Shake Shack (SHAK) FY Conference June 11, 2025 02:15 PM ET Speaker0 Hi, everyone. Thanks for participating in Oppenheimer's twenty fifth Annual Consumer Conference. I'm Mike Tamas, and I cover Shake Shack here at Oppenheimer. Know, Shake Shack's been one of our top picks in 2025, and we remain excited about management's new strategies to stimulate same store sales, enhance margins, and accelerate unit growth. We're gonna dig into all those topics and much more with Katie Fogarty, Shake Shack's CFO. She join ...

Shake Shack (SHAK) 2025 Conference June 05, 2025 09:05 AM ET Speaker0 Okay. Good morning, everybody. Welcome to the session for Shake Shack. I'm David Tarantino, restaurants analyst at Baird. And as many of you know, Shake Shack is a leader in the fast casual premium burger segment, a concept that's been very popular and generated really good returns on capital and has a lot of room to grow in our opinion. Pleased to welcome two members of the management team here today, CEO Rob Lynch and CFO Katie Bogarty. ...

Core Viewpoint - Shake Shack Inc. (SHAK) has experienced a significant share price increase of 34.2% over the past year, outperforming the industry growth of 8.7%, driven by menu innovation, digital initiatives, and unit expansion efforts, although challenges from weather and macroeconomic conditions remain a concern [1] Growth Drivers for SHAK Stock - Culinary innovation is a key differentiator for Shake Shack, with new menu items like the Dubai Chocolate Pistachio Shake receiving strong consumer response [2] - The introduction of the first-ever fish sandwich in Hong Kong has also been successful, quickly becoming the second-best-selling protein [3] - Digital sales accounted for 38% of total transactions in the fiscal first quarter, reflecting a 130-basis-point increase year over year, supported by new digital menu boards and a guest recognition platform [4] - The company plans to open 45 to 50 new locations in 2025, marking its largest development year, particularly in high-growth regions [5] - Shake Shack's licensed business is expanding, with seven new licensed shacks opened in the fiscal first quarter, enhancing brand visibility and global appeal [6] Concerns for Shake Shack Stock - The company faced operational challenges in the fiscal first quarter due to severe weather events and economic uncertainty, particularly in major markets like Los Angeles and New York City, which accounted for about 75% of overall headwinds [8][9] - These challenges resulted in a 4.6% decline in overall traffic and a 1% drop in same-store sales in April, compounded by the effects of a previous menu price increase [9] Overall Assessment - Shake Shack demonstrates long-term growth potential through strong brand recognition, innovative offerings, and an ambitious expansion plan, but faces near-term pressures from weather disruptions and economic uncertainty [10]

For the first time, Shake Shack, the fast-casual burger chain, is getting into the loyalty game to ramp up business with economic uncertainty looming.  Starting Wednesday, the burger chain, founded by renowned New York City restaurateur Danny Meyer, said customers will be able to get any size soft drink for $1 if they order through the Shake Shack App or its website, shakeshack.com. In June, customers ordering a burger or BBQ sandwich at least twice within a certain period — online or through the company's ...

Core Insights - Shake Shack is launching its first loyalty program after a successful test earlier this year, aimed at increasing customer visits and app usage [1][2] - The company reported a 10.5% year-over-year increase in first-quarter revenue and a 0.2% rise in comparable sales [3] - The loyalty program includes offers such as $1 sodas and discounts for customers who place multiple orders online or through the app [1][2] Company Strategy - Shake Shack is focused on creating durable value for stakeholders through initiatives that drive same-Shack sales, including enhancing culinary strategies and increasing customer visit frequency [4] - The company has added new offer capabilities to its app and web channels to encourage repeat business and improve guest recognition [4] Market Trends - A report indicates that 67% of shoppers are motivated by rewards when making purchases, highlighting the importance of loyalty programs in driving customer engagement [5] - Preferred payment methods and rewards can enhance shopper confidence and conversion rates, suggesting that loyalty programs are critical for retail success [6]

Group 1 - Shake Shack (NYSE: SHAK) reported earnings that missed expectations, yet the stock price increased by 6.38%, indicating market optimism despite the disappointing results [1] Group 2 - The analysis of restaurant stocks is conducted by a specialized firm that covers various segments including QSR, fast casual, casual dining, fine dining, and family dining, utilizing advanced analytical models and valuation techniques [2]

Core Insights - The Q1 earning season has revealed that many major companies are maintaining their outlooks for the year despite macro volatility caused by tariffs [1] Group 1 - Major companies, including Shake Shack, have not cut their forecasts for the year, indicating resilience in the face of economic challenges [1]

Core Insights - Shake Shack Inc. (SHAK) reported first-quarter fiscal 2025 results with earnings and revenues missing the Zacks Consensus Estimate, although both metrics increased year over year [1][2] - The stock experienced a marginal gain of 1.1% following the results [1] Earnings & Revenue Details - Adjusted earnings per share (EPS) were 14 cents, missing the estimate of 16 cents by 12.5%, but increased 7.7% year over year [2] - Quarterly revenues reached $320.9 million, falling short of the consensus mark of $328 million by 2.1%, yet showing a year-over-year increase of 10.5% [2] Sales Performance - Same-Shack sales increased by 0.2% year over year, a decline from the previous quarter's growth of 4.3% [3] - Shack sales rose 10.4% year over year to $309.8 million, below the expected $317.9 million [3] - Licensing revenues were $11.1 million, up 11.1% year over year, exceeding the forecast of $10.7 million [3] - Shack system-wide sales increased 10.4% year over year to $489.4 million [3] Operating Highlights - Operating income for the quarter was $2.8 million, compared to $0.03 million in the prior-year quarter [4] - Restaurant-level profit margin improved to 20.7%, up 120 basis points year over year [4] - Food and paper costs as a percentage of revenues decreased by 80 basis points to 27.8% [4] - Labor and related costs as a percentage of revenues reduced by 110 basis points to 28% [4] Expense and EBITDA Analysis - Total expenses for the quarter were $318.1 million, compared to $290.5 million in the prior-year quarter, slightly above the estimate of $326 million [5] - Adjusted EBITDA was $40.7 million, up from $35.9 million in the year-ago quarter, with an adjusted EBITDA margin expanding by 30 basis points to 12.7% [5] Balance Sheet Overview - As of March 26, 2025, cash and cash equivalents totaled $312.9 million, down from $320.7 million as of December 25, 2024 [6] - Long-term debt remained relatively stable at $246.5 million compared to $246.7 million as of December 25, 2024 [6] Future Outlook - For the second quarter of fiscal 2025, total revenues are expected to be between $346 million and $353 million, with licensing revenues projected between $11.9 million and $12.3 million [7] - For fiscal 2025, revenues are anticipated to be in the range of $1.4 billion to $1.5 billion, with a restaurant-level profit margin projected at about 22.5% [8] - The company expects to open approximately 45-50 company-operated locations and 35-40 licensed Shack openings in fiscal 2025 [8]

Sales Performance - Same-Shack sales for the thirteen weeks ended March 26, 2025 increased by 0.2% year-over-year, driven by a 4.8% increase in price mix, offset by a 4.6% decline in guest traffic [102]. - Average weekly sales were $72,000 for the thirteen weeks ended March 26, 2025, a decrease from $73,000 in the same period last year, primarily due to a decline in guest traffic [103]. - System-wide sales for the thirteen weeks ended March 26, 2025 increased by 10.4% to $489.4 million compared to the same period last year [103]. - Digital sales increased by 14.3% to $118.0 million, representing 38.1% of Shack sales during the thirteen weeks ended March 26, 2025 [104]. - Shack sales for the thirteen weeks ended March 26, 2025 increased by 10.4% to $309.8 million, primarily due to the opening of 43 new Company-operated Shacks [109]. - Licensing revenue for the thirteen weeks ended March 26, 2025 increased by 11.1% to $11.1 million, attributed to the opening of 30 net new licensed Shacks [112]. Expenses and Costs - Food and paper costs increased by 7.2% to $86.0 million, primarily due to the opening of new Shacks, despite a decrease in the percentage of Shack sales to 27.8% [114]. - Labor and related expenses increased by 6.3% to $86.7 million, influenced by the opening of new Shacks, with a decrease in the percentage of Shack sales to 28.0% [117]. - Other operating expenses increased by 15.3% to $48.3 million for the thirteen weeks ended March 26, 2025, compared to the same period last year, primarily due to higher transaction costs and increased marketing spend [121]. - Occupancy and related expenses rose by 11.0% to $24.6 million, attributed to the opening of 43 new Company-operated Shacks, contributing approximately $2.7 million [124]. - General and administrative expenses increased by 13.1% to $40.6 million, driven by higher marketing investments and increased wages to support Shack growth [128]. - Depreciation and amortization expense grew by 4.3% to $26.5 million, mainly due to incremental depreciation from the opening of new Shacks [131]. - Pre-opening costs increased by 16.9% to $3.2 million, primarily due to higher legal costs associated with accelerating development pipelines [134]. - Impairments, loss on disposal of assets, and Shack closures surged by 291.1% to $2.1 million, largely due to expenses related to the closure of nine Company-operated Shacks [136]. Income and Profitability - The net income attributable to Shake Shack Inc. for the thirteen weeks ended March 26, 2025 was $4.245 million, compared to $2.040 million in the same period last year [107]. - Total revenue for the thirteen weeks ended March 26, 2025, was $320.9 million, an increase from $290.5 million for the same period in 2024, representing a growth of 10.4% [150]. - Restaurant-level profit for the same period was $64.2 million, up from $54.7 million in 2024, reflecting a year-over-year increase of 17.1% [150]. - Restaurant-level profit margin improved to 20.7% compared to 19.5% in the prior year, indicating enhanced operational efficiency [150]. - Net income for the thirteen weeks ended March 26, 2025, was $4.5 million, compared to $2.2 million in 2024, marking a significant increase of 103.6% [155]. - Adjusted EBITDA for the period was $40.7 million, up from $35.9 million in 2024, which is an increase of 13.5% [155]. Cash Flow and Financial Position - Cash and cash equivalents at the end of the period stood at $312.9 million, a decrease from $320.7 million at the beginning of the period [172]. - Net cash provided by operating activities was $31.2 million, slightly up from $30.7 million in the previous year [172]. - The company reported net cash used in investing activities of $29.4 million, compared to a net cash provided of $11.3 million in 2024 [172]. - The adjusted pro forma earnings per fully exchanged share for the period was $0.14, compared to $0.13 in 2024, reflecting a growth of 7.7% [161]. - Net cash used in financing activities increased to $9.7 million from $6.4 million, primarily due to higher withholding taxes related to net settled equity awards [175]. Debt and Obligations - The company issued $250.0 million in 0% Convertible Senior Notes due 2028, which can be converted into cash, shares of Class A common stock, or a combination thereof [176]. - The Revolving Credit Facility allows borrowings up to $50.0 million, with the potential to increase by an additional $100.0 million, maturing in March 2026 [177]. - As of March 26, 2025, there were no amounts outstanding under the Revolving Credit Facility, which requires compliance with maximum net lease adjusted leverage and minimum fixed charge coverage ratios [178][180]. - Material contractual obligations include operating and finance lease obligations, long-term debt, and purchase obligations, with most due within the next 12 months [181][183]. Market Risks - The company has not experienced material changes in exposure to market risks as described in the previous annual report [186].

Financial Performance - Shake Shack reported revenue of $320.9 million for the quarter ended March 2025, reflecting a year-over-year increase of 10.5% [1] - The EPS for the same period was $0.14, compared to $0.13 a year ago, indicating a slight improvement [1] - The reported revenue fell short of the Zacks Consensus Estimate of $327.76 million, resulting in a surprise of -2.09% [1] - The company experienced an EPS surprise of -12.50%, with the consensus EPS estimate being $0.16 [1] Key Metrics - Shake Shack's same-Shack sales growth was 0.2%, significantly below the 2.5% estimated by analysts [4] - The total number of licensed Shacks was 256, matching the average estimate [4] - Domestic company-operated Shack counts stood at 333, in line with analyst expectations [4] - System-wide Shack counts totaled 589, consistent with the average estimate [4] - International licensed Shack counts were 211, also matching the average estimate [4] - Domestic licensed Shack counts were 45, slightly below the average estimate of 46 [4] - Average weekly sales were $72, compared to the average estimate of $73.54 [4] - Revenue from licensing was $11.06 million, exceeding the average estimate of $10.84 million, representing a year-over-year change of +11.1% [4] - Revenue from Shack sales was $309.84 million, below the average estimate of $316.72 million, with a year-over-year change of +10.4% [4] - Shack system-wide sales reached $489.40 million, slightly below the estimated $495.03 million, but still reflecting a +10.4% change year-over-year [4] Stock Performance - Shake Shack shares have returned -8.3% over the past month, compared to the Zacks S&P 500 composite's -0.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]