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Shake Shack Q1 sales jump, but revenues light amid digital push, COVID recovery

·Associate Producer
·4 min read
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Shake Shack (SHAK) posted a mixed fiscal first-quarter earnings report on Thursday, as it ramps up its digital footprint, urban locations and strategic collaborations in an effort to compete in the post-COVID-19 era. 

Here's what the New-York based fast-casual restaurant reported versus Wall Street expectations, according to a Bloomberg consensus estimate:

  • Revenue: $155.3 million versus $161.6 million expected

  • Adj. share loss share (EPS): 1 cent versus - $0.09 expected

  • Same-store sales: 5.7% versus -1.74% expected

The higher-than-expected same-store sales in fiscal April saw an "increase of 86% versus the same period last year."

"In the first quarter and so far through fiscal April, the positive momentum of our financial recovery continued," Shake Shack CEO Randy Garutti shared in the release. He said the quarter ended with Shake Shack's posting average weekly sales of at least $68,000.

This quarter, digital channels maintained 90% of sales retention in fiscal April versus fiscal January, according to the company. 

Meanwhile, app and web sales skyrocketed by an astounding 203% compared to a year ago, reflecting how the fast food industry has pivoted quickly to digital as COVID-19 restrictions have forced most consumers to grab and go.

In March, "roadside" burger chain launched a new, exclusive UberEats (UBER) partnership on its Apple iOS app. Shake Shack is joining other fast food companies, like Chipotle (CMG) and McDonald's (MCD), that are racing to leverage digital orders to cultivate customer loyalty via digital-only offerings.

On the Shack App, customers can order and track their delivery in real-time, but it does come with a $0.99 flat delivery fee — and none at all for orders over $35.

"Shack Track digital convenience leads, with about a third of the class featuring walk-up windows, about 10% with a drive-up window and many other Shacks featuring curbside and/or an enhanced interior pickup experience," Garutti shared in the report. 

Hoping for an urban rebound

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In the first-quarter report, he noted the importance of "the return of business traffic, events and tourism to cities like NYC, Chicago and LA will be key to our full recovery," noting the company is already experiencing it in its home base.

“Spring has ushered in a great energy around the country and in our hometown of New York City. With COVID cases stabilizing and more regions steadily loosening restrictions, we are optimistic that improving trends can continue for our industry."

Back in March, the fast casual chain opened a new location in New York's Bryant Park as part of the CEO's belief in an "urban Renaissance." The Big Apple is moving aggressively to reopen the city at full capacity within the coming months, which should boost the fortunes of restaurants that have largely restricted indoor dining.

"We believe urban restaurants and centers are going to come back, and come back really strong," Garutti told Yahoo Finance previously. "We know we have a long way to go in that, right, this year," following what has been a difficult year for the restaurant industry during COVID-19 pandemic.

That comeback, "will probably take some time, but we'll come back," he added. 

Shake Shack also launched "Now Serving," this quarter, a collaboration with well-known chefs and restaurants in the U.S. to unveil local, limited-time offerings. The idea is to spotlight an ethnically and geographically diverse cuisine.

Still, Wall Street believes there is a long road to recovery for Shake Shack following the pandemic.

Peter Saleh of BTIG, which has a neutral rating on shares of Shake Shack, said the most impressive aspect of the company's first-quarter report was "the performance of suburban Shacks, which were essentially flat versus last year with positive comps in November, December and January." 

However, "urban locations including Manhattan continue to struggle under the weight of the pandemic... looking ahead, we remain optimistic about the unit growth trajectory and the performance of new formats, but remain Neutral given the uncertainty around margins, and inability to justify valuation." 

In recent industry outlook note from Wells Fargo, the firm attributes a spike in same-store sales among restaurant earnings "to a burst of spend once stimulus checks" that initially hit back in March. 

In "some cases" those stimulus checks were "tied to larger ticket item, but also as mass vaccination efforts pick up restaurants are "becoming more of a destination with a longer duration spend."

Shares of Shake Shack fell by nearly 5 percent in midday trading Thursday.  

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com. Check out her latest: