Is Cheesecake Factory getting stale?

The stock drops after a research note questions the company's projections.

By Kim Peterson Jun 4, 2012 3:55PM
Credit: © Fred Prouser / Reuters
Caption: The Cheesecake Factory restaurantAre diners getting tired of the Cheesecake Factory (CAKE)?

The company's business may be slowing down. The stock dropped by as much as 5% Monday after an analyst at William Blair & Co. cut her rating to "market perform" from "outperform."

The stock's slide put the brakes on what had been a pretty nice year of growth. Shares fell below $25 last October, but climbed back to nearly $33 last week. Heading into the close Monday, the stock was down to $30.29.

The analysts at William Blair said their checks showed a choppy May for the casual dining sector, and that comes after a softer April. The Cheesecake Factory is not immune to these industry trends, writes analyst Sharon Zackfia.

As a result, the analysts are expecting Cheesecake Factory sales to slow. They think same-store sales will be at or below the low end of the company's forecast for the second quarter. Executives estimated that sales growth would be 1.5% to 2.5%, compared to 2.1% growth a year earlier.

The William Blair analysts are estimating quarterly revenue at $448 million, about $10 million below the consensus. They think the company has enough wiggle room to meet its full-year earnings guidance of $1.83 to $1.91 a share. But, Zackfia wrote, "we are increasingly worried about the potential for more downside than upside to our and the consensus estimates of $1.88."

The majority of analysts covering the stock have a "hold" rating, perhaps because the stock has just become too expensive. "The greater risk, however, could be a very range-bound stock absent some catalyst for sales both for The Cheesecake Factory and the broader casual dining space," Zackfia added.

Perhaps a better buy in this sector is Darden Restaurants (DRI), owner of Red Lobster and Olive Garden, notes Jonas Elmerraji of TheStreet. It's "the casual dining firm that's best been able to succeed in this challenging economic environment," he adds. Plus, Darden pays a 3.3% dividend yield and may increase its dividend in the next quarter.


Tags: CAKEDRI
309Comments
Jun 4, 2012 6:07PM
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Cheesecake Factory food is mediocre at best and severely over priced.
Jun 4, 2012 9:48PM
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The cheesecake Factory needs to stop charging top dollar for a quarter menu. Advertise half off happy hour on drinks and apps. Have a 2 for special, app, entree and dessert for two for $25-$30 dollars. All restaurants have done this to help diners enjoy a night out without breaking the bank; if Cheesecake Factory wants to compete they better step up like their competitors have and offer deals!
Jun 5, 2012 12:36PM
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I'm sure no one's heart attack was caused by The Cheesecake Factory alone.   If they suffer a heart attack, its from CONSISTENTLY eating high fatty foods.   Which would mean, what???   .....IT'S THEIR OWN FAULT!   *gasp*  Oh, my....

 

Lesson for today:  TAKE RESPONSIBILITY FOR YOUR OWN HEALTH, PEOPLE! 

Jun 4, 2012 5:05PM
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Who can afford it these days... surely not me....
Jun 4, 2012 8:47PM
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I love The Cheesecake Factory. And of course sales are off. Almost all restaurant sales are off. Who has the money to eat out, when they can barely manage to buy groceries?

 

"Hope and Change." And Obama kept his promise. Yes, there's always Hope. And Change? Yeah, I've got a little bit of "change" rattling around in my purse.

 

 

Jun 5, 2012 8:13AM
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I sure hope Penny and Bernadette don't end up losing their jobs :(
Jun 4, 2012 8:19PM
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Worked as a waiter their 10yrs ago and still have to say the food is great but I'm not into cheesecake. There locations just look to similar is my real complaint. I don't mind waiting even an hour...what else are you doing on a Sat. Night. Anticipation only makes the experience better if your with good company. Most are located in areas where you can shop while you wait. Staff has always been awesome. I'm a GM at Panera now....wonder when Panera will have an article stating the same thing. All these restaurants think they can outlive the 10yr cycle before becoming stale. Guess what, patron fatigue and a never emding desire to expand is what kills chains. Even though I work and enjoy some of them, I always find local restaraunts better...everytime.
Jun 5, 2012 1:01PM
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Kind of perplexed by some of these comments...

 

When the name of a restaurant is "CHEESECAKE FACTORY" I don't know whether or not comments about the health value of their food is relevant. What where you expecting? I don't think their major aim was to be considered the healthiest place in America, it's not named "The All Natural Locally Grown Organic Lettuce Farm" it's "The Cheesecake Factory" the specialize in decadence and fatty foods. It would be like going to a state fair and then complaining that the deep fried butter was too greasy.

 

It's always packed because they don't take reservations for whatever reason, I don't always enjoy it but I respect it and appreciate the fact that if I have to wait so does everybody else. And no I have never been to one where they had open tables and refused to seat people at them, A lot of the time I go have a drink at the bar and get a table there. I’ve maybe waited a half hour to receive my food from the time I ordered it, but I’ve definitely never waited an hour and a half.

 

No they do not have a dollar menu, but it is a little bit of a nicer restaurant than Mickey D’s.  I think they are competitively priced, especially for the portion size.  Complaining that it’s too expensive and then complaining that the portion sizes are too large seems ridiculous to me.  Bring a friend ask for another plate and eat it family style if you want to save money.

 

I don't think they have a racist agenda either, I don't think the company is sending out memo's on how to keep the black man down. I've had waiters of all races and been there with people of all races and the service has always been the same.

 

If you don’t like the food that’s fair enough, you are allowed to like what you like (or not like it), but I don’t think that they are comparable to a Chili’s or Applebee’s.  Ambiance alone they aren’t even comparable, let alone when you factor in the food and menu variety.  Why do people think that Chili’s, Applebee’s, Red Lobster, and Olive Garden are fine dining?  I don’t really consider Cheesecake Factory fine dining either but I would say that it is better and closer to it than any of those aforementioned restaurants.  I wouldn’t consider those on the same level as McDonald’s or Burger King, but they are like a notch above Denny’s and Cheesecake Factory is like a notch above them.

 

Jun 5, 2012 10:56AM
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I think the biggest problem with the Cheescake Factory is the cost....I have a family of (3) and we can have a modest meal and the bill still exceed $100.00.  I don't consider that casual dining pricing.
Jun 5, 2012 11:40AM
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maybe because no one wants to wait 45 minutes EVERY single time they want a meal.
Jun 5, 2012 12:00AM
Jun 4, 2012 6:38PM
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mediocre and overpriced. loaded with fat grams and calories. crowded.

nuff said

Jun 5, 2012 9:55AM
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The times I've gone, the food is always excellent, but long wait is a downer. They should consider groupon type deals to get new or existing customers to patronize more...their prices are too high!

Jun 5, 2012 8:51AM
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I went to Cheesecake Factory exactly once. I agree with the folks that say it is both noisy and overpriced. 

But the reason I won't go back is the ridiculous dining room layout. We were shoved in there like cattle. My husband and I had one of the tiny two-person tables, and they were so close together that a) I was sitting closer to the stranger next to me than my husband across from me, and b) there was so little room to get to your chair that the VERY tiny young woman next to my husband had to turn sideways to get to her seat. 

I wouldn't go through that again even if the food was spectacular...which it definitely was not. 
Jun 4, 2012 5:23PM
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It is pretty expensive, but aren't all restaurants suffering right now?
Jun 5, 2012 12:28PM
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Went recently with our daughter for the first time.The food was very good.We didn't have to wait more than 10-15 min. to be seated.Food took about 30 min to arrive.Service was excellent price was acceptable.Protions were larger than the 2 females could eat.Husband ate it all.We took home the left overs for another meal.No room for dessert but we looked at the desserts before dinner and they all looked good.We hoped we would have room to share one dessert among us but we were stuffed!Got the idea to go from watching the Big Bang.We usually go to the Outback but this menu was much more diverse.We will be sure to go again sometime soon.Loved it!!!!!
Jun 4, 2012 10:53PM
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Used to be our favorite restaurant...we still like the food but on more occasions than not the service is very lacking.  Unfortunately though service is declining in just about every aspect these days. The staffing and the pay these people are expected to work for is so pathetic these days (especially servers) it's no wonder they give crappy service. Companies need to pay better, staff better and set higher expectations to keep good help.
Jun 5, 2012 8:49AM
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There's nothing special about The Cheesecake Factory.  Their food average at best, yet overpriced.  Their cheesecake slices are not only expensive, but one slice (depending on the variety) can contain over 2000 calories in itself.  Who needs it? 

 

And, I wouldn't wait in line for an hour for any restaurant, ever.  No meal or restaurant is ever worth waiting that long for. 

Jun 5, 2012 10:40AM
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Perhaps the should scale back their prices and portions a bit?  I know I don't eat there because I can't possibly eat that much food, and I refuse to pay that kind of money to eat a quarter of the meal, and leftovers are not always an option, especially since if I am eating at one I am at least an hour away from home.
Great food, great atmosphere...just need to make it more affordable!

Jun 5, 2012 2:56PM
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I think the Cheesecake Factory sucks, and I'll tell you why.  When I ate there, I asked if they had sugar free cheesecake because I'm diabetic.  The waitor said yes, and I was very happy until he added but it's two bucks more than the regular.  I said is it a bigger piece?  And he said no......smaller if anything.  I asked for the manager to come and explain the price difference to me.  Basically he said other people can eat what they want and they want them to eat their cheesecake so they make the price affordable.  But diabetics, he said HAVE to have the sugar free, so they charge more just because they can.  I said I don't think I'll be eating here anymore with that kind of attitude.  He just shrugged.  He could not have cared less.  I hope they whole place goes down the toilet.

Thanks for your time.

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