Cheesecake Factory (CAKE) bucked the trend of emptier tables that plagued rivals Ruby Tuesday (RT) and Darden Restaurants' (DRI) Red Lobster this past quarter, posting reasonable growth in Wednesday's quarterly report.
Revenue climbed a modest 2.2 percent to $475.1 million, shy of Wall Street's expectations, but at least the chain's moving in the right direction. Expansion factored into the growth, but so did a 0.9 percent increase in comparable restaurant sales. Comps actually would have risen 1.6 percent if it wasn't for the negative weather impact during the quarter. But storm clouds and snowstorms still weren't enough to keep patrons away the way they did at rival operators.
Cheesecake Factory is rocking, and the 181-unit chain bragged during its earnings conference call that it just completed its fourth consecutive year of delivering positive quarterly comparable sales at full margins without discounting.
Growth without promotional markdowns? Four years of growth during a tricky economic recovery? Cheesecake Factory investors better not take that for granted, because its performance is certainly not typical.
Peers Under Pressure
Cheesecake Factory isn't growing as quickly as it used to, but at least it's growing.
Red Lobster saw same-restaurant sales decline by 5.2 percent and 4.5 percent in its two most recent quarters. Things have been even worse at Ruby Tuesday where comps have plunged 7.8 percent and 11.4 percent in its two most recent quarters.
The two chains aren't going down without a fight. They realize that they're out of favor, and they're making changes. Red Lobster added more entrees for landlubbers in late 2012.
The tweaks obviously haven't worked.
Cheesecake Factory hasn't had to get desperate. The chain already has one of the largest menus in casual dining, so it's not as if it needs to beef up its offerings to give regulars something new to try. At a time when its peers are struggling in the reinvention process, Cheesecake Factory is sticking to what it does well.
Let Them Eat Cheesecake
Many of the casual dining operators that have been stumbling have tried to pin the blame on external factors. They can blame mall shoppers migrating online, but most of Cheesecake Factory's locations are inside retail developments. It also disclosed on Wednesday night that it's not seeing a discernible performance difference between its mall and non-mall units.
They can blame health trends showing that patrons are shying away from their decadent offerings for their shortcomings, but it's hard to top Cheesecake Factory's dessert menu with its dozens of choices.
You can be sure that chains will point to crummy weather that has kept traffic light in many parts of the country. There's also the timing of the Easter holiday, which this year will push that historical spike in business from March last year to April this time around. Cheesecake Factory acknowledges the challenges, but its guidance still calls for comps to clock in between flat to slightly positive for the current quarter.
In the end, actions speak louder than words. Cheesecake Factory is growing at a time some of its competitors are throwing in the towel. Darden is looking to sell Red Lobster. Ruby Tuesday is in the process of closing 30 of its 779 eateries.
But Cheesecake isn't shying away from the retreats elsewhere. If anything, it stands to benefit as rivals close their restaurants in prime locations. Cheesecake Factory expects to open as many as a dozen new locations this year after opening nine units in 2013.
Cheesecake Factory gets it. Ruby Tuesday and Red Lobster don't.
Motley Fool contributor Rick Munarriz owns shares of The Cheesecake Factory. The Motley Fool has no position in any of the stocks mentioned.