Cheesecake Factory shares were downgraded to Sell by UBS

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UBS on Tuesday downgraded shares of Cheesecake Factory (CAKE) to sell from neutral.

In a note to investors, analyst Dennis Geiger said he expected same-store sales for the fast-casual chain to decline and that higher grocery and labor costs would weigh on the bottom line. of the company. Cheesecake Factory is aiming for a return to pre-Covid margins of around 15.7%, but UBS currently expects CAKE’s earnings to be slightly lower than that at 14.1% in 2023.

Customer loyalty can help boost sales, but other factors likely prevail, Geiger said.

“While CAKE can continue to benefit from customer brand affinity and there is upside potential if targets are met, we believe that potentially depressed industry demand, ongoing costs versus costs and the -limited macro visibility mitigates the risk for the recent upside in equities and expectations highlight,” he explained. .

While consumers were eager to dine out in 2022, Geiger predicts “a challenging macroeconomic environment and stressed spending this year [that] may lead to some reduction in sales trends.”

The company expects full-year sales to be “at the low end of its target range of $3.5 billion to $3.6 billion,” with consumers likely to be put off by higher menu costs. He noted that the chain is more expensive than the competition, with “an elevated ticket compared to competitors ($27 vs. peers with an average of $24).”

He also keeps tabs on Cheesecake Factory’s plans to achieve ~7% growth in stores by 2023. He noted that continued permitting and construction delays, as well as higher construction costs, pose a potential risk to the plans.

Last week, Citi downgraded shares of The Cheesecake Factory to neutral from buy. Despite those two downgrades from Wall Street, shares are up 19% year to date.

The refrigerated display case at the Cheesecake Factory in the Coastland Center Mall. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)

Shares of Cheesecake Factory reached more than $38 on Tuesday. UBS’s price target remained unchanged at $30.00 per share. The California-based company is expected to report fourth quarter results on February 15, 2023.

On Tuesday, the Street had 3 buys, 9 holds, and 4 sells in Cheesecake Factory shares.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected]

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