Cheesecake Optimistic for the Year of Reopening

 Delivery and pickup orders at the Cheesecake Factory Inc. have helped the Calabasas upscale casual restaurant chain during the coronavirus pandemic, its management said.

In a conference call with analysts to discuss fourth-quarter results, Chief Executive David Overton said the company exited the quarter with 75 of its restaurants operating an off-premises model only. Those locations had sales that exceeded prior peak off-premises sales seen earlier in the pandemic.

“Our restaurants with reopened dining rooms continued to demonstrate strong performance in the off-premises channel as well during the fourth quarter,” Overton said. “Notably, we had 24 Cheesecake Factory locations with positive, comparable sales during the fourth quarter despite capacity restrictions.”For the fourth quarter, pickup and delivery sales accounted for 43 percent of revenue. In the first month and a half of the first quarter of fiscal year 2021, those sales made up 40 percent of revenue.

The company reported on Feb. 17 that it had an adjusted net loss of $17.2 million (-32 cents a share) for the quarter ending Dec. 29 compared with adjusted net income of $25.5 million (58 cents) for the same period a year earlier. Revenue dropped by 20 percent to $555 million.

The company’s next earnings will be released on April 28.

In the past 52 weeks ending on April 14, Cheesecake shares have gained 234 percent in value. The stock closed at $57.61 on April 21.

Analyst reactionAnalysts who follow Cheesecake Factory were pleased with the fourth quarter results.

Brian Bittner, an analyst with Oppenheimer & Co. Inc. in New York, said in a research note released after the quarterly results that as indoor dining restrictions are lifted and locations reopen, Cheesecake Factory is showing signs of pent-up demand.

Same store sales are down only 9 percent in the first quarter through Feb. 16, despite average seating capacity limitations of 50 percent. Strength in the pickup and delivery sales remains “a large factor” and remains elevated in the 40 percent range at reopened locations.  “(Cheesecake’s) investment merits are improving, but we prefer (Darden Restaurants Inc.) as our full-service dining top pick,” Bittner wrote in his note.Darden operates the Olive Garden, LongHorn Steakhouse and Bahama Breeze restaurant chains.Nicole Miller Regan, a senior research analyst with Piper Sandler & Co. in Minneapolis, said that the company executes from “a position of strength” in a research note released with fellow analyst Joshua Long in early March.

In California, where Cheesecake Factory has a concentration of locations, it is well positioned to benefit as restrictions are lifted, Regan and Long wrote.

“Although Texas at 9 percent of the company’s portfolio remains sizeable, the reopening and return to normalized sales trends in the concept’s home state of California arguably remain more impactful overall,” the pair added in the note.

Bittner, Regan and Long all expect to see growth in the company in the coming years.

New locationsDuring the fourth quarter, the company opened one new Cheesecake Factory restaurant in Florida in late December. The location did nearly $200,000 in sales in its first week even with restrictions.

The company also has opened its sixth Cheesecake Factory location in Mexico, and its subsidiary Fox Restaurant Concepts opened a new Blanco Tacos + Tequila location in Arizona, Overton said.

“With a solid pipeline of sites, we believe we are on track to open as many as 12 to 15 new restaurants across our concepts this year. And internationally, we expect as many as three Cheesecake Factory locations to open under licensing agreements,” Overton added.

Matt Clark, the chief financial officer, responded to a question from Jon Tower, an analyst with Wells Fargo Securities who asked about the company’s forecast of 7 percent growth and when that might happen.

Clark said the company would look at the operating environment, especially if capacity limitations are lifted later this year as more people get vaccinated for COVID-19.

“We’re looking at sites right now to get there for 2022. We want to be prepared to get there in 2022,” Clark said. “We’ll probably wait to pull the trigger at 100 percent (capacity). … But we’ll be ready to do it if the environment is appropriate.”