Core Theme - The article discusses the growth potential of quick-service restaurants (QSR) in the U.S., highlighting successful expansion stories and identifying four companies with significant growth opportunities [1][2]. Company Summaries Chipotle - Chipotle Mexican Grill operates 3,781 company-owned restaurants and plans to open 315 to 345 new locations in 2025, representing a 9% unit growth [4][5]. - The long-term goal is to operate up to 7,000 locations in North America, which could be achieved in the next 12 to 13 years [5]. - Chipotle is also expanding internationally, with plans to enter Mexico next year and ongoing expansion in the Middle East [6]. Cava - Cava has reported four consecutive quarters of positive double-digit same-store sales and plans to open 64 to 68 new locations this fiscal year, indicating high-teens unit growth [8][9]. - The company aims to reach at least 1,000 restaurants by 2032, nearly tripling its current locations [9]. - Cava employs a "coastal smile" expansion strategy, focusing on areas with a high interest in Mediterranean cuisine, and is now expanding into the Midwest [10][11]. Dutch Bros - Dutch Bros operates 1,012 shops and plans to open at least 160 new locations this year, representing about 16% unit growth [12][13]. - The company believes it can reach 2,029 locations by the end of 2029, with a total market opportunity for 7,000 shops [13]. - Dutch Bros has a significant opportunity to increase sales by adding more food items to its menu, as currently only 2% of its sales come from food [14]. Shake Shack - Shake Shack operates 579 locations and plans to open 45 to 50 new company-owned locations this year, indicating mid-teens unit growth [16][17]. - The company aims to open the most new locations in its history this year while reducing construction costs by 10% [18]. - Shake Shack believes it can support at least 1,500 locations in the U.S. over the long term, quadrupling its current U.S. locations [19].

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]

Company Performance - Shake Shack reported quarterly earnings of $0.14 per share, missing the Zacks Consensus Estimate of $0.16 per share, and showing a slight increase from $0.13 per share a year ago, resulting in an earnings surprise of -12.50% [1] - The company posted revenues of $320.9 million for the quarter ended March 2025, which was 2.09% below the Zacks Consensus Estimate, but an increase from $290.5 million year-over-year [2] - Over the last four quarters, Shake Shack has surpassed consensus EPS estimates two times and topped revenue estimates two times [2] Stock Performance - Shake Shack shares have declined approximately 32.4% since the beginning of the year, contrasting with the S&P 500's decline of -5.3% [3] - The current Zacks Rank for Shake Shack is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.33 on revenues of $355.99 million, and for the current fiscal year, it is $1.26 on revenues of $1.46 billion [7] - The outlook for the Retail - Restaurants industry, to which Shake Shack belongs, is currently in the bottom 19% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - In Q1 2025, total revenue grew by 10.5% year over year to $320.9 million, marking the highest first quarter total revenue on record [18][19] - Restaurant level profit margin increased by 120 basis points year over year to 20.7%, the highest first quarter margin since 2019 [6][19] - Adjusted EBITDA grew by approximately 13.5% year over year to $40.7 million, representing 12.7% of total revenue [27] Business Line Data and Key Metrics Changes - Company-operated Shack sales increased by 10.4% year over year to $309.8 million, with four new Shack openings [19] - License business revenue grew by 11.1% year over year to $11.1 million, with sales increasing by 10.4% year over year to $179.6 million and seven new license Shack openings [19][14] Market Data and Key Metrics Changes - Nearly two-thirds of markets experienced same Shack sales growth, although major markets like Los Angeles and New York City faced significant weather-related challenges [20] - Traffic was down 4.6% in the quarter due to unfavorable weather and broader industry pressures, with an estimated 400 basis points of traffic pressure attributed to these factors [20][22] Company Strategy and Development Direction - The company aims to grow to at least 1,500 company-operated Shacks, with a focus on innovative thinking and operational improvements [4][5] - Strategic priorities include building a culture of leaders, improving restaurant operations, driving comp sales, and expanding the license business [8][14] - The company is committed to investing in long-term strategic capabilities and accelerating innovation across various operational areas [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic headwinds impacting transaction growth but emphasized the opportunity to improve guest experience and operational efficiency [4][6] - The company expects low single-digit same Shack sales growth for 2025, with a focus on maintaining competitive pricing and operational improvements [30][31] Other Important Information - The company plans to open 45 to 50 company-operated Shacks in 2025, marking the largest class on record [30] - Menu pricing is expected to increase modestly, with in-Shack prices up approximately 2% year over year [30] Q&A Session Summary Question: Store margins and near-term opportunities - Management highlighted operational improvements and a new labor model as key factors driving margin expansion and confidence in future performance [36][37] Question: Drive-thru strategy and early learnings - The company reported significant improvements in ordering time and guest satisfaction from testing new digital menu boards and combo offerings in drive-thrus [42][45] Question: Q2 comp outlook and underlying assumptions - Management expects low single-digit comps for Q2, driven by new menu innovations and improved weather conditions [90][92] Question: Long-term targets and pricing assumptions - Management confirmed that operational improvements and supply chain efficiencies are expected to support margin expansion without relying heavily on price increases [63][64] Question: Innovation and LTO strategy - The company is focused on maintaining a quarterly cadence for new product innovations while ensuring operational efficiency [72][75]

Financial Data and Key Metrics Changes - In Q1 2025, total revenue grew by 10.5% year over year to $320.9 million, marking the highest first quarter total revenue on record [18][19] - Restaurant level profit margin improved by 120 basis points year over year to 20.7%, the highest first quarter margin since 2019 [7][18] - Adjusted EBITDA increased by approximately 13.5% year over year to $40.7 million, representing 12.7% of total revenue [27] Business Line Data and Key Metrics Changes - In the company-operated business, Shack sales grew by 10.4% year over year to $309.8 million, with four Shack openings including two drive-throughs [19] - The licensing business saw revenue growth of 11.1% year over year to $11.1 million, with sales increasing by 10.4% year over year to $179.6 million and seven new license Shack openings [19][15] Market Data and Key Metrics Changes - Nearly two-thirds of markets experienced same Shack sales growth, although major markets like Los Angeles and New York City faced significant weather-related challenges [20][22] - Traffic was down 4.6% in the quarter due to unfavorable weather and broader industry pressures, with an estimated 400 basis points of traffic pressure attributed to these factors [20][21] Company Strategy and Development Direction - The company aims to grow to at least 1,500 company-operated Shacks, with a focus on innovative thinking and operational improvements [5][6] - Strategic priorities include building a culture of leaders, improving restaurant operations, driving comp sales, and expanding the licensing business [9][15] - The company is committed to investing in long-term strategic capabilities and accelerating innovation across various operational areas [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macro headwinds impacting transaction growth but emphasized the opportunity to improve guest experience and reduce costs [5][6] - The company expects to achieve low single-digit same Shack sales growth for 2025, with a focus on menu innovation and culinary strategy to drive traffic [31][54] Other Important Information - The company plans to open 45 to 50 company-operated Shacks in 2025, marking the largest class on record [31] - The balance sheet remains solid with $312.9 million in cash and cash equivalents at the end of the quarter [27] Q&A Session Summary Question: Can you elaborate on the near-term opportunities for margin expansion? - Management highlighted operational improvements and a new labor model as key factors driving productivity and margin growth [37][38] Question: What are the early learnings from the drive-through strategy tests? - Management reported significant improvements in ordering time and guest satisfaction from the new digital menu boards and combo offerings [43][45] Question: What are the underlying assumptions for the Q2 comp outlook? - Management expects low single-digit comps based on current macro trends and new menu innovations, including a summer barbecue menu [93] Question: How does the company plan to balance menu innovation with operational efficiency? - Management emphasized the importance of ensuring that new innovations do not disrupt operational efficiency and are manageable for staff [58][60] Question: What is the company's strategy for driving mix without increasing prices? - Management plans to introduce premium items and combos to enhance mix while minimizing price increases on core items [80][82]

Financial Performance - Total revenue for Q1 2025 was $320.9 million, representing a 10.5% increase compared to 2024, with Shack sales of $309.8 million and licensing revenue of $11.1 million[5]. - System-wide sales reached $489.4 million, up 10.4% from 2024, while same-Shack sales increased by 0.2%[5]. - Net income attributable to Shake Shack Inc. was $4.2 million, or earnings of $0.10 per diluted share, compared to $2.0 million in the same period of 2024[5][17]. - Adjusted EBITDA for the quarter was $40.7 million, reflecting a 13.5% increase from 2024[5]. - Restaurant-level profit was $64.2 million, accounting for 20.7% of Shack sales[5]. - Net income for the thirteen weeks ended March 26, 2025, was $4,513,000, compared to $2,214,000 for the same period in 2024, representing a 103% increase[19]. - Total revenue increased to $320,898,000 in Q1 2025 from $290,504,000 in Q1 2024, reflecting a growth of 10.5%[26]. - Shack sales reached $309,838,000, up from $280,552,000, indicating a 10.4% increase year-over-year[26]. - Restaurant-level profit for the period was $64,240,000, compared to $54,746,000 in the prior year, marking an increase of 17.3%[26]. - Adjusted EBITDA for Q1 2025 was $40,745,000, up from $35,885,000 in Q1 2024, which is a 13.5% increase[32]. - Adjusted EBITDA margin improved to 12.7% in Q1 2025 from 12.4% in Q1 2024[32]. - Adjusted pro forma net income for the same period was $6,398,000, up from $5,623,000, reflecting a 13.8% increase year-over-year[39]. - Earnings per share of Class A common stock—diluted increased to $0.10 for the thirteen weeks ended March 26, 2025, compared to $0.05 for the same period in 2024, a 100% increase[39]. - Adjusted pro forma earnings per fully exchanged share—diluted rose to $0.14, up from $0.13, indicating an increase of 7.7%[39]. Operational Highlights - The company opened four new Company-operated Shacks, including two drive-thrus, and seven new licensed Shacks during the quarter[5]. - The company incurred $2,057,000 in impairments and losses on asset disposals during the quarter, compared to $526,000 in the same period last year[26]. - The restaurant-level profit margin increased to 20.7% from 19.5% year-over-year, indicating improved operational efficiency[26]. - The company incurred an impairment charge and Shack closures amounting to $1,653,000 during the fiscal period[39]. - Legal settlements accounted for expenses of $983,000 in the current fiscal period[39]. Cash and Assets - Cash and cash equivalents as of March 26, 2025, were $312.9 million, a slight decrease from $320.7 million at the end of 2024[15]. - Cash provided by operating activities was $31,222,000, slightly up from $30,665,000 in the previous year[19]. - Cash and cash equivalents at the end of the period were $312,921,000, compared to $260,203,000 at the end of Q1 2024, showing a 20.2% increase[19]. - Total assets increased to $1.727 billion from $1.697 billion at the end of 2024[15]. - Total liabilities rose to $1.230 billion, up from $1.203 billion at the end of 2024[15]. Tax and Shares - The effective tax rate for the thirteen weeks ended March 26, 2025, was assumed at 21.3%[41]. - Non-GAAP adjustments for the period had a per share impact of $0.04, compared to $0.08 in the previous year[42]. - Weighted-average shares of Class A common stock outstanding—diluted increased to 41,864,000 from 41,259,000, a growth of 1.5%[39]. - The tax impact of adjustments was a reduction of $993,000 for the thirteen weeks ended March 26, 2025[39].