Cheesecake Factory Conference Call Highlights

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Cheesecake Factory
CAKE
reported its third quarter earnings on Wednesday. Shares of the company are down three percent. Below are some key highlights and takeaways from its conference call: • Total revenues of The Cheesecake Factory for the third quarter of 2014 were $499.1 million. • Revenues reflect an overall comparable sales increase of 1.8%, maintaining a continued favorable gap between our performance and that of the industry. • Comparable sales increased 2.1% at The Cheesecake Factory and declined 2% at Grand Lux Cafe. • External bakery sales were $12.6 million in the third quarter, up slightly from the third quarter of 2013 as expected. • Cost of sales was up more than projected, increasing by 90 basis points in the third quarter of 2014 at 24.9% of revenues versus 24% in the prior year quarter. • Overall, compared to last year, our cost of sales variance in the third quarter was almost all attributable to the unprecedented increases we saw in the dairy market during the summer, and the impact it had on our bakery and restaurants. • In fact, it reached the new all-time high in September at over $3 a pound. • This was an increase of about 30% from mid-July and nearly 100% from the beginning of the year. • The impact to us in the third quarter alone from overall dairy pricing was approximately $4.3 million and $0.06 in earnings per share compared to prior year. • Labor was 32.7% of revenues in the quarter as compared to 32.1% in the third quarter of the prior year. • For the fourth quarter of 2014, we estimate diluted earnings per share of between $0.58 and $0.62 based on an assumed range of comparable sales of between 1% and 2%. • Our fourth quarter earnings per share estimate reflects our current expectations for the cost of dairy and our self-insured medical coverage. • The impacts from each of these areas on a year-over-year basis are an estimated cost of $3.6 million and $1.3 million respectively for the fourth quarter. • We would estimate diluted earnings per share in a range of $2.07 to $2.11 for the full year 2014. • Overall, our outlook for total company food inflation in 2014 is now over 4% for the year, inclusive of the pressure in cream cheese in our bakery and other dairy items as previously noted. • Based on our full year 2014 estimate, these two items will have accounted for year-over-year cost increases of $10.1 million for dairy commodities and $7.5 million in health insurance or about $0.25 in earnings per share in fiscal 2014.
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Posted In: EarningsNews
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