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GuruFocus has detected 3 Warning Signs with Cheesecake Factory Inc \$CAKE.
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Cheesecake Factory Inc (NAS:CAKE)
Gross Profit
\$436 Mil (TTM As of Sep. 2016)

Cheesecake Factory Inc's gross profit for the three months ended in Sep. 2016 was \$110 Mil. Cheesecake Factory Inc's gross profit for the trailing twelve months (TTM) ended in Sep. 2016 was \$436 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Cheesecake Factory Inc's gross profit for the three months ended in Sep. 2016 was \$110 Mil. Cheesecake Factory Inc's revenue for the three months ended in Sep. 2016 was \$560 Mil. Therefore, Cheesecake Factory Inc's Gross Margin for the quarter that ended in Sep. 2016 was 19.60%.

Cheesecake Factory Inc had a gross margin of 19.60% for the quarter that ended in Sep. 2016 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Cheesecake Factory Inc was 19.81%. The lowest was 16.12%. And the median was 18.53%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Cheesecake Factory Inc's Gross Profit for the fiscal year that ended in Dec. 2015 is calculated as

 Gross Profit (A: Dec. 2015 ) = Revenue - Cost of Goods Sold = 2100.609 - 1689.489 = 411

Cheesecake Factory Inc's Gross Profit for the quarter that ended in Sep. 2016 is calculated as

 Gross Profit (Q: Sep. 2016 ) = Revenue - Cost of Goods Sold = 560.018 - 450.282 = 110

Cheesecake Factory Inc Gross Profit for the trailing twelve months (TTM) ended in Sep. 2016 was 103.494 (Dec. 2015 ) + 107.705 (Mar. 2016 ) + 114.738 (Jun. 2016 ) + 109.736 (Sep. 2016 ) = \$436 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Cheesecake Factory Inc's Gross Margin for the quarter that ended in Sep. 2016 is calculated as

 Gross Margin (Q: Sep. 2016 ) = Gross Profit (Q: Sep. 2016 ) / Revenue (Q: Sep. 2016 ) = (Revenue - Cost of Goods Sold) / Revenue = 110 / 560.018 = 19.60 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Cheesecake Factory Inc had a gross margin of 19.60% for the quarter that ended in Sep. 2016 => No sustainable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Cheesecake Factory Inc Annual Data

 Dec06 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Gross_Profit 258 285 259 276 301 313 339 367 362 411

Cheesecake Factory Inc Quarterly Data

 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Gross_Profit 95 89 91 97 110 101 103 108 115 110
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