maintains a favorable bias toward Cheesecake Factory based on the organization, its brands and its “total return model anchored by the best-in-class returns of the core Cheesecake Factory concept and with an opportunity in acceleration in unit development (via the addition of North Italia).”
North Italia is a full-service restaurant with 28 locations. In her report, Regan said it has a domestic potential of 200 and a targeted long-term unit growth of 20 percent.
In the third quarter, North Italia brought in revenue of $44.4 million, compared to $28 million in the same period a year earlier.
David Gordon, president of Cheesecake, said that sales at North Italia strengthened during the fourth quarter through the Nov. 3 conference call with comparable store sales up by about 14.5 percent versus the same period in 2019.
“Off-premises has continued to comprise approximately 14 percent of sales at North,” Gordon said.
The chain, however, was seeing more labor pressure than at the Cheesecake Factory restaurants, given the smaller nature of it, Gordon added.
But overall, the company was experiencing a labor market that remains tight while it sees some improvement, Gordon said.
“For example, we saw hourly staff turnover moderate throughout the third quarter, and we received solid application flow for our recent Cheesecake Factory Huntsville opening enabling the restaurant to be fully staffed in advance of its opening date,” Gordon added.