The Cheesecake Factory Inc. (CAKE, Financial) created the upscale casual dining segment in 1978 with the introduction of its namesake concept.
The company, through its subsidiaries, owns and operates 201 full-service, casual dining restaurants throughout the U.S. and Puerto Rico, including 188 restaurants under the Cheesecake Factory mark; 12 restaurants under the Grand Lux Café mark and one restaurant under the RockSugar Pan Asian Kitchen mark. Internationally, 11 Cheesecake Factory restaurants operate under licensing agreements.
The company’s bakery division operates two production facilities, in Calabasas Hills, California, and Rocky Mount, North Carolina, that produce quality cheesecakes and other baked products for its restaurants, international licensees and third-party bakery customers.
The company recently reported strong fourth-quarter results and reached a number of important milestones in 2015. It expanded its business and now operates 200 restaurants around the world. The international presence grew to 11 locations in operation under licensing agreements. It recorded more than $2 billion in revenues for the first time, moved another step forward toward improving operating margin and grew adjusted earnings per share by 20%. Overall, it successfully accomplished its objective of increasing shareholder returns in 2015 while also remaining focused on quality growth for the future.
The fourth quarter marked the completion of its sixth consecutive year of delivering positive comparable sales every quarter and continuing its outperformance relative to the casual dining industry.
Fourth-quarter results
Total revenues were $526.8 million in the fourth quarter of fiscal 2015 (which was $499.7 million in the prior-year quarter). Net income and diluted net income per share were $27.2 million and 54 cents in the fourth quarter of fiscal 2015.
Comparable restaurant sales at Cheesecake Factory restaurants increased by 1.1% in the fourth quarter of fiscal 2015.
The company opened six Cheesecake Factory restaurants during the fourth quarter of fiscal 2015, meeting its objective of opening as many as 11 company-owned restaurants domestically in fiscal 2015.
Internationally, two Cheesecake Factory restaurants opened in the Middle East in the fourth quarter of fiscal 2015, for a total of three locations opened under licensing agreements in the Middle East and Mexico during the year, as anticipated.
In fiscal 2016, the company expects to open as many as eight company-owned restaurants domestically. Internationally, the company expects as many as four or five restaurants to open under licensing agreements.
In fiscal 2015, the company repurchased 2.1 million shares of its common stock at a cost of $104.8 million, including approximately 350,000 shares repurchased in the fourth quarter at a cost of $17.3 million. In total, the company returned $140.7 million in cash to shareholders in fiscal 2015 through share repurchases and dividends.
The company’s board of directors declared a quarterly cash dividend of 20 cents per share on the company’s common stock, payable on March 14 to shareholders of record at the close of business on March 1.
For fiscal 2016, the company expects to return substantially all its free cash flow to shareholders in the form of share repurchases and dividends.
(Source: Company’s website)
Awards and recognition
On March 3 Fortune magazine recognized the company as one of the “100 Best Companies to Work For” for the third consecutive year. The Cheesecake Factory ranked No. 98 and is the only restaurant company on the list, which recognizes companies with a strong culture, determined primarily by an extensive employee survey that measures overall job satisfaction, engagement, pride, trust and camaraderie in the workplace.
In 2014, consumers voted The Cheesecake Factory "North America’s Favorite Casual Dining Chain" in a Market Force Information study for its menu and food quality. And in 2014, it was also named the "Most Preferred Casual Dining Restaurant" in Nation’s Restaurant News’ Consumer Picks’ report for the third consecutive year. The Consumer Picks’ survey is a comprehensive study that rates restaurant chains based on customer preferences, and The Cheesecake Factory was selected for both menu variety and reputation for excellence.
On a concluding note
For more than 35 years The Cheesecake Factory has been committed to creating a culture that fosters integrity, respect, responsibility and mutual trust. It has a number of productive restaurants that provide significant returns on capital. The Cheesecake Factory posted kind of a mixed quarter, but it has a lot of room to grow. The company is doing well, and investors should consider adding this company to their portfolio.
Disclosure: I do not hold any position in the company.
