Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Shake Shack (NYSE:SHAK) stock jumped as much as 13.7% early Thursday, but had settled to trade up around 6.5% as of 10:30 a.m. after the burger-centric restaurant chain reported better-than-expected first-quarter results Wednesday after the market closed.
So what: Quarterly revenue climbed 56.3% year over year to $37.8 million, helped both by a solid 11.7% increase in "same-Shack" sales, as well as the opening of three new locations in Q1. Adjusted earnings before interest, taxes, depreciation and amortization rose 94% over the same period to $7 million, which translated to adjusted pro forma net income of $1.3 million, or $0.04 per diluted share. Analysts, on average, were expecting Shake Shack to achieve an adjusted net loss of $0.03 per share on revenue of just $33.9 million.
Now what: "We are pleased to have continued our strong momentum through the first quarter," added Shake Shack CEO Randy Garutti. "Our strong track record of opening successful Shacks in both the United States and internationally continues to demonstrate the global appeal of Shake Shack and validates our belief in our significant whitespace opportunity."
As of April 1, 2015, Shake Shack had 66 systemwide locations, including 34 domestic company-operated, five domestic franchises, and 27 international franchises. And Shake Shack has already opened two additional locations so far in the second quarter.
Shake Shack also provided guidance for the full year, calling for 2015 revenue between $161 million and $165 million -- an increase over the outlook it provided last quarter for revenue between $159 million and $163 million. That performance will be driven by at least 10 new domestic locations during the year, five international franchises, and same-Shack sales growth in the low- to mid-single digits. However, Wall Street was already modeling revenue near the end of that range, which could explain why the stock has pulled back from it's early morning highs.
Even so, it's hard to blame the market for bidding up shares of Shake Shack this morning given its guidance raise and solid Q1 beat on both the top and bottom lines. Shares might look expensive trading at over 800 times next year's expected earnings, but that's more than anything a byproduct of the fact Shake Shack is on the cusp of sustained profitability. If the up-and-coming chain can continue this momentum going forward, I see little reason to believe it can't continue rewarding long-term investors from here.