This Week in Food and Restaurants
by Aristotle Munarriz (MF Edible)

Miami, FL. (April 25, 1997) -- Nobody does it like SARA LEE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLE)") else Response.Write("(NYSE: SLE)") end if %>. The conglomerate, with interests in everything from Hillshire Farms to Champion athletic wear, reported quarterly earnings per share of $0.41 vs. $0.37 despite a stronger dollar. With all of the company's international exposure, foreign exchange currency translations shrunk their overseas revenues, and naturally, operating margins worldwide. Still, the company managed to meet analyst estimates, thanks to the L'eggs of their domestic operations. Yep, Sara Lee owns the popular line of hosiery too.

As if the thought of a nice forkful of Sara Lee Cheesecake prompted inspiration, CHEESECAKE FACTORY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CAKE)") else Response.Write("(Nasdaq: CAKE)") end if %> also reported earnings yesterday, up to $0.16 a share, and a penny higher than last year's first fiscal quarter. While the gain was scant, it was the first time since 1995 in which the company reported bottom line improvement.

All is not perfect at the wildly popular chain. Analysts were looking for $0.18 a share and, again, overshot the margin pressures at the California company. There is nothing wrong with the top-line at Cheesecake Factory. Same store sales soared 6.6% and revenues as a whole were up 28%. The suppressed bottom line, fault of poor expense management and a costly ramp-up at their new bakery facility, may appear troublesome but one can only imagine the upside once margins return to their 1992-1994 levels. Rather, if they return to earlier levels.

THE EDIBLE EIGHT

38% of the E8 reported earnings this past week. No need for tricky math, the point is that RAINFOREST CAFE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RAIN)") else Response.Write("(Nasdaq: RAIN)") end if %>, ALPINE LACE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LACE)") else Response.Write("(Nasdaq: LACE)") end if %> and GARDEN FRESH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LTUS)") else Response.Write("(Nasdaq: LTUS)") end if %> all made their quarterly pilgrimage to the podium earlier this week.

Alpine Lace doubled earnings per share to $0.14 a share on a slight uptick in sales. Coming from a depressed quarter the year before, where the company mustered just $0.07 a share in earnings as high cheese prices butchered margins, don't mistake this for a growth stock. Applaud the turnaround. Cheer on the fact that the stock leads the E8 this month with a 20% gain. Just don't expect earnings to double at this time next year.

Garden Fresh, owner of the Souplantation and Sweet Tomatoes chain of soup and salad scatter bars, reported earnings of $0.23 a share vs. $0.19 for the quarter. The analysts nailed it this time. Garden Fresh had beaten the pro pegs regularly over the last few quarters. Same store sales are higher, now for the fourth consecutive year. That is impressive given the fickle nature of the industry.

Finally, Rainforest Cafe reported earnings of $0.16 a share yesterday, four times their $0.04 a share showing from last year's first quarter, and a few pennies above analyst estimates. The stock rose $3 1/16 to close at $21 1/8, but still has quite a few ticks before it closes in on its previous highs in the mid-$30's set last year.

Some interesting notes from the Rainforest Cafe Conference Call, which I posted in the AOL Message Board:

* Disney did $8.2 million. Amazing! Granted, Easter fell into March this year but I still wouldn't have expected it to beat the 4th quarter there, especially by almost half a million. This was the site RAIN and analysts were saying would do about $25 million a year. I thought $30 million was more realistic but looks like we're heading to $32 million there.

* Woodfield is improving. While Mall of America continued to rock, same store sales up 9%, Woodfield is beginning to trim its comp declines. While they were down 14% for the quarter the company began to improve in March and for April is running down just 8%. It's hard to look at a negative number and call it good news, but in this case, it is.

* Strong retail. As more proprietary products come into the stores it should still be no surprise that it was Beanie Babies that helped the strong sales in the retail areas. 23% of revenues is mighty nice. Send a thank-you note to Ty Corp. (the maker of Beanie Babies) and hope that once the craze fades that the Rainforest Animals will take the baton and run.

* RAIN in June. Yes, South Coast Plaza will open June 9 (party on June 8), as we knew, but Cancun and London will also open in June. The rest remains the same with Source, Palisades and Chicago in the 3rd quarter, MGM, Arizona Mills, Grapevine Mills and Aventura in the 4th quarter.

* 1998? Well, first, a note on 1997. Martin said there would be 18 units open at the end of this year. Strangely enough he only pointed out the ten new units we knew about. Two were missing. It seems that maybe a Toronto and a second unit in Mexico may squeeze into 1997 but with or without that, the projections are for 16 units in 1998. Eight here, eight abroad. As new licensing deals are being worked on, and domestic leases negotiated, Martin did refer to a pair of Canadian units in Toronto, one in Manchester, England, and being active in finding new sites in Mexico. Beyond that nothing new, but, add them up, we're talking 32-34 RFC's by the end of next year.

* Cash is king. Despite spending $17 million of the projected $45 million for 1997 capital expenditures, the company still had $156 million in cash at the end of the quarter. A similar $45 million is targeted for next year. As one sharp analyst was quick to point out, with the money coming in over that time, the company will still have more than $100 million at the end of 1998, and with almost three dozen units open. The fact that that money can be better served than sitting in a money market was made.

So, with all the fireworks in The Edible Eight you'd figure it would go "to the moon Alice" right? Well, not exactly. It edged up just 0.3%, closing the gap between the S&P 500, which inched lower, and itself.

1997 Returns To Date:
The Edible Eight        -3.6%
NASDAQ                  -4.9%
S&P 500                 +1.9%

Until next week, Digest Foolishly,

MF Edible

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