Cheesecake Factory shares plunge after restaurant chain blames weather for declining sales

Key Points
  • Cheesecake Factory expects second quarter sales to decrease one percent.
  • Chairman and CEO David Overton said in a statement the company "faced unfavorable weather that reduced patio usage."
  • Shares of Cheesecake Factory are down 8 percent in Tuesday's trading.
A baker plates slices of cheesecake at a Cheesecake Factory restaurant in Louisville, Kentucky.
Luke Sharrett | Bloomberg | Getty Images

Cheesecake Factory said sales will fall this quarter because of poor weather, but investors aren't buying that excuse.

Shares of Cheesecake Factory dropped 8 percent in trading Tuesday.

The company lowered its second quarter 2017 outlook and now expects comparable sales at Cheesecake Factory restaurants to be down approximately 1 percent. This adjustment represents a shift from the company's previous guidance for an increase of one to two percent for the quarter. Analysts expected an increase of 1.7 percent, on average, according to FactSet.

"We have seen pockets of softness as we moved through the quarter, notably in the East and Midwest where we also faced unfavorable weather that reduced patio usage," Chairman and CEO David Overton said in a statement.

Cheesecake Factory expects the lowered second quarter outlook to impact both second quarter margins and earnings per share.

Year-to-date shares of the restaurant chain are down nearly 3 percent on declining mall traffic and an increasing generational gap, as millennials' preference for fast casual dining takes its toll.