Markets & Finance

Cheesecake Factory Sounds a Sour Note

The shares dropped Friday after the company disappointed market players with its earnings forecast

The Cheesecake Factory's (CAKE) share price fell on Dec. 1, after the restaurant chain operator gave quarterly results and guidance.

The Calabasas Hills (Calif.)-based company has been late on its filings, as the Securities and Exchange Commission is probing its accounting of stock options. Cheesecake Factory finally said Nov. 30 that it had second quarter earnings per share of 30 cents compared to 29 cents during the same period last year. Its third quarter earnings per share amounted to 23 cents compared to 27 cents EPS last year.

"While it has been a challenging year for many of us in the restaurant industry, I am encouraged by recent trends and pleased with the level and quality of service we are providing, the positive guest response to our most recent menu change and the success of our recent openings," said David Overton, Cheesecake Factory CEO, in a press release.

The next day, Cheesecake Factory added that it expects to announce diluted net income per share during the fourth quarter ended Jan. 2 that ranges between 22 cents and 24 cents. The mean analyst estimate had been for 26 cents per share, according to the San Francisco research firm StarMine, which aggregates data from Thomson Financial.

Cheesecake Factory also said it expects total revenues in the range of $351 million to $354 million. The mean analyst estimate had been for $356.5 million revenue, according to StarMine.

Investors sold the stock 6.8% to $25.85 per share in afternoon trading on the Nasdaq.

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