CAKE's 2011 Growth On Track - Analyst Blog
August 24 2011 - 1:36PM
Zacks
The Cheesecake Factory Inc. (CAKE), which
currently operates 164 restaurants, remains on track to open as
many as 7 new restaurants in fiscal 2011, of which three
restaurants have already been opened. The first restaurant has been
opened in Houston, Texas.
This week, the company opened its latest Cheesecake Factory
restaurant at The Shops at Pembroke Gardens in Pembroke Pines,
Florida. The 8,400-square feet restaurant accommodates up to 225
guests.
The second restaurant has come up at The Mall at Short Hills,
New Jersey in mid July. The restaurant spans approximately 10,000
square feet and seats around 277 guests.
Geographically, Cheesecake witnessed strength across a number of
key markets, including California, Florida, the Midwest, the
Southeast and Texas in the recently concluded second quarter with
each delivering at or above average comparable sales. The company
enjoys a significant presence in these regions and remains well
received among consumers. Hence, we believe, the newest opening in
Texas is strategically perfect.
Going forward, Cheesecake’s pipeline possesses a number of sites
for 2012. The new Cheesecake Factory units will range from
8,500 to 10,000 square feet. In addition to the 8,000 square feet
design, the company will also open a 7,200 square feet restaurant
this year in Danbury, Connecticut.
For 2012, management expects to increase the number of new
openings. Management has now become comfortable with using
different sized formats depending on the needs of the market. Its
smaller-footprint units are generating well above the targeted
returns, which makes the company focus on A-plus sites to spur the
return on investment.
On a flip side, the company incurred increased pre-opening
expense of $1.1 million in the second quarter of 2011 versus $0.6
million in the same period last year on the back of higher number
of expected openings in the third quarter of this year relative to
last. Hence, the company’s plan of domestic expansion comes with a
threat of increased pre-opening costs. However, the concern is for
the near term.
Cheesecake currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We are also maintaining our
long-term Neutral recommendation on the stock. The company’s close
competitors include BJ's Restaurants Inc. (BJRI)
and Krispy Kreme Doughnuts Inc. (KKD).
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
CHEESECAKE FACT (CAKE): Free Stock Analysis Report
KRISPY KREME (KKD): Free Stock Analysis Report
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