Cheesecake Expands in California - Analyst Blog
September 23 2011 - 6:00AM
Zacks
The Cheesecake Factory
Inc. (CAKE), which currently operates 168 restaurants,
recently announced the opening of a new unit in San Mateo,
California. This is the fifth of the company’s targeted 7 new
openings for fiscal 2011. The other restaurants have already opened
in Texas, New Jersey, Florida and Connecticut.
The newly opened restaurant spans
approximately 8,500 square feet and accommodates around 251 guests.
It is located in the Hillsdale Shopping Center, which hosts over
130 stores and is anchored by three department stores
(Nordstrom Inc. (JWN), Macy’s Inc
(M) and Sears). We expect the restaurant to benefit immensely from
its strategic positioning. We also expect a great variety of menu
offering at the new unit to attract guests.
Apart from Cheesecake, other major
restaurant operators including California Pizza Kitchen, Café
Nordstrom, TGI Fridays and Boudin’s Sourdough Bakery and Café have
units in the Hillsdale Shopping Center.
The Californian market, which was
badly hit during the housing downturn, has begun to turn around.
The gradual improvement in this market, which is one of the key
markets for the company, should drive growth going
forward.
Going forward, Cheesecake possesses
a number of sites in its pipeline for 2012. The new Cheesecake
Factory units will span from 8,500 to 10,000 square feet. 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.
The company is also concentrating
on its other two brands, Grand Lux Cafe and RockSugar Pan Asian
Kitchen, for future growth. Presently, the company has 13
restaurants under the Grand Lux Cafe mark and one under the
RockSugar Pan.
Despite more business from the new
units, Cheesecake will face stiff competition in California from
Red Robin Gourmet Burgers Inc (RRGB) and
BJ’s Restaurants Inc (BJRI), which have strong presence in
that area.
Cheesecake has a Zacks #3 Rank,
which translates into a short-term Hold rating. Our long-term
recommendation also remains Neutral.
BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
CHEESECAKE FACT (CAKE): Free Stock Analysis Report
NORDSTROM INC (JWN): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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