Cheesecake Factory (NASDAQ:CAKE) disappointed investors as the company reported a surprise loss in the third quarter of Fiscal 2022 (ended September 27, 2022) as higher expenses ate into profits. The restaurant chain slipped to an adjusted loss per share of $0.03 from adjusted earnings per share (EPS) of $0.65 in the prior-year quarter and significantly lagged analysts’ EPS estimate of $0.27.
The company’s Q3 revenue grew 3.9% to $784 million, with comparable restaurant sales rising 1.1%. However, revenue missed the Street’s estimate of $799 million. Cheesecake Factory stock plunged 7.4% in Tuesday’s extended trading session in reaction to the dismal Q3 results.
Cheesecake’s Q3 performance was impacted by a “challenging inflationary environment in some areas.” The company’s profit margins were hit by increased operating expenses, mainly related to utilities and building maintenance.
Looking ahead, the company is optimistic about improving its restaurant margins to pre-pandemic levels in the near term by increasing prices to offset the higher costs.
Meanwhile, Cheesecake announced a quarterly dividend of $0.27 per share. It repurchased about 889,000 shares for $26.7 million in Q3. As of Q3-end, the company had 1.5 million shares remaining under its existing share repurchase program. The company’s board approved an increase of 5 million shares to the existing repurchase program, raising the total authorization to 61 million shares.
Is Cheesecake Factory a Good Stock to Buy?
Wall Street is cautiously optimistic about Cheesecake Factory stock, with a Moderate Buy consensus rating based on two unanimous Buys. The average CAKE stock price target of $38 implies 11.3% upside potential. Shares have declined 12.8% year-to-date.