CAKE has seen its fortunes slip along with the economy, and it's been a perfect storm of bad news for some time now.
First it was high food and gasoline prices that initially crushed the stock. Customers began worrying about filling their SUVs instead of dining out. At the same time, high input costs shrank restaurant margins.
After gas prices dropped, some relief was thought to be in sight. Alas, food costs have come down some but remain historically high and volatile. The state of the consumer is getting worse.
Economic conditions and consumers' uncertainty about their job prospects are weighing on the stock. In California, where a large percentage of the company's stores are located, unemployment has risen to levels not seen in decades. The housing downturn has also hit the state harder than most, with a lot of households seeing their equity completely dry up.
Gone are the days of equity extraction, which fueled pricey cars, vacations and expensive dinners out.
Cheesecake is doing what it can to lure customers and enhance loyalty. In commemoration of its 30th anniversary, it is inviting customers to "Share the Love" by celebrating their passion for cheesecake in three unique ways: create and name the next cheesecake flavor for the menu, send a personalized "e-slice" of cheesecake to family and friends, and receive a complimentary slice of cheesecake for every $30 spent in the restaurant.
Whether these gimmicks work or not remains to be seen, but the fact that they are even being deployed says a lot about how tough conditions are.
Cheesecake Factory will release fourth-quarter and full-year 2008 results next week. They certainly will not be pretty, but with expectations about as low as low can go, any hint of good news could be good for a short-term pop in the shares.
Jamie Dlugosch is a contributor to InvestorPlace.com.
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Reader Comments (Page 1 of 1)
2-04-2009 @ 1:37PM
BHarrison said...
As I recall from my last trip to the grocery store with my wife, these cakes cost approximately $8.00 - $10.00, or more . . . relatively speaking, that is a lot of money for a "cake", isn't it. And then when most items minimally costs $3.00 to $5.00 per can or container, that "cake" starts to symbolize an unnecessary "luxury" (Ha! . .. don't laugh at this.) At this time, gorceries have become the most inflated priced, basic necessity. The psychology of it is that, while we could afford the prices, we simply have resolved to not "suport" the outrageous price inflations by buying those products. I don't know how a family offive or more are getting by on an "average income". The biggest con in all of this is the "corn for ethanol programs". There are several other plants that produce substantially more ethanol per acre per year than corn. However, since corn or corn byprducts are used in most foods, the inflated price of corn raises the costs of most food . . . that is merely "market manipulations, and farm commodity susidies that need to be changed.
When you shop at the grocery store, "vote" by what you buy. in time that may make a difference.