Cheesecake Factory Releases Second-Quarter Earnings, Bakes in Shaved EPS Guidance

The Cheesecake Factory CAKE posted second-quarter results on Wednesday that missed guidance and reflected the competitive nature of the restaurant industry. Total revenue grew by 3.4% over the prior-year period, though same-store sales growth from the firm's namesake restaurants sat at 0.9% while struggling Grand Lux Cafe contributions remained flat at 0.1%. Meanwhile, a $1.5 million charge relating to the planned relocation of two restaurants contributed to a 20-basis-point decline in the firm's operating margin to 8.8%. Management also cited adverse climate patterns that negatively affected the quarter due to the absence of material contributions from patio seating. Meanwhile, the firm still plans to open eight to 10 company restaurants within the year, while its foreign expansion initiatives in the Middle East are likely to bear fruit with higher than expected volume and growing brand awareness. Going forward, the EPS guidance range for 2013 stands at $2.10-$2.15, which is slightly lower than the $2.12-$2.18 range given last quarter and represents a 12%-14% expansion of the $1.88 figure posted in 2012. Same-store sales growth is expected to come in at around 1.5% with a 50-basis-point operating margin expansion driven by growth in the Middle East and easing commodity expenses, principally from favorable dairy prices.