Earnings Reports: Cheesecake Factory Posts Record $1.03B
The latest round of earnings reports delivered an unlikely crossover between Wall Street and the campaign trail on Tuesday, as The Cheesecake Factory announced record third-quarter revenue of 1.03 billion dollars, only days after the restaurant chain was dragged into the middle of a presidential feud. The California-based company said sales rose 14 percent from a year earlier, comparable sales at its namesake restaurants jumped 15.2 percent, and adjusted earnings of 1.02 dollars a share beat what analysts had expected. It was the company’s second consecutive quarter above a billion dollars in revenue.
The timing could hardly have been more unusual. The results landed three days after former President Barack Obama, campaigning in Ohio on Saturday, mocked the gold decorations President Donald Trump has added to the White House by saying he had made the executive mansion look like Saddam Hussein had opened a Cheesecake Factory. The line went viral and drew a furious response from Trump. Yet when the company’s executives spoke to investors on Tuesday evening, the subject never came up at all.
Earnings Reports: A Record Quarter by the Numbers
The headline figures were strong across the board. Revenue for the three months reached 1.03 billion dollars, up from 907.2 million dollars in the same quarter a year earlier, setting a new record for the company. Comparable sales, which track restaurants open for at least a year, rose 15.2 percent at Cheesecake Factory restaurants, far ahead of what the market had pencilled in. Adjusted earnings came in at 1.02 dollars a share, comfortably above Wall Street forecasts.
The company opened six restaurants during the quarter and still expects to open as many as 26 across the full year. By the end of the quarter it was operating 415 locations, against 399 a year earlier. The group also includes the North Italia chain, where comparable sales slipped 3 percent and margins eased to 13.2 percent, a reminder that not every part of the business is moving at the same pace.
Chairman and chief executive David Overton credited the growth to new menu items, the company’s rewards programme and what he described as significant engagement across social media. “The Cheesecake Factory has long enjoyed tremendous brand affinity across generations, and its ability to attract younger guests reinforces the enduring appeal and relevance of our namesake concept,” Overton said in the company’s earnings release.
The scale of the jump deserves context. In the second quarter, announced in July, the chain had already surprised the market with comparable sales growth of 5.8 percent, well ahead of expectations of about 2 percent, according to analyst Jim Salera at Stephens. That was the first time the company had ever reported more than a billion dollars of revenue in a single quarter. The third quarter has now beaten that record, with a comparable-sales figure roughly three times the spring rate.
Wall Street Reaction: Stock Market Today Sees CAKE Slip After the Beat
The stock market today gave the results a complicated reception. Shares in the company, which trade under the ticker CAKE, had risen about 1.6 percent on Monday to 110.13 dollars, the first trading day after Obama’s remark, before falling 1.5 percent on Tuesday to 108.47 dollars ahead of the after-the-bell earnings announcement. They slipped further in after-hours trading, a familiar pattern when a stock has already run hard into its results.
That the shares eased after such a strong report says more about the year they have already had than about the quarter itself. The stock has more than doubled since January and touched an all-time high of 118.63 dollars earlier this month, outperforming almost everything in the restaurant sector. The company has also appeared on Fortune’s list of the 100 Best Companies to Work For for 13 consecutive years.
Sit-down chains such as The Cheesecake Factory and Chili’s have meanwhile been winning customers from fast-food outlets as the price gap between the two has narrowed, and the chain’s enormous menu has made it one of the main beneficiaries.
“Restaurant guests are being far more discerning about where they spend their dollars,” Salera said earlier in the week, arguing that the way to win when the overall market for eating out is shrinking is to deliver exceptionally high quality, in the food and in the experience. The third-quarter numbers suggest the chain is doing exactly that. The question for investors is whether a 15 percent comparable-sales jump can be repeated, or whether it is a high-water mark.
How the Chain Built Its Momentum
Understanding the earnings reports means understanding what changed inside the restaurants. Overton and his team have pointed to three drivers: new dishes, the rewards programme and social media. The menu, famously one of the longest in American dining at around 250 items, has been refreshed with new items designed to give regulars a reason to come back and to give younger diners something to photograph and share.
The chain’s appeal has always been its breadth. As USA Today noted, the company has for decades been the ultimate neutral ground of casual dining, a place where a group can settle on everything from avocado egg rolls to macaroni and cheese balls. That neutrality is what made Obama’s joke land so hard: almost every American has an opinion about the restaurant, and almost every American has eaten there.
The backdrop makes the performance more striking still. Fewer Americans are eating out as prices rise, and casual dining has been one of the hardest hit sectors. Against that background, a double-digit jump in comparable sales is evidence that the company’s mix of menu breadth, theatrical dining rooms and relatively affordable prices is resonating with careful customers.
The guidance alongside the results suggests the company expects the momentum to continue. For the current quarter it is guiding to revenue of between 1.04 billion and 1.05 billion dollars, a third straight quarter above the billion-dollar mark, and it is targeting about 4.425 billion dollars of revenue for fiscal 2027.
The Obama Jab That Put the Chain in the Spotlight
The chain’s moment in the spotlight began on Saturday, October 24, when Obama was campaigning for Democrats in Cleveland, Ohio, a week before the midterm elections. Taking aim at Trump’s White House renovation projects, including a new ballroom and changes to the Rose Garden, Obama questioned whether the president was paying enough attention to the cost of living. “He seems very focused on home renovations,” he told the crowd. “He should be on HGTV.”
He then turned to the gold decorations that have become the signature of Trump’s Oval Office. “There’s gold everywhere. What’s up with the gold? Everything, more gold. He’s got the White House looking like Saddam Hussein opened a Cheesecake Factory,” he said, drawing laughter from the crowd and a reference to the former Iraqi dictator’s lavish palaces. The line spread online within hours, becoming the most-shared moment of Obama’s campaign swing through Ohio and Michigan.
Trump’s response came on Monday, as he travelled to a rally in Mississippi. “The White House is now in the best shape it’s been since 1792 when it was built. It’s in beautiful shape,” he told reporters, adding that for Obama “to say it’s a Cheesecake Factory, that just shows why you were a lousy president.” Later that night, at a rally in Corinth, he spent seven minutes defending the renovation projects and praised the chain itself, calling it “a very successful company.”
The row drew in others too. Treasury Secretary Scott Bessent stopped by one of the chain’s restaurants for lunch on Monday, telling reporters: “I had a great meal, always have a great meal, and I would tell the Martha’s Vineyard set to give it a try,” a pointed reference to the Obamas’ home on Martha’s Vineyard. Conservative commentators accused Obama of looking down on ordinary Americans, with Scott Jennings calling him “undefeated at condescending to regular folks.” Rick McCormack, the chain’s former vice president of design, said the comparison missed the mark: Overton opened the first restaurant in 1978 to showcase his mother’s cheesecakes, and the goal had always been a theatrical design with a European flair, so guests would be wowed by the space and pleasantly surprised to dine somewhere upscale without spending a lot of money.
Why the Company Stayed Silent, and What Happens Next
What the company itself did not do is almost as notable as what everyone else did. The Cheesecake Factory has not commented publicly on Obama’s remark, and the topic did not come up on the company’s earnings call. The company did not respond to Fortune’s request for comment, and its representatives did not respond to multiple requests for comment from USA Today.
“Staying quiet is exactly the right thing to do as there is no mileage to be gained from entering this arena,” said Neil Saunders, managing director and retail analyst at GlobalData Retail. “Sometimes brands can use humor and clever quips in response to things, but even doing that might be a little dangerous as politics is such a live wire right now.”
There is also a practical reason the executives had little to say about the row. The fiscal third quarter ended on September 29, almost a month before Obama made his remark, so the record results cannot be credited to this week’s publicity. Any boost from the headlines will only show up in the current quarter’s numbers, which will not be reported until early next year. McCormack said he was fairly sure the company was grateful for the free advertising, and added: “I’m sure David Overton got a good chuckle out of it.”
The test now is whether the company can sustain the growth it has just reported. The guidance for the final quarter and for fiscal 2027 sets a high bar, and the North Italia figures show the momentum is not evenly spread across the group. Investors will also be watching whether the past week’s publicity translates into real visits, or fades as quickly as most campaign moments do.
On the political side, the Cheesecake Factory line is now part of the closing argument of the midterm campaign, with voting a week away on November 3. Trump’s critics have seized on the White House renovations as evidence that his administration is focused on vanity projects instead of lowering prices for Americans. A report released last week by the Center for American Progress, a Democratic-aligned think tank, tallied the cost of what it called vanity projects at at least 1.6 billion dollars of taxpayer money, counting the refurbishment of the gifted Qatari jet, gilded decorations, a monument to Trump, and the new ballroom.
For the chain itself, the next few weeks will show whether the week’s extraordinary attention was a one-off or the start of something more lasting. This week it discovered that its broad appeal makes it a useful punchline for a former president, a useful prop for a sitting one, and a useful lunch stop for a Treasury secretary. The record quarter suggests the business underneath is in the best shape it has ever been.
Source: Fortune