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Burger restaurant chain Shake Shack reported better than expected third quarter earnings after the close Monday. However $SHAK shares sold off over 16% on lower then expected same store sales, similar to McDonalds $MCD and Wendy's $WEN

Shake Shack

Shake Shack Inc NYSE: SHAK Q3 Earnings

Shake Shack Inc NYSE: SHAK · Report Earnings After Close Monday

$0.21 PS and $401.5 Beat $157.8 million forecast in revenue

Earnings

Shake Shack reports earnings on Monday after the close were reported better than what Wall Street was expecting, based on a survey of analysts by Refinitiv: Earnings per share: 26 cents, adjusted, vs. 20 cents expected Revenue: $157.8 million, vs. $157.8 million expected. Shake Shack said its net income rose to $11.4 million, or 31 cents a share, from $6.9 million, or 17 cents a share, a year ago. Excluding items, Revenue climbed 32% to $157.8 million from the year-earlier period.

Wedbush was expecting the company to earn less, 18 cents on $152.6 million in revenue. Analyst Nick Setyan has a neutral rating and $84 target on the stock. He believes cannibalization could be a potential headwind in coming quarters, and he also thinks that same-store sales growth guidance could be conservative.

In comparison, McDonald’s (MCD) had disappointing third-quarter earnings miising analysts’ sales and earnings forecasts. McDonald’s adjusted EPS fell on a YoY basis. MCD stock has fallen about 8% since its third-quarter earnings on October 22.

Shake Shack shares have ripped this year, gaining 81% compared to the S&P’s 22% return, that took a hot after the earnings release.

 

Shake Shack Inc NYSE: SHAK

Market Reaction Pre-market $70.10 −14.11 (-16.76%)

Highlights

Shake Shack started transitioning from four delivery partners, DoorDash, Postmates, Caviar and GrubHub, to just GrubHub in the third quarter. Garutti said that the company expects an impact on its delivery revenue, especially in areas where GrubHub is not a market leader.

Shake Shack Same Store Sales Trend Q3 2019

During the three-month period, the average weekly sales at domestic company-operated Shacks dropped 7% annually to $80,000, mainly due to the addition of newer Shacks at a broader range of average unit volumes.

Chief Financial Officer Tara Comonte noted on the earnings call that the company’s results to-date coupled with “expected volatility from the delivery transition” were reflected in the downward revised year-end same-store sales guidance of 1.5%. The burger chain also sees more “inherent risk” in its fourth-quarter performance because of this transition.

Outlook

Shake Shack revised its financial outlook for the 2019 fiscal year. The company said total revenue, which includes licensing revenue, is now expected to come in between $592 million to $597 million, compared to the previous outlook of $585 million to $590 million.

Same-store sales growth for 2019 was revised downwards to about 1.5% from the previous outlook of about 2.0%.

Shake Shack said it still expects to have 38 to 40 company-operated restaurant openings by the end of 2019. In 2020, it expects to open 40 to 42 domestic company-operated restaurants, including a few urban restaurants with a smaller footprint that increasingly integrate digital ordering, CEO Randy Garutti said during the earnings call. At the end of its second quarter, Shake Shack announced a deal with GrubHub. Garutti said Monday that the company will start actively marketing the partnership nationally.

About ShakeShack

Shake Shack is a modern day “roadside” burger stand known for its 100% all-natural Angus beef burgers, chicken sandwiches and flat-top Vienna beef dogs (no hormones or antibiotics - ever), spun-fresh frozen custard, crinkle cut fries, craft beer and wine and more. With its fresh, simple, high-quality food at a great value, Shake Shack is a fun and lively community gathering place with widespread appeal. Shake Shack’s mission is to Stand for Something Good®, from its premium ingredients and caring hiring practices to its inspiring designs and deep community investment.

Since the original Shack opened in 2004 in NYC’s Madison Square Park, the company has expanded to more than 240 locations in 30 U.S. States and the District of Columbia, including more than 80 international locations across London, Hong Kong, Shanghai, Singapore, Philippines, Mexico, Istanbul, Dubai, Tokyo, Moscow, Seoul and more.

From The Traders Community Research Desk

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