Shake Shack's Same-Store Sales to Gain on Menu Innovation

Shares of Shake Shack Inc. SHAK, which have declined 7.4% in the past six months, took a sharp U-turn in the last two trading sessions. The company’s shares gained 14.5% in the last two trading sessions. The sharp gain can be primarily attributed to Goldman Sachs analyst’s bullish view on the stock’s future performance.

Menu Innovation & Digitalization to Drive Growth

Menu innovation will drive the company’s same-store sales in the coming quarters. Customers have responded well to the company’s addition of a group of holiday-themed milkshakes to its menu. It has also added the award-winning ShackMeister Burger to the menu in the United States. Further, the company will add Hot Chick'n to its menu later this year.

We believe Shake Shack’s partnership with Grubhub Inc. GRUB will also be a major growth driver. Last year, the company partnered with Grubhub for the rollout of delivery services nationwide. The popular ‘roadside’ burger brand’s more than 140 restaurants are now available for delivery on Grubhub. Per the company, other programs related to the partnership will be rolled out throughout 2020. The partnership is expected to drive Shake Shack’s sales.

With the Internet, digitalization and electronics influencing every facet of our daily lives, the restaurant industry has embraced this trend as well. Per The NPD Group, foodservice delivery services have contributed significantly to restaurant sales in the past few years.

Moreover, the company is focusing on unit expansion. Shake Shack’s cult following and successful expansion into various cities across the globe are likely to boost Shack sales and keep driving traffic.

Zacks Rank & Key Picks

Shake Shack currently has a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Chipotle Mexican Grill, Inc. CMG and Dunkin' Brands Group, Inc. DNKN. Both stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chipotle Mexican Grill reported trailing four-quarter positive earnings surprise of 16.1%, on average.

Dunkin' Brands Group has an impressive long-term earnings growth rate of 10.9%.

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