The Cheesecake Factory Incorporated (CAKE) Bundle
Understanding The Cheesecake Factory Incorporated (CAKE) Revenue Streams
Understanding The Cheesecake Factory's Revenue Streams
Revenue Overview
For the first nine months ended October 1, 2024, total revenues increased by 3.8% to $2,660.7 million, compared to $2,562.5 million for the same period in the prior year .
Revenue Breakdown by Segment
The revenue contributions from different restaurant segments for the first nine months of fiscal 2024 are as follows:
| Segment | Revenue (in millions) | Year-over-Year Change |
|---|---|---|
| The Cheesecake Factory | $1,992.2 | 2.9% |
| North Italia | $218.3 | 13.9% |
| Other FRC | $214.9 | 11.3% |
| Other | $235.4 | -2.0% |
| Total | $2,660.7 | 3.8% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for the first nine months of fiscal 2024 reflects a consistent upward trend:
- First nine months of fiscal 2024: $2,660.7 million
- First nine months of fiscal 2023: $2,562.5 million
- Percentage increase: 3.8%
Average Sales Per Restaurant Operating Week
The average sales per restaurant operating week for The Cheesecake Factory increased by 0.5% to $236,637 in the first nine months of fiscal 2024 from $235,398 in the prior year .
Comparable Sales Performance
Comparable sales for The Cheesecake Factory increased by 0.8%, which translated to an increase of $14.9 million from the first nine months of fiscal 2023 .
Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Sales through the off-premise channel accounted for approximately 21% of total restaurant sales during the first nine months of fiscal 2024, down from 22% in the prior year .
- North Italia saw substantial growth of 13.9% compared to the previous year, indicating a strong performance in that segment .
- Flower Child reported an increase of 10.1% in sales, reflecting a growing consumer interest in its offerings .
A Deep Dive into The Cheesecake Factory Incorporated (CAKE) Profitability
Profitability Metrics
Gross Profit Margin: For the fiscal quarter ended October 1, 2024, the gross profit margin was 77.4%, compared to 76.5% for the same quarter in 2023. This increase reflects improved cost management strategies.
Operating Profit Margin: The operating profit margin for the third quarter of fiscal 2024 was 3.9%, an increase from 2.3% in the same quarter of 2023. This improvement is attributed to better revenue generation from new restaurant openings and operational efficiencies.
Net Profit Margin: The net profit margin for the quarter ended October 1, 2024, was 3.5%, up from 2.2% in the previous year. This increase is a result of higher revenues and effective cost control measures.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 77.4% | 76.5% | +0.9% |
| Operating Profit Margin | 3.9% | 2.3% | +1.6% |
| Net Profit Margin | 3.5% | 2.2% | +1.3% |
Trends in Profitability: Over the past three years, the net income has shown a steady increase, with fiscal 2024 reporting net income of $115.6 million, up from $88.7 million in fiscal 2023. This trend demonstrates not only growth in revenue but also improvements in managing operational costs.
Comparison with Industry Averages: The average net profit margin for the restaurant industry hovers around 5%. The company's net profit margin of 3.5% indicates room for improvement but reflects competitive positioning amidst rising costs and inflationary pressures.
Operational Efficiency Analysis: The company has effectively managed its food and beverage costs, which accounted for 22.6% of revenues in Q3 2024, down from 23.5% in Q3 2023. Labor costs were 35.9% of revenues, a slight decrease from 36.3% in the same period last year, indicating improved labor productivity.
| Cost Component | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Food & Beverage Costs | 22.6% | 23.5% | -0.9% |
| Labor Costs | 35.9% | 36.3% | -0.4% |
| Other Operating Costs | 27.7% | 27.6% | +0.1% |
Debt vs. Equity: How The Cheesecake Factory Incorporated (CAKE) Finances Its Growth
Debt vs. Equity: How The Cheesecake Factory Finances Its Growth
Long-term Debt: As of October 1, 2024, the company had a gross principal balance of $345.0 million in convertible senior notes, with a net balance of $341.6 million after unamortized issuance costs.
Short-term Debt: The outstanding balance under the revolving credit facility was $130.0 million as of October 1, 2024.
Total Debt: The total debt, including both long-term and short-term debt, amounts to $471.6 million.
Debt-to-Equity Ratio: As of October 1, 2024, the debt-to-equity ratio is approximately 1.46, calculated based on total debt of $471.6 million and total equity of $322.7 million.
Industry Comparison: The restaurant industry average debt-to-equity ratio is typically around 1.0 to 1.5, indicating that the company is positioned within the industry norm.
Recent Debt Issuances: On June 15, 2021, the company issued $345.0 million in convertible senior notes.
Credit Rating: The company does not currently have a publicly rated credit rating from major agencies, which can impact its ability to issue additional debt and the interest rates it may incur.
Refinancing Activity: The company entered a Fourth Amended and Restated Loan Agreement on October 6, 2022, which provides for a $400 million revolving credit facility.
Debt and Equity Balancing: The company utilizes operating lease arrangements for its restaurant locations, which reduces the need for funded indebtedness. This enables a balanced approach to financing growth through both debt and equity.
| Category | Amount (in millions) |
|---|---|
| Convertible Senior Notes | $345.0 |
| Revolving Credit Facility | $130.0 |
| Total Debt | $471.6 |
| Equity | $322.7 |
| Debt-to-Equity Ratio | 1.46 |
Assessing The Cheesecake Factory Incorporated (CAKE) Liquidity
Assessing The Cheesecake Factory's Liquidity
Current Ratio: As of October 1, 2024, the current ratio stands at 1.1, indicating that the company has sufficient current assets to cover its current liabilities.
Quick Ratio: The quick ratio is reported at 0.9, suggesting that when excluding inventory, the company may face challenges in meeting its short-term obligations.
| Liquidity Ratios | 2024 | 2023 |
|---|---|---|
| Current Ratio | 1.1 | 1.2 |
| Quick Ratio | 0.9 | 1.0 |
Working Capital: The working capital has shown a slight decrease, amounting to $12.5 million in 2024 compared to $14.3 million in 2023.
Analysis of Cash Flow Statements
Operating Cash Flow: In the first nine months of 2024, cash provided by operating activities was $174.3 million, up from $150.5 million in the same period of 2023.
Investing Cash Flow: Cash used in investing activities totaled $121.0 million in 2024, compared to $100.6 million in 2023, primarily due to capital expenditures for new restaurant openings.
Financing Cash Flow: Cash used in financing activities was $57.3 million in 2024, down from $60.4 million in 2023, reflecting lower treasury stock purchases.
| Cash Flow Activities | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $174.3 | $150.5 |
| Investing Activities | ($121.0) | ($100.6) |
| Financing Activities | ($57.3) | ($60.4) |
Potential Liquidity Concerns or Strengths
While the current ratio indicates a comfortable liquidity position, the quick ratio reveals potential challenges, primarily due to inventory levels. The increase in operating cash flow is a positive sign of operational efficiency. However, the growing cash outflows in investing activities may require close monitoring to ensure that capital expenditures do not adversely impact liquidity.
Is The Cheesecake Factory Incorporated (CAKE) Overvalued or Undervalued?
Valuation Analysis
As of October 1, 2024, the price-to-earnings (P/E) ratio stands at 30.2, while the price-to-book (P/B) ratio is 2.5. The enterprise value-to-EBITDA (EV/EBITDA) ratio is 12.8.
| Metric | Value |
|---|---|
| P/E Ratio | 30.2 |
| P/B Ratio | 2.5 |
| EV/EBITDA | 12.8 |
Over the past 12 months, the stock price has fluctuated between $29.00 and $40.50, with a current price of $37.00 as of October 1, 2024. This indicates a 15% increase year-to-date.
In terms of dividends, the dividend yield is currently 2.9%, with a payout ratio of 27% based on the last annual dividend of $1.08 per share.
| Dividend Details | Value |
|---|---|
| Dividend Yield | 2.9% |
| Payout Ratio | 27% |
| Annual Dividend per Share | $1.08 |
Analyst consensus indicates a "Hold" rating for the stock, with 7 analysts recommending a hold, 3 analysts suggesting a buy, and 1 analyst advising a sell as of October 1, 2024.
| Analyst Consensus | Number of Analysts |
|---|---|
| Buy | 3 |
| Hold | 7 |
| Sell | 1 |
Key Risks Facing The Cheesecake Factory Incorporated (CAKE)
Key Risks Facing The Cheesecake Factory Incorporated
As of 2024, several internal and external risk factors threaten the financial health of the company. These include industry competition, regulatory changes, and fluctuations in market conditions.
Industry Competition
The restaurant industry is highly competitive, with numerous players vying for market share. The company faces pressure from both established brands and new entrants. As of the third quarter of fiscal 2024, comparable sales increased by only 1.6%, indicating a challenging competitive environment.
Regulatory Changes
Changes in labor laws, health regulations, and environmental policies can significantly impact operational costs. For instance, labor expenses as a percentage of revenues were 35.7% in the first nine months of fiscal 2024. Such regulatory changes could further increase these costs.
Market Conditions
Economic fluctuations, including inflation and changes in consumer spending habits, pose additional risks. The company anticipates commodity inflation in the low-single digit range. This inflation can affect food and beverage costs, which were 22.6% of revenues in the first nine months of fiscal 2024.
Operational Risks
Operational risks include reliance on operating leases for restaurant locations, which can limit financial flexibility. The total lease expense for the first nine months of fiscal 2024 was $181.977 million. Additionally, the company recorded impairment of assets and lease termination income of $1.577 million.
Financial Risks
The company has a gross principal balance of $345 million in convertible senior notes, maturing in June 2026. This indebtedness could pose a risk if market conditions deteriorate or if the company fails to generate sufficient revenues to cover its obligations.
Strategic Risks
Strategic risks arise from the company's plans for expansion. It aims to open as many as 22 new restaurants in fiscal 2024, requiring estimated capital expenditures of $180 to $200 million. Delays in supply chain or permitting processes could impede these plans.
Mitigation Strategies
To mitigate these risks, the company is focused on maintaining a strong balance sheet and enhancing operational efficiencies. Cash provided by operating activities increased to $174.3 million for the first nine months of fiscal 2024, which can help manage liquidity and funding for expansion efforts.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | High competition in the restaurant sector | Comparable sales increased by 1.6% |
| Regulatory Changes | Labor laws and health regulations | Labor expenses at 35.7% of revenues |
| Market Conditions | Economic fluctuations and inflation | Commodity inflation expected in low-single digits |
| Operational Risks | Reliance on operating leases | Total lease expense of $181.977 million |
| Financial Risks | Convertible senior notes | Gross principal balance of $345 million |
| Strategic Risks | Expansion plans and capital expenditures | Estimated $180 to $200 million for new openings |
Future Growth Prospects for The Cheesecake Factory Incorporated (CAKE)
Growth Opportunities
In the fiscal year 2024, the company has identified several key growth drivers that are expected to enhance its financial performance. These drivers include product innovations, market expansions, and strategic acquisitions.
Key Growth Drivers
- New Restaurant Openings: The company opened 14 new restaurants in the first nine months of fiscal 2024, which included one The Cheesecake Factory, three North Italia, four Flower Child, and six Other FRC locations. The target is to open as many as 22 new restaurants by the end of fiscal 2024.
- Comparable Restaurant Sales Growth: For the first nine months of fiscal 2024, comparable sales increased by 0.8%, driven by an average check increase of 1.6%.
- Expansion of Off-Premise Sales: Off-premise sales accounted for approximately 21% of total restaurant sales during the first nine months of fiscal 2024, slightly down from 22% in the prior year.
Future Revenue Growth Projections
The company anticipates total revenue for fiscal 2024 to be approximately $3.57 billion. For fiscal 2025, projected revenue is expected to reach $3.75 billion.
Strategic Initiatives and Partnerships
In addition to new restaurant openings, the company is focusing on enhancing its menu offerings and improving customer experience. This includes effective menu price increases implemented in the first and third quarters of fiscal 2024, which were approximately 2.5% and 2.0%, respectively.
Competitive Advantages
The company benefits from a strong brand recognition and a diverse portfolio of restaurant concepts. Its ability to leverage operational efficiencies and maintain a conservative balance sheet positions it favorably for growth.
Projected Financial Performance Metrics
| Metric | Fiscal 2024 | Fiscal 2025 |
|---|---|---|
| Total Revenue | $3.57 billion | $3.75 billion |
| Net Income Margin | 4.5% | 4.75% |
| Capital Expenditures | $180 - $200 million | $190 - $210 million |
| New Restaurant Openings | 22 | 24 |
These growth opportunities, driven by strategic initiatives and favorable market conditions, position the company for a potentially robust financial future.
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Resources:
- The Cheesecake Factory Incorporated (CAKE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The Cheesecake Factory Incorporated (CAKE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View The Cheesecake Factory Incorporated (CAKE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.