UPDATE: Cheesecake Factory, Shake Shack downgraded as shopper traffic and delivery take a toll
By Tonya Garcia, MarketWatch
Shares are down by double digits so far this year for much of this restaurant segment
The Cheesecake Factory was downgraded to neutral from outperform at Wedbush with analysts saying the restaurant chain, which has many mall-based locations, is especially exposed to retail traffic declines.
Its price target was lowered to $44 from $52.
Wedbush also downgraded Shake Shack Inc. (SHAK) and burger chain Habit Restaurants Inc. (HABT) from outperform to neutral on Tuesday, all on broader concerns about the casual and fast-casual dining areas.
However, each company also faces unique challenges, the analysts said.
"As income growth of higher-income brackets plateaus, as [quick-service restaurants] and casual dining continue to price relative to muted at-home inflation trends, and as secular headwinds, such as declining retail traffic and growth in third-party delivery continue, we expect transactions in casual dining to remain under pressure relative to what we believe are still moderately optimistic expectations," Wedbush analysts led by Nick Steyan wrote in a note published Tuesday.
Analysts say that checks of about 20% of Cheesecake Factory's (CAKE) domestic locations indicate that third-quarter same-store sales are in line with the 1% to 2% decline that the company forecast.