Yahoo Finance Shake Shack Inc (SHAK) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and Strategic ...
Total Revenue: $290.5 million, up 14.7% year-over-year.
System-wide Sales: $443 million, increased by 12.3% year-over-year.
Same-Shack Sales: Grew by 1.6%.
Adjusted EBITDA: $35.9 million, a 30% increase year-over-year.
Adjusted EBITDA Margin: Improved to 12.4%, up 150 basis points.
Restaurant-Level Profit Margin: 19.5%, expanded by 120 basis points year-over-year.
License Business Sales: Grew by 8.1% year-over-year to $162.7 million.
New Shack Openings: 8 new Shacks in Q1; 40 planned for the year.
Net Income: $2 million, or $0.05 per diluted share.
Adjusted Pro Forma Net Income: $5.6 million, or $0.13 per fully exchanged and diluted share.
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Shake Shack Inc (NYSE:SHAK) reported a 14.7% increase in total revenue to $290.5 million, demonstrating strong performance in new Shack openings and positive same-Shack sales.
The company achieved a 13th consecutive quarter of positive same-Shack sales and a seventh straight quarter of year-over-year restaurant-level margin expansion.
Adjusted EBITDA grew by 30.2% to $35.9 million, with an improved adjusted EBITDA margin of 12.4%, up 150 basis points from the previous year.
Shake Shack Inc (NYSE:SHAK) continued its global expansion, opening eight new Shacks in the first quarter, contributing to a system-wide sales growth of 12.3% year over year.
The company made significant progress in operational efficiencies, including better forecasting and labor scheduling, and increased adoption of kiosks, which are now the largest order channel and most profitable.
Negative Points
Despite overall growth, Shake Shack Inc (NYSE:SHAK) faced weather-related headwinds that impacted sales, estimating a loss of about $3 million due to mobility closures and reduced hours.
Traffic was down 2.1% in the quarter, although it would have been approximately flat excluding weather impacts, indicating potential challenges in attracting customers.
The company continues to face macroeconomic headwinds in the Middle East and China, which could affect its international market performance.
There are ongoing inflationary pressures, particularly in wages and food costs, which could impact future profitability despite current operational efficiencies.
Shake Shack Inc (NYSE:SHAK) is in a transition period with the CEO changing, which could bring uncertainties regarding the continuation of current strategies and company performance.
Q & A Highlights
Q: Can you discuss the impact of kiosk implementation on sales and customer experience? A (Katie Fogertey, CFO): The kiosk strategy has led to a significant lift in sales, now seeing high teens percentage increases over traditional in-Shack orders. The new digital interfaces developed by our team guide guests through the ordering process, encouraging upgrades and customizations which might not be as intuitive at the cashier. This not only enhances the guest experience by reducing wait times but also improves order accuracy and increases average order values.
Q: What are the main drivers behind the strong comp sales momentum into April and May, especially considering the broader industry trends? A (Randall Garutti, CEO): The momentum is largely due to our marketing strategies, LTOs, and guest experience enhancements. Despite industry-wide pressures, our focused campaigns and promotions, particularly around chicken sundaes, have been very effective. We've also benefited from easier comparisons from the previous year and have continued to see improvement each month.
Q: How are you managing labor costs and what are the expected savings from the new labor model being implemented? A (Katie Fogertey, CFO): We've achieved good leverage on labor costs by improving forecasting, scheduling, and efficiency through kiosk adoption. The new labor model allows for more tailored staffing recommendations based on menu mix, channel mix, and peak times, which we are currently testing and plan to roll out across all company-operated Shacks by year-end. The savings from this new model have not been factored into our guidance yet.
Q: With the upcoming intensified burger value activity in the market, how does Shake Shack plan to maintain its premium brand positioning while offering value? A (Randall Garutti, CEO): Our approach to promotions and value is centered around added value rather than discounting. We focus on enhancing the guest experience with quality ingredients and superior service, which sets us apart from traditional fast food. Our promotions are designed to encourage trial and enhance the perceived value of our offerings without compromising our brand's premium positioning.
Q: Can you provide insights into the expected impact of digital marketing and advertising strategies on sales and brand awareness? A (Randall Garutti, CEO): We are ramping up our marketing investments, which have already started to show positive results in terms of brand awareness and sales growth. These initiatives are designed to be margin accretive and are focused on both attracting new customers and enhancing the experience for existing ones. We're leveraging data to tailor our marketing efforts more effectively across different regions.
Q: What are the plans for international expansion, particularly in new markets like Canada and Western Europe? A (Randall Garutti, CEO): We are optimistic about our growth opportunities internationally, with plans to enter Canada later this year and potential for expansion into Western Europe. Our international strategy focuses on both licensed and company-operated Shacks, leveraging local partnerships to adapt our offerings to regional tastes while maintaining the core attributes of the Shake Shack brand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
