Cheesecake Factory comparable sales down 57 percent in 2Q as off-premises, dining room reopenings ramp up
Off-premises business boosts North Italia, Cheesecake Factory restaurants
The Cheesecake Factory continues to reopen its restaurants, both for indoor and outdoor-only dining, as it seeks to recapture sales during the COVID-19 health crisis. During its fiscal second quarter sales, total comparable sales decreased by 56.9 percent at Cheesecake Factory restaurants and dropped 59 percent at North Italia locations. By the end of the quarter, 206 Cheesecake Factory restaurants, 23 North Italia units and 65 locations within a mix of Fox Restaurant Concepts & other brands, had reopened.
Dining room reopening continues
During the second quarter, revenues had decreased 51 percent from last year to $295.9M. Diluted net loss decreased 301 percent to $(1.61) for the second quarter of 2020. On an 2Q analyst call, executives indicated that The Cheesecake Factory restaurants are currently posting a 32-percent decrease in comparable sales month-to-date in July. Between April and June, the chain posted comparable sales that gradually increased—from (66) percent to (42) percent.
Among Cheesecake Factory restaurants that had reopened, 146 were reopened with indoor dining and 36 were open with outdoor patio dining only. Of North Italia restaurants, 17 locations had reopened indoor dining rooms and 6 had outdoor-dining operations only.
Off-premises sales have provided substantial lift, comprising $4.2M on average per Cheesecake Factory restaurant. Off-premises sales at North Italia are just beginning and executives indicated that the same technology powering online ordering for The Cheesecake Factory was implemented at North Italia. Off-premises sales currently make up 32 percent of North Italia’s sales.
Remarkably, Cheesecake Factory restaurants that reopened dining rooms at 50-percent capacity and were open in full during June recaptured 87 percent of last year’s sales. The sales derived from off-premises sales are a big part of the Cheesecake Factory’s recovery. And analysts wondered whether a post-pandemic Cheesecake Factory could outperform its pre-pandemic sales volumes with continued, robust off-premises sales.
Cheesecake Factory bullish on off-premise stickiness
Company executives continue to be bullish on off-premises sales and suggest these sales are highly “sticky,” becoming a permanent part of the mix. David Overton, chairman and chief executive, shrugged off as an analyst questioned if the current success with off-premises could propel the company to consider smaller footprint stores. Overton said, “…we do have a number of size restaurants. So they are as small as 5,500 square feet and so we choose the restaurant based on the demographic and what we think we can do in our estimate. So, we have from 10,000 down to 5,500 and it is a possibility that we would want a little bit smaller dining rooms but that remains to be seen.”
A total of 16 locations remain closed, but Overton indicated they would be reopening in short order. In addition, the company is planning to continue new stores development, including two new Flower Child units. Cheesecake Factory management is wait and see on the timeline of new store development based on the economic and health crisis factors. Matthew Clark, chief financial officer and executive vice president, indicated that the company would spend $5M to $10M per quarter to complete nearly-finished restaurants that are ready to debut.
The research for this article utilized audio from the Cheesecake Factory 2Q earnings conference call, an accompanying earnings release and transcripts from Seeking Alpha.
Photo credit: The Cheesecake Factory (featured preview image)
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