The Cheesecake Factory also beat street expectations with earnings of $.27 a share, $.29 if you exclude a pre-tax charge, a more than 52 percent gain from a year ago. The street was expecting $.24. They also beat on the topline, with sales of $400.6 million for the quarter, better than the $397 million analysts were predicting. However, same store sales fell 2.8 percent.
"When we think about restaurants, we kind of have to split it between fast food, such as your McDonald's and Burger Kings of the world, and casual dining, like Brinker, which owns Chili's, and Darden, which owns Red Lobster and Olive Garden," says Steve West of Stifel Nicolaus. West says that the casual dining stocks did a good job beating expectations the first half of the year through cost cutting, but that investors may now move away from "higher beta, higher risk stocks back into the higher quality, like McDonald's." Investors now want to see profit growth based on consumer spending, not cost savings. For example, McDonald's beat the street on both earnings and same store sales, profiting handsomely from lower commodity costs, but also consumers looking for value. Brinker also beat the street this week, but the stock fell as profits seemed to come more from lower costs than from more traffic. "Deep discounting and promotion on some of their products is actually eating away at some of that savings," says West.