Shake Shack (SHAK -2.27%), the modern-day "roadside burger stand" known for its burgers, chicken, hot dogs, shakes, frozen custard, beer, wine, and more, released first-quarter earnings on May 2. The company outperformed estimates for earnings per share (EPS) with a reported $0.13 adjusted pro forma, against analysts' estimates of $0.10. However, revenue slightly missed expectations. The quarter showcased strong systemwide sales growth and operational efficiencies.
| Metric | Q1 2024 Actual | Q1 2024 Estimates | Q1 2023 Actual | Change (YOY) |
|---|---|---|---|---|
| Earnings per share (EPS) | $0.13 | $0.10 | ($0.01) | N/A |
| Total revenue* | $290.5 million | $291 million | $253 million | 14.7% |
| Systemwide sales | $443 million | N/A | $395 million | 12.3% |
| Same-shack sales growth vs. prior year | 1.6% | N/A | 10.3% | N/A |
| Net income | $2.2 million | N/A | ($1.6 million) | N/A |
Data source: Company results from company. Analyst estimates from FactSet. *Revenue = $280.6 million from company-operated Shacks and $9.9 million of licensing revenue. Systemwide sales consists of sales from company-operated Shacks and licensed Shacks.
Shake Shack unpacked
Shake Shack is a testament to American culinary culture, serving a menu of premium, classic foods in a fast-casual setting. Its foundation, stemming from Danny Meyer's Union Square Hospitality Group, underscores a commitment to quality ingredients, innovative dishes, and "enlightened hospitality." This approach has catapulted Shake Shack from a New York City hot dog cart to an international presence with over 520 locations worldwide. The brand's strategy revolves around strategic expansion into key markets, culinary innovation, and leveraging technology to enhance the customer experience.
Key to its current and future success is the balance between physical store expansion and digital prowess. With roughly 40 new Shacks planned this year, including drive-thrus, Shake Shack is not only increasing its geographical footprint but also adapting to new consumer behaviors. In the first quarter, there were four new company-operated Shacks opened, including two drive-thrus, and four new licensed Shacks opened.
Digital initiatives like mobile app enhancements and kiosk ordering systems are driving operational efficiencies and contributing to an improved bottom line.
Quarterly performance highlights
The company's performance this quarter reflects its strategic expansion efforts and operational adjustments. The 12.3% increase in systemwide sales underscores a successful implementation of its growth strategy. Despite the slight miss in revenue target, Shake Shack has demonstrated resilience through its licensing revenue (up 10% year over year) and an impressive 14.7% year-over-year total revenue increase. The company said same-Shack sales trends improved each month of the quarter.
The company reported net income of $2.2 million against a prior-year net loss, reflecting effective operational and strategic maneuvers.
Looking ahead
Shake Shack's vision for the coming quarters is optimistic yet cautious, given the volatile economic landscape. The company posits strategic openings and digital innovations as key growth drivers but remains wary of geopolitical and macroeconomic pressures, particularly in the Middle East and China. Management's guidance suggests a focused approach on enhancing operational efficiency, customer experiences, and sustained profitability, with an eye on expanding margins and increasing sales.
For the year, Shake Shack expects revenue of $1.22 to $1.25 billion and a restaurant-level profit margin of roughly 20.6%.
Investors and stakeholders should monitor these areas closely, alongside the company's ability to adapt to market changes and consumer habits.
