Shake Shack(SHAK) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue in Q2 2021 was $187.5 million, up 104$181.5 million, reflecting a year-over-year growth of 102.7% [20] - Shack level margin improved to 19.2% in Q2, a 420 basis-point increase from the first quarter [10][30] Business Line Data and Key Metrics Changes - Same Shack sales increased by 52.7% year-over-year in Q2, with traffic growing 61.5% year-over-year [22][27] - Digital sales accounted for 47% of Shack sales in Q2, with a retention rate of approximately 80% [27][28] - The company opened 20 domestic company-operated Shacks in 2021 and plans to open 15 to 18 more by year-end [11][12] Market Data and Key Metrics Changes - Urban markets showed signs of recovery, with same Shack sales down only 9% compared to July 2019 levels [9][24] - The Southeast region, particularly Texas, reported same Shack sales above 2019 levels, indicating strong market performance [26] - Licensed business saw a strong uptick in sales, with weekly sales performance increasing from $6.6 million in April to$8.7 million in July [13][14] Company Strategy and Development Direction - The company is focusing on the evolution of Shack formats through physical and digital transformation to enhance guest experience [10] - Plans to open drive-thru locations and Shack Track walk-up windows are part of the strategic investment in new formats [11][12] - The company is committed to investing $10 million in team members for wage increases and leadership development [7][19] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about the ongoing COVID situation but is encouraged by the current momentum in sales recovery [9][39] - The company expects to see continued growth in both urban and suburban markets, with a focus on digital sales and new Shack openings [29][30] - Management believes that investments in team members and innovation will position the company for stronger recovery and growth [39][40] Other Important Information - The company plans to raise menu prices by 3$86 million and $88 million to support growth initiatives [36] - The balance sheet remains strong, ending the quarter with$420.2 million in cash and marketable securities [38] Q&A Session Summary Question: Importance of maintaining positive sales gap for new Shacks - Management acknowledges the importance of maintaining the positive sales gap and highlights the mix of suburban and urban locations contributing to strong performance [42][43] Question: Details on the $10 million investment in team members - Management confirms that a significant portion of the investment will be loaded in the back half of the year, focusing on wage increases and retention bonuses [45][46] Question: Managing elevated construction costs - Management emphasizes the long-term vision for building Shacks and the importance of investing in new formats despite current cost pressures [48][50] Question: Recovery rates of new unit classes - Management indicates that it is too early to provide reliable comparisons for recovery rates of new unit classes due to COVID impacts [65][66]