JP Morgan downgraded Cheesecake Factory (CAKE) to underweight from neutral.
Analyst John Ivankoe says the -2% sales comparisons were meaningfully below his 1% estimate and lower than other industry competitors' comparisons. He says the results were especially disappointing given the positive 2% trends discussed for the first five weeks of the quarter during a fourth-quarter conference call.
Ivankoe notes the comparison decline can't be explained solely by the cold weather or the Easter and Spring Break calendar shift. Cheesecake Factory estimates that these factors may have hurt sales by $2.5 million to $2.9 million, but he says even adjusted February and March comparisons are still down nearly 2%. Ivankoe cut the 1% 2003 comparison estimate to flat, and he cut the $1.16 2003 earnings per share to $1.13. He also trimmed the $1.40 2004 estimate to $1.35.