Here's Why Cheesecake Factory Deserves a Spot in Your Portfolio

Cheesecake Factory CAKE continues to benefit from multiple growth drivers, including expansion initiatives, strong operational execution and ongoing strategic innovation. Improvements in labor productivity, food efficiencies and wage management have further strengthened margins, while higher guest satisfaction has reinforced customer loyalty. Together, these factors serve as key tailwinds, positioning the company for sustainable long-term growth.

Shares of this high-end casual restaurant chain and a global distributor of cheesecakes have rallied 59% in the past year, outperforming the Zacks Retail - Restaurants industry’s 0.8% rise. Its earnings topped the Zacks Consensus Estimate in all of the trailing four quarters, the average being 15.2%.

The earnings estimate for fiscal 2025 has moved up to $3.77 per share from $3.66 over the past 60 days. Despite prevailing macroeconomic uncertainties, increased costs and inflationary pressures, the stock exhibits a favorable trajectory, underscoring its operational excellence and steady demand for distinctive, high-value concepts, which heighten expectations for meaningful improvement in profitability.

Cheesecake Factory — a Zacks Rank #2 (Buy) stock — has a favorable VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities to investors.

Let’s delve deeper and find out the factors aiding the stock.

Factors Fueling Growth of CAKE Stock

Sales-Building & Margin-Driving Initiatives: Cheesecake Factory continues to drive sales growth by combining innovative menu items, focused marketing campaigns and advanced digital capabilities. The company expects continued margin improvement, supported by menu innovation, disciplined cost management and strategic ideas, reinforcing its path toward long-term shareholder value creation.

In the second quarter of fiscal 2025, Cheesecake Factory recorded 1.2% year-over-year comparable sales growth, driving record-high average weekly sales of nearly $12.8 million per unit. On the margin front, the company achieved a 4-wall restaurant margin of 18.5%, up 80 basis points year over year and the highest level in eight years. This strong performance translated into consolidated revenues of $955.8 million and adjusted EPS of $1.16, exceeding expectations and highlighting its ability to balance sales growth, margin expansion and shareholder returns.

Expansion Efforts: Cheesecake Factory is advancing its growth strategy with new unit development across multiple locations. In the second quarter of fiscal 2025, the company opened eight restaurants, including two Cheesecake Factory restaurants, one North Italia, three Flower Child and two FRC restaurants. Following the quarter's end, CAKE opened one FRC restaurant and one international Cheesecake Factory restaurant in Mexico under its licensing agreement.

With plans to launch up to 25 new restaurants throughout the year, the firm hopes to accelerate unit growth in fiscal 2025. The remaining locations are anticipated to open in the second half of the year, with about eight opening in the fiscal second quarter. In order to support the unit development and upkeep of its restaurants, the firm continues to project $190-$200 million in capital expenditures.
 
Focus on Menu Innovation: Cheesecake Factory is moving forward with its long-term growth plan by constantly adding new items to its menu, reinforcing its reputation for variety and culinary creativity. In the second quarter of fiscal 2025, the company introduced 14 new dishes across two new menu categories — Bowls and Bites.

In addition, CAKE launched its seasonal Peach Perfect Cheesecake with Raspberry Drizzle in celebration of National Cheesecake Day, showcasing its intention to carry on with menu innovation and strategic ideas. The company's cuisine remains highly relevant, appealing to a diverse variety of guests and improving its competitive position in experiential dining.

Digital Initiatives to Boost Revenues: Cheesecake Factory is using digital capabilities to boost revenue growth and improve guest engagement. The company signed an exclusive national delivery partnership with DoorDash. It expects to reap benefits from these collaborative marketing opportunities.

The company is benefiting from robust off-premise sales. Off-premise sales contributed 21% of its restaurant sales during the second quarter of fiscal 2025. Additionally, CAKE has implemented operational changes and technology upgrades, which include a contactless menu, payment technology and text paging. This targeted approach has led to stronger engagement, higher satisfaction and deeper customer loyalty.

Other Key Picks

Other top-ranked stocks from the Zacks Retail-Wholesale sector are Build-A-Bear Workshop, Inc. BBW, Groupon, Inc. GRPN and Levi Strauss & Co. LEVI.

Build-A-Bear Workshop presently sports a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 21.3%, on average. BBW stock has jumped 34% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BBW’s 2025 sales and earnings per share (EPS) indicates growth of 7.4% and 6.9%, respectively, from the year-ago period’s levels.

Groupon sports a Zacks Rank of 1 at present. The company delivered a trailing four-quarter earnings surprise of 230.5%, on average. Groupon's stock has jumped 91% year to date.

The Zacks Consensus Estimate for Groupon’s 2025 sales and EPS indicates growth of 2.2% and 153%, respectively, from the prior-year levels.

Levi Strauss flaunts a Zacks Rank of 1 at present. The company delivered a trailing four-quarter earnings surprise of 25.9%, on average. Levi Strauss stock has gained 30.5% year to date.

The Zacks Consensus Estimate for Levi Strauss’ 2025 sales indicates a decline of 3.3% and EPS indicates growth of 4% from the prior-year levels.

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This article originally published on Zacks Investment Research (zacks.com).

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