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    The Call @ Hedgeye Plus

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Over the past 12-months CAKE has taken significant steps to reshape the company and focus on utilizing capital more efficiently for shareholders. Unfortunately, due to commodity pressures and the fact that CAKE is a California-centric company, the macro issues are overwhelming any initiatives the company is taking to improve its business.

While, milk and dairy products represent only 5% of CAKE’s COGS, the trend toward easing commodity costs will help market psychology. Over the past month, milk has been headed south and the latest numbers from the government suggest that further declines are likely. While this will not provide any solace to CAKE shareholders this quarter (CAKE has contracted a majority of its cream cheese costs for the balance of 2008), the commentary coming out of the quarter will be more positive than negative for this key commodity.