|
Related Topics
|
Category: Stock Market and Electronic Arts
Date: 12 June 2020 Stock Price: $22.66 We take a look at the 1st quarter earnings report of their 2020 fiscal year of The Cheesecake Factory a leader in experimental dining with 289 restaurants open across the United States and Canada trading under their various brands. The group has been hit hard by the Covid-19 and lockdowns and stay at home orders keeping people out of their outlets.
|
About The Cheesecake Factory
The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. Delicious, memorable experiences created by passionate people – this defines who we are and where we are going. We currently own and operate 289 restaurants throughout the United States and Canada under brands including The Cheesecake Factory®, North Italia® and a collection within the Fox Restaurant Concepts subsidiary. Internationally, 24 The Cheesecake Factory® restaurants operate under licensing agreements. Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers. In 2019, we were named to the FORTUNE Magazine “100 Best Companies to Work For®” list for the sixth consecutive year
Overview of The Cheesecake Factory 1st quarter 2020 earnings report
Data below refers to quarterly data unless specified otherwise:
- Net Revenues: $615.106 million (up from $599.481 million for the same period of the previous year)
- Net revenues increased by 2.6% over the last 12 months
- Total cost and expenses: $620.672 million (up from $569.333 million for the same quarter of the previous year)
- Total cost and expenses increased by 9% over the last 12 months
- Net loss: -$3.99 million (down from $26.974 million from for the same period of the previous year)
- Diluted loss per share: -$0.09 (down from $0.61 for the same period of the previous year)
- PE ratio of Cheesecake Factory: Since the group is loss making right now a PE ratio cannot be calculated
- Diluted weighted-average shares outstanding: 43.773 million (down from 44.255 million for the same period of the previous year)
- Cash and cash equivalents $81.023 million
- Cash and cash equivalents per share: $1.85
- Cash and cash equivalents makes up 8.2% of The Cheesecake Factory's market capital
The Cheesecake Factory's management commentary on their 1st quarter 2020 results
CALABASAS HILLS, Calif.--(BUSINESS WIRE)-- The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported preliminary financial results for the first quarter of fiscal 2020, which ended on March 31, 2020.
“Our first quarter was off to a solid start with comparable sales growth both ahead of plan and outperforming the broader casual dining industry trend, which drove solid restaurant-level margin results through February,” said David Overton, Chairman and Chief Executive Officer. “That trajectory was impacted by the onset of COVID-19 and the associated social distancing and shelter-in-place orders that required us to close our restaurant dining rooms and shift to an off-premise only operating model in March.”
Overton continued, “Our restaurant teams have done a tremendous job executing in this environment in the face of significant adversity, and we have seen sales volumes accelerate. At the same time, we have made very difficult, yet necessary decisions to manage costs and preserve cash, while ensuring that we are well-positioned for the eventual reopening of our restaurant dining rooms, although we expect capacity restrictions for some time as social distancing protocols remain in place. With our experienced management teams, long-standing and strong off-premise business and a strengthened liquidity position, we believe we will continue to be able to effectively manage through and ultimately emerge from this crisis even stronger as we have proven in prior cycles.”
“Our first quarter was off to a solid start with comparable sales growth both ahead of plan and outperforming the broader casual dining industry trend, which drove solid restaurant-level margin results through February,” said David Overton, Chairman and Chief Executive Officer. “That trajectory was impacted by the onset of COVID-19 and the associated social distancing and shelter-in-place orders that required us to close our restaurant dining rooms and shift to an off-premise only operating model in March.”
Overton continued, “Our restaurant teams have done a tremendous job executing in this environment in the face of significant adversity, and we have seen sales volumes accelerate. At the same time, we have made very difficult, yet necessary decisions to manage costs and preserve cash, while ensuring that we are well-positioned for the eventual reopening of our restaurant dining rooms, although we expect capacity restrictions for some time as social distancing protocols remain in place. With our experienced management teams, long-standing and strong off-premise business and a strengthened liquidity position, we believe we will continue to be able to effectively manage through and ultimately emerge from this crisis even stronger as we have proven in prior cycles.”
Overton concluded, “I want to thank our teams for everything they are doing to support our business during this unprecedented time. While the duration of COVID-19 and what the reopening of the economy will look like remains uncertain, we look forward to getting our affected staff members back to work as soon as practicable.”
Balance Sheet
As of March 31, 2020, cash and cash equivalents totaled $81.0 million and total debt was $380.0 million. On April 20, 2020, the Company announced that it closed a $200 million convertible preferred investment from affiliates of Roark Capital. As of April 30, 2020, the Company’s cash balance was approximately $260 million.
On May 1, 2020, the Company entered into an amendment to its revolving credit facility that, among other changes, provides for net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratio covenant relief through the first quarter of fiscal 2021. To preserve liquidity and in conjunction with the terms of the credit facility amendment, the Company’s Board of Directors has suspended the quarterly dividend on its common stock, as well as share repurchases.
Balance Sheet
As of March 31, 2020, cash and cash equivalents totaled $81.0 million and total debt was $380.0 million. On April 20, 2020, the Company announced that it closed a $200 million convertible preferred investment from affiliates of Roark Capital. As of April 30, 2020, the Company’s cash balance was approximately $260 million.
On May 1, 2020, the Company entered into an amendment to its revolving credit facility that, among other changes, provides for net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratio covenant relief through the first quarter of fiscal 2021. To preserve liquidity and in conjunction with the terms of the credit facility amendment, the Company’s Board of Directors has suspended the quarterly dividend on its common stock, as well as share repurchases.
The Cheesecake Factory (NASDAQ: CAKE) stock price history
The image below, obtained from Google, shows the stock price history of Cheesecake Factory over the last 5 years. And its not been a very good time for Cheesecake Factory stockholders. 5 years ago the stock was trading at around $54.30 a stock and its currently trading at $22.66 a stock. That's a significant loss of -58.4% suffered by Cheesecake Factory stockholders over the last 5 years.
The stock of Cheesecake Factory is trading at a lot closer to its 52 week low of $14.52 than it is to its 52 week high of $46.26 which to us is a clear indication that the short term sentiment and momentum of Cheesecake Factory stock is negative at this point in time.
The stock of Cheesecake Factory is trading at a lot closer to its 52 week low of $14.52 than it is to its 52 week high of $46.26 which to us is a clear indication that the short term sentiment and momentum of Cheesecake Factory stock is negative at this point in time.
Cheesecake Factory (CAKE) stock vs Cracker Barrel (CBRL) stock
The image below shows the stock price performance of The Cheesecake Factory (CAKE) and Cracker Barrel Old Country Store (CBRL) over the last 3 years. The trends of the two companies stock prices are fairly similar and both firms stock price saw significant declines over the last 3 years. Over the 3 year period the stock of Cheesecake Factory declined by 54.17% while the stock of Cracker Barrel declined by -33.5% over the same time period
Recent coverage of The Cheesecake Factory
The extract below discusses the latest news regarding The Cheesecake Factory as obtained from Forbes.com
The Cheesecake Factory’s stock (NASDAQ: CAKE) has declined by 36% since the beginning of the year. The restaurant industry is rattled, and Cheesecake Factory is no exception. A Covid recession will impact the company’s revenues, cash flows, and ability to pay dividends. We estimate that a recession that persists through late Q2/early Q3 2020 can reduce the company’s revenues by 20% from $2.5 billion in 2019 to $2 billion in 2020. Many restaurants are closed, while some are running in a takeaway-only mode. Further, lower consumer spending and consumption over the coming months will likely lead to lower demand for food and beverages which can put the mere survival of restaurant companies into question.
Trefis analyzes the potential Impact Of The Covid-19 Recession On The Cheesecake Factory with a focus on the company’s liquidity reserves and concludes that The Cheesecake Factory has a steady financial position and a Covid-19 recession will not have a major impact on the company’s cash reserves in the near term.
Impact On The Cheesecake Factory’s Revenues
Impact On The Cheesecake Factory’s Cash Flows
Read the full article here
The Cheesecake Factory’s stock (NASDAQ: CAKE) has declined by 36% since the beginning of the year. The restaurant industry is rattled, and Cheesecake Factory is no exception. A Covid recession will impact the company’s revenues, cash flows, and ability to pay dividends. We estimate that a recession that persists through late Q2/early Q3 2020 can reduce the company’s revenues by 20% from $2.5 billion in 2019 to $2 billion in 2020. Many restaurants are closed, while some are running in a takeaway-only mode. Further, lower consumer spending and consumption over the coming months will likely lead to lower demand for food and beverages which can put the mere survival of restaurant companies into question.
Trefis analyzes the potential Impact Of The Covid-19 Recession On The Cheesecake Factory with a focus on the company’s liquidity reserves and concludes that The Cheesecake Factory has a steady financial position and a Covid-19 recession will not have a major impact on the company’s cash reserves in the near term.
Impact On The Cheesecake Factory’s Revenues
- If the outbreak of the virus increases, the system-wide sales will decline until the situation improves as people will be averse to entering restaurants. As a result, The Cheesecake Factory’s revenues could decline by about 20% in FY’20, on account of weaker demand, more focus on essentials, a reduction in meeting friends and colleagues for dinners and drinks, which further reduces demand.
- In addition to that, the company derives nearly 100% of its revenues from North America, which has become the epicenter of the outbreak – recording the largest numbers of Covid-19 cases across the globe.
Impact On The Cheesecake Factory’s Cash Flows
- Cheesecake Factory’s cash flows are likely to plunge in FY2020 due to a fall in revenues and reduced profitability.
- Elevated costs, coupled with lower revenues, will hurt the company’s bottom line.
- We estimate that Free cash flow from operations will go down from $218.8 million in 2019 to $65.8 million in 2020. Also, with expected capital expenditures of $36.9 million for the year, FCFO-CapEx will be $28.9 million in 2020.
Read the full article here
The Cheesecake Factory (NASDAQ: CAKE) latest stock valuation
So what is Cheesecake Factory stock worth based on the release of their 1st quarter 2020 earnings report? Based on Cheesecake Factory latest earnings report (and their business update) our valuation models provide a target price (full value price) for the stock of Cheesecake Factory at $24.90 a stock (down significantly from our last valuation) and therefore believe the stock of Cheesecake Factory is slightly undervalued
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $24.90. Therefore we believe a good entry point into Cheesecake Factory stock is at $22.40 or below. We expect the stock of Cheesecake Factory to trade in a narrow range around its current price in coming weeks and months as more of their stores starts opening up after Covid-19 related stay at home orders and lockdowns
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $24.90. Therefore we believe a good entry point into Cheesecake Factory stock is at $22.40 or below. We expect the stock of Cheesecake Factory to trade in a narrow range around its current price in coming weeks and months as more of their stores starts opening up after Covid-19 related stay at home orders and lockdowns
Next earnings release date for The Cheesecake Factory
It is expected that The Cheesecake Factory will release their 2nd quarter 2020 earnings report in mid September 2020