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The Cheesecake Factory Incorporated CAKE has shown strong stock performance in recent months. Over the past six months, the stock has jumped 22.1%, significantly outperforming the Zacks Retail – Restaurants industry’s decline of 0.5%. It has also fared better than the broader Zacks Retail-Wholesale sector’s 2.1% growth and the S&P 500 index’s 1.6% decline during the same period.
Cheesecake Factory continues to benefit from strong consumer demand, improving comparable sales and restaurant openings. The solid performance of Flower Child and a focus on operational efficiency further support growth. The company's investments in differentiated concepts and emerging brands strengthen its long-term growth potential.
As of Wednesday, the stock closed at $48.27, below its 52-week high of $57.32 but above its 52-week low of $33.05. In the past six months, CAKE has also outperformed industry players like The Wendy's Company WEN, Shake Shack Inc. SHAK and Chipotle Mexican Grill, Inc. CMG. During the said time frame, shares of WEN, SHAK and CMG have declined 13.6%, 15.8% and 15.9%, respectively.
CAKE Stock’s Six-Month Price Performance
Image Source: Zacks Investment Research
Factors Favoring Cheesecake Factory
Steady Growth in Comps: Cheesecake Factory continues to deliver positive comps growth, driven by strong consumer demand and pricing adjustments. In the fourth quarter of fiscal 2024, comps at Cheesecake Factory restaurants increased 1.7% year over year, outperforming the industry. The rally was supported by a 1.7% rise in the average check, driven by a 4.7% increase in menu pricing. However, a 3% negative impact from the mix and a 0.7% decline in customer traffic partially offset the gains.
Expansion to Drive Growth: CAKE remains committed to expanding its footprint as part of its long-term growth strategy. The company is actively increasing its restaurant count across multiple brands to strengthen its market presence. In the fourth quarter of fiscal 2024, the company expanded its footprint with nine restaurant openings, including three North Italia locations, two Flower Child locations, two Fox Restaurant Concepts restaurants and the relocation of two Cheesecake Factory restaurants.
The company intends to accelerate unit growth in 2025, with plans to open up to 25 restaurants throughout the year. Approximately 15 locations are likely to open in the first half, with the remaining units launching in the latter half. The company expects $190-$210 million in Capex for unit development and restaurant maintenance, targeting 7% long-term unit growth.
Digitalization Efforts: The company is strengthening its digital capabilities to enhance customer convenience and drive sales. Investments in technology and delivery partnerships are strengthening its off-premise business and expanding its reach. In the fourth quarter of fiscal 2024, off-premise sales contributed 21% to restaurant sales. The company has been seeing steady performance in the delivery channel and expects targeted marketing efforts to drive growth.
Menu Innovation & Operational Efficiency: Cheesecake Factory is enhancing its menu with new offerings that cater to diverse tastes while maintaining quality. During the fourth-quarter fiscal 2024 earnings call, the company highlighted the launch of more than 20 items across various cuisines and price ranges. Positive guest feedback reflects a strong demand for the updated menu. Going forward, the company remains focused on innovation to stay competitive while avoiding heavy discounting.
Meanwhile, the company's focus on operational improvements and strong management practices is driving better efficiency, leading to an improvement in restaurant-level margins. In the fiscal fourth quarter, restaurant-level margins reached 18.4%, marking the highest level in more than seven years. Strong management and improved staff retention are expected to support ongoing operational enhancements.