Shake Shack Inc. SHAK posted strong third quarter results with earnings and revenues beating the Zacks Consensus Estimate for the fourth consecutive quarter. Same-Shack sales were impressive and the company increased its revenue as well as comps guidance for 2015 for the third consecutive quarter. Share price of the company went up 5.4% in aftermarket hours yesterday.
Earnings and Revenue Discussion
The company’s adjusted earnings of 12 cents per share beat the Zacks Consensus Estimate of 7 cents by 71%. Meanwhile, earnings grew 300% year over year. The upside reflects an increase in revenues as well as margins.
Shake Shack-A (SHAK) - Earnings Surprise | FindTheCompany
Revenues grew 67.4% year over year to $53.3 million and beat the Zacks Consensus Estimate of $47 million by 13.4%. The upside reflects healthy comps as well as an increase in Shake Shack sales as well as Licensing revenues.
Behind the Headline Numbers
Same-Shack sales grew 17.1% year over year and were better than prior-year quarter growth of only 1.2% as well prior quarter growth of 12.1%. The upside reflects robust traffic growth, increased menu prices and favorable shifts in sales mix from menu innovation.
Total operating expenses as a percentage of revenues fell 1220 basis points (bps) to 85.4% as general and administrative expenses as a percentage of revenues declined 550 bps. The decline in general and administrative expenses was due to the elimination of management fees as well as IPO-related expenses incurred in the prior year. However, this was partially offset by increased costs associated with becoming a public company and incremental stock-based compensation expense.
While labor costs as a percentage of revenues declined 170 bps, food and paper costs fell 190 bps year over year. Operating profit margin was up 530 bps to 30.4% owing to lower than anticipated food costs. Adjusted EBITDA increased 128.3% to $13.0 million.
Guidance for 2015 Raised Again
Driven by the year-to-date results, the company increased its comps and revenue guidance for the third consecutive quarter. The company now expects revenues in the range of $189.0 million to $190.0 million compared with the previous expectation of $171.0 million to $174.0 million. Same-Shack sales growth is expected in the range of 11% to 12% compared with the previous expectation of mid- to high-single digit growth.
The company continues to expect to open total 12 new domestic company-operated Shacks and 6 international licensed Shacks compared with the previous expectation of 5.
Guidance for 2016
In 2016, the company expects revenues in the range of $237.0 million to $242.0 million and Same-Shack sales growth in the range of 2.5% to 3%.
Shake Shack currently carries a Zacks Rank #1 (Strong Buy).
Stocks to Consider
Other well-ranked restaurateurs include BJ's Restaurants, Inc. BJRI, Darden Restaurants, Inc. DRI and Carrols Restaurant Group, Inc. TAST. All these stocks sport a Zacks Rank #1 (Strong Buy).
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BJ'S RESTAURANT (BJRI): Free Stock Analysis Report
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