Cheesecake's Rich Results

• Email
• Share
• Print

With obesity at epidemic proportions, no one would suggest that a great motto for Americans would be "Let them eat cake," but if Cheesecake Factory's (Nasdaq: CAKE) recent first-quarter results are any indication, that's exactly what folks are doing.

The restaurant chain, which is known for its generous portions and decadent dessert menu, reported that earnings rose 32% in the quarter to $0.32 a share. Revenue growth was likewise robust, rising 28% to $220.5 million from $172.9 million. Perhaps best of all, results were underpinned by a same-restaurant sales increase of 6.1%, the largest quarterly increase in comparable-restaurant sales since 1998.

What's the key to this success? While McDonald's (NYSE: MCD) has done away with "super-sizing," Cheesecake Factory is embracing it, and consumers love it. Not only are Cheesecake Factory's servings massive, but its menu is voluminous. And now the firm appears to be onto another winner with its newest brand, the Grand Lux, a restaurant concept featuring palatial venues and pricier fare.

Cheesecake Factory opened its first Grand Lux in Las Vegas back in 1999 and has been slow to expand the chain. Just three units are operating right now, but evidently the firm feels the time is right to expand. Of the 16 new restaurants planned for 2004, two of them will be Grand Luxes. With Grand Lux sales up 19% in the first quarter versus last year, it's not surprising that Cheesecake Factory is confident enough to build out.

From the fabulous performance of its original chain and the promise of the Grand Lux, it's clear that Cheesecake Factory has embraced a time-tested strategy for building restaurant sales: Give the people what they want, and then give them a little extra to take home in a doggie bag.

How do Cheesecake Factory's first-quarter results taste to you? Talk about it with other Fools on the Cheesecake Factory discussion board. You can take a free 30-day trial to the Fool Community.

Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.