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Shake Shack (SHAK) Down 49% in the Past Year: Is Revival Likely?

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Shares of Shake Shack Inc. SHAK have declined 48.7% in the past year compared with the industry’s fall of 15.4%. The decline was primarily due to the coronavirus pandemic and high costs. The COVID restrictions in Mainland China and Hong Kong negatively impacted the company’s performance during first-quarter 2022. However, the company is gradually recovering on the back of robust same-Shack sales and digital sales. Let’s delve deeper and find out the factors that can revive the Zacks Rank #3 (Hold) company’s share price.

Factors Likely to Revive Performance

Shake Shack continues to impress investors with robust global same-Shack sales growth. During the first, the second, the third and the fourth quarter of 2021, Same-Shack sales rose 5.7%, 52.7%, 48.1% and 20.8% year over year, respectively. During first-quarter 2022, Same-Shack sales rose 10.3% in first-quarter 2022, primarily driven by urban same-Shack sales growth of 19% in the last year. The company anticipates the trend to improve in second-quarter 2022. In first-quarter 2022, urban same-Shack sales increased 19% year over year, while suburban same-Shack sales rose 4% year over year. For second-quarter 2022, its Same-Shack Sales are expected to increase in the low-mid-teens digits.

Digital sales continue to impress investors. In the second, the third and the fourth quarter of fiscal 2021, orders placed on the Shake Shack app and website and third-party delivery platforms contributed 47%, 42% and 42%, respectively, to total Shack sales. During first-quarter 2022, total digital sales, including orders placed on the Shake Shack app, website and third-party delivery platforms, accounted for nearly 43% of Shack sales.

Shake Shack is committed to effectively strategizing its expansion plans. In 2021, the company had opened 36 company-operated Shacks. The company anticipates increasing its store count to 40-50 Shacks within fiscal 2022. The company opened a total of seven company-operated Shacks during first-quarter 2022. The company is also expecting to open stores in Malaysia in 2023 through a new development agreement. The company, which operates more than 150 licensed restaurants, is targeting to open 23 to 27 new licensed Shack in 2022. Since December, the company has opened five company-operated drive-thrus.

The company is also benefiting from the gradual improvement in average weekly sales. The company said that average weekly sales increased throughout the quarter from $63,000 in January to $74,000 by March and $76,000 by April. Average weekly sales benefited from the increase in traffic and higher prices.

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Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are MarineMax, Inc. HZO, BBQ Holdings, Inc. BBQ and Cracker Barrel Old Country Store CBRL.

MarineMax sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 32.8%, on average. Shares of the company have declined 14.6% in the past year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for MarineMax’s 2022 sales and EPS suggests growth of 16% and 21.5%, respectively, from the year-ago period’s levels.

BBQ Holdings carries a Zacks Rank #2. BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have decreased 6.2% in the past year.

The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 46.1% and 67.6%, respectively, from the year-ago period’s levels.

Cracker Barrel carries a Zacks Rank #2. Cracker Barrel has a long-term earnings growth of 9.4%. Shares of the company have declined 35.1% in the past year.

The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 17.3% and 33.5%, respectively, from the year-ago period’s levels.


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