What happened
Shares of The Cheesecake Factory Incorporated (CAKE -0.51%) were giving investors indigestion last month, as the stock dropped 15%, according to data from S&P Global Market Intelligence.
Image source: Cheesecake Factory
The casual-dining chain took a hit after reducing its guidance for the second quarter. The bulk of the slide came on June 13, when the stock fell 10%.
So what
The Cheesecake Factory had mostly been bucking the broader negative trend in the restaurant industry but said it expects its streak of 29 consecutive quarterly comparable sales increases to come to an end in the second quarter, as it expects comps to fall 1%.
CEO David Overton blamed bad weather for the sales slump, saying that "unfavorable weather in the East and Midwest reduced patio usage." He also noted that the company continued to outperform the broader casual-dining industry and that over half of its regions, including California, Texas, and Florida, were experiencing positive comps. Overton added that the company's brand was as strong as ever and that the "underlying operating metrics remain solid."
Now what
Before the update, management had been calling for a same-store sales increase of 1% to 2%. Retailers and restaurants often use the weather as an excuse when it's convenient, but the Cheesecake Factory's invocation may be more plausible than most. It was a colder spring than normal in much of the Northeast and Midwest, which can affect outdoor dining, and the fact that comps grew across most of the country is a positive sign.
Shares fell to 52-week lows on the news. If sales bounce back in the subsequent quarter, the recent slide could be a buying opportunity.
