Shares in Cheesecake Factory (CAKE) surged 8% in Tuesday’s after-hours trading after the company provided a positive business update given the ongoing Covid-19 pandemic.
CAKE began to reopen dining rooms in the second week of May. Currently approximately 25% of the company’s restaurants, including 34 Cheesecake Factory restaurants, have reopened dining rooms with limited capacity.
Most encouragingly, the reopened Cheesecake Factory restaurants have recaptured, on average, approximately 75% of prior year sales levels, which CAKE says “reflect[s] continued strength in off-premise sales and building dine-in business.”
For restaurants that are continuing to only operate off-premise, current weekly off-premise sales would equate to nearly $4 million per unit on an annualized basis, on average, the company said.
Overall, fiscal second quarter to-date comparable sales at Cheesecake restaurants are down 63%, including the impact of 87 full or partial closures due to recent demonstrations across the United States.
Looking forward, the company expects to have approximately 65% of dining rooms that closed due to Covid-19 reopened with limited capacity by mid-June, including an anticipated 124 Cheesecake Factory restaurants.
However this is subject to any closures due to further demonstrations and other factors related to the ongoing Covid-19 pandemic, CAKE added.
Shares in Cheesecake Factory are currently trading down 46% on a year-to-date basis, and analysts have a cautious Hold consensus on the stock. The average analyst price target stands at $22 (3% upside potential). (See CAKE stock analysis on TipRanks.)
“We believe management’s efforts to reduce costs will position the company to survive and take share when things normalize but also expect a slower sales recovery this year given its mall dependency and reduced earnings power longer-term from the expensive financing the company secured last month,” BTIG analyst Peter Saleh explained, as he recently reiterated his Hold rating without a price target.
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