Cheesecake’s Earnings Feed Dining Trend

Americans may have cut their spending on many things in recent months, but eating out apparently wasn’t one of them.

Cheesecake Factory on Wednesday reported earnings well above analysts’ expectations for the fourth quarter, adding to other recent reports suggesting that dining at moderately priced restaurants hasn’t taken a hit because of the economic slowdown.

The Calabasas-based firm said net income in the quarter ended Jan. 2 rose 34% to $9.4 million, or 28 cents a share, from $7.02 million, or 22 cents, a year earlier.

The company had been expected to earn 26 cents a share, according to the average estimate of analysts surveyed by Zacks Investment Research.

Cheesecake’s sales jumped 32% to $125.6 million in the quarter, bolstered by new-store openings last year. The firm now has 40 sites nationwide.

Same-store sales--sales at stores open at least one year--rose 3%, Cheesecake said. Like many restaurant chains, it said sales were hurt by cold, wet weather conditions in November and December.

But industry analysts say many reports suggest there has been no conscious cutback by consumers on restaurant spending.

Indeed, Brinker International, parent of the Chili’s chain and other eateries, said Wednesday that same-store sales jumped 8% in January from a year earlier.

Outback Steakhouse shares (ticker symbol: OSI) surged $3.47 Tuesday and added 36 cents to $26.56 Wednesday after the company said same-store sales in January surged 8% at its steakhouses.

Outback said its January results were helped by easy comparisons with a year ago, when bad weather hurt turnout at many of its eateries.

Still, analysts have been impressed by the restaurant industry’s continuing sales gains.

“Maybe because people didn’t buy that new couch or washer or dryer, there is a little more in their pockets. People aren’t going to stop eating out and go into a bunker,” said Allan Hickok, analyst at U.S. Bancorp Piper Jaffray.

“I think casual dining has been very strong through 2000,” said Dennis Forst, managing director of McDonald Investments. “If the economy is actually slowing, we could see flat sales sometime soon, but it hasn’t happened yet.”

In its earnings release, Cheesecake acknowledged it is being affected by higher utility costs. The firm said it raised menu prices 1% in January to help recover those and other costs.

For the year, Cheesecake said net income rose 48% to $32.1 million. Earnings per share jumped 41% to 96 cents.

Cheesecake shares (CAKE) fell 75 cents to $42.75 on Nasdaq before its results were announced. Brinker (EAT) rose $1.25 to $27.50 on the New York Stock Exchange.

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Revived Appetite

Shares of mid-priced restaurant chains surged for much of 2000 before a sell-off in December. The stocks, including Cheesecake Factory, IHOP and Applebee’s, have revived in recent weeks.

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Standard & Poor’s index of 14 restaurant stocks, monthly closes and latest

Wednesday: 172.84

Source: Bloomberg News