Cheesecake Factory Inc. issued its quarterly earnings report Tuesday, providing an early look at how the COVID-19-related economic shutdown has affected restaurant companies in the Valley area. The Calabasas group beat Wall Street predictions on both earnings and revenue.
Cheesecake reported a net loss of $3.9 million or -9 cents a share on revenue of $615 million for the quarter ending March 31. Analysts at Zacks Investment Research predicted a loss of 46 cents a share on revenue of $613 million.
Not surprisingly, the first-quarter results were down significantly from the same quarter last year, when the company reported net income of $26.9 million (60 cents a share) on revenue of $600 million.
The results include Cheesecake’s acquisition of Fox Restaurant Concepts LLC. The company did not issue guidance, given the uncertainty regarding the virus and the reopening of the economy.
Chief Executive David Overton said the quarter was going well before COVID-19 broke out.
“Our first quarter was off to a solid start with comparable sales growth both ahead of plan and outperforming the broader casual dining industry trend, which drove solid restaurant-level margin results through February,” said David Overton, chairman and chief executive. “That trajectory was impacted by the onset of COVID-19.”
He said the pandemic has forced the company to make “difficult, yet necessary decisions to manage costs and preserve cash.”
That includes temporary furloughs for about 41,000 hourly restaurant employees, as well as cuts of 20 percent to executive salaries. Also, the company defaulted on its rent payments for the month of April.
“The severe decrease in restaurant traffic has severely decreased our cash flow and inflicted a tremendous financial blow to our business,” Overton said in a letter sent in late March to the company’s landlords, many of which are shopping mall operators.
In March, to improve its cash position, Cheesecake Factory dipped into its revolving credit facility to the tune of $90 million. The company also closed a $200 million investment last month from Atlanta-based private equity firm Roark Capital, which received convertible preferred Cheesecake Factory shares.
Over the worst stretch of the stock market’s seizure in the first quarter, shares of Cheesecake Factory (CAKE) dropped from a high of $42.25 on Feb. 20 to $17.08 on March 31 – a nosedive of almost 60 percent. The stock is now hovering just below $20.
Shares closed up 19 cents, or about 1 percent, to $19.71 on the Nasdaq on Wednesday, a day when the Nasdaq was up about half of a percent.