Shake Shack(SHAK)2021-11-05 04:52Financial Data and Key Metrics Changes - Total revenue for Q3 2021 reached $193.9 million, marking a 49% year-over-year increase and the highest revenue in the company's history [23][7] - Average weekly sales for Q3 were $72,000, exceeding historical seasonality expectations, while October's average weekly sales were $70,000, above September levels [24][26] - Same-Shack sales rose 24.8% year-over-year in Q3, with October Same-Shack sales just 1% below 2019 levels, showing significant recovery [25][26] Business Line Data and Key Metrics Changes - The company experienced approximately 100 days of temporary closures due to COVID and extreme weather, resulting in an estimated $850,000 in lost sales [24] - Same-Shack sales were about 7% below 2019 levels in Q3, improving from a 12% decline in Q2 [25] - Suburban Same-Shack sales were reported to be 7% above 2019 levels in October, indicating strong performance in suburban locations [27][30] Market Data and Key Metrics Changes - Urban Same-Shack sales were down 11% from 2019 levels in September, improving to down 8% in October, reflecting a steady urban recovery [26] - The company noted that all regions outside of New York City had more than fully recovered to 2019 sales levels as of October [27] - The licensed business generated $6.9 million in revenue for the quarter, benefiting from the relaxation of COVID-related restrictions [34] Company Strategy and Development Direction - The company is focused on elevating its workforce, investing in higher wages and retention bonuses to attract and retain talent [10][13] - A digital transformation is underway, with investments in omni-channel guest experiences and new menu items launched exclusively through the app [14][15] - Plans for 2022 include opening 45 to 50 new Shacks, with a focus on suburban locations and drive-thru formats [17][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing profitability challenges due to rising costs of goods and labor, with beef prices up approximately 30% year-over-year [11][39] - The company remains cautious about potential supply chain disruptions and labor market volatility as it approaches the colder months [35][36] - Despite challenges, management expressed confidence in the company's growth trajectory and the ability to navigate through uncertainties [48][49] Other Important Information - The company reported a Shack level operating margin of 15.8% for Q3, within the guided range, but noted margin dilution due to labor and commodity inflation [37][39] - G&A expenses for Q3 were $20.5 million, reflecting continued investments in marketing and technology [43] - The balance sheet remains strong, ending the quarter with $401.5 million in cash and marketable securities [47] Q&A Session Summary Question: Impact of operational delays on average weekly sales - Management noted that while there were temporary closures and some staffing challenges, the impact on average weekly sales was not broad-based [51][52][53] Question: Future pricing strategy amid inflation - Management indicated a history of conservative pricing but acknowledged the potential for further price adjustments if inflationary pressures continue [54][55][56] Question: Suburban sales trends and drivers - Management highlighted a strong rebound in traffic across suburban formats, with successful limited-time offers contributing to sales growth [59][60][61] Question: Beef price outlook for Q4 - Management reported that while beef prices spiked in Q3, they have seen some stabilization but remain in an inflationary environment [63][64] Question: Menu innovation amidst supply chain challenges - Management acknowledged disruptions but emphasized that these challenges have not materially distracted from their menu innovation efforts [75]