Shake Shack (SHAK) Q3 Earnings Beat, Revenues Meet, Both Up Y/Y
Shake Shack Inc. SHAK reported third-quarter fiscal 2023 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues met the same. Moreover, both metrics increased year over year. The bottom line beat the consensus estimate for the fourth straight quarter.
The company’s earnings reflect growth in sales driven by digital marketing strategies, sequentially improving traffic and the strong execution of its 2023 Strategic Priorities. However, weather headwinds, seasonality demand patterns and the lap of a strong limited-time offering launch later in October partially offset the aforementioned tailwinds.
Although the company is concerned about macroeconomic and inflationary uncertainties, it intends to remain focused on executing its strategic plan while driving profitable sales and margin expansion. It also intends to continue focusing on its global footprint expansion plans for the upcoming period.
Earnings & Revenue Details
Shake Shack’s fiscal third-quarter adjusted earnings were 17 cents per share, beating the Zacks Consensus Estimate of earnings per share of 9 cents by a whopping 88.9%. In the prior-year quarter, the company reported an earnings loss of 6 cents per share.
Quarterly revenues of $276.2 million met the consensus mark. However, the top line increased 21.2% on a year-over-year basis. Same-Shack sales improved 2.3% year over year.
Shake Shack, Inc. Price, Consensus and EPS Surprise
Shake Shack, Inc. price-consensus-eps-surprise-chart | Shake Shack, Inc. Quote
Shack sales rose 20.7% year over year to $265 million. Our model predicted the metric to improve 20.4% year over year.
Licensing revenues jumped 35.1% year over year to $11.2 million. We expected the metric to gain 25.9% year over year. Shack system-wide sales soared 24.3% year over year to $438.9 million.
Operating Highlights
Operating income totaled $5.7 million against a loss of $4.8 million reported in the prior-year quarter. Shack-level operating profit margin was 20.4%, up 400 basis points (bps) from the year-ago quarter’s reported value.
In the fiscal third quarter, food and paper costs (as percentages of company revenues) decreased 180 bps year over year. Labor and related costs (as percentages of company revenues) also declined 60 bps year over year to 28.8%. Total expenses (as percentages of company revenues) for the fiscal quarter notably declined 410 bps to 98% year over year.
Adjusted EBITDA for the reported quarter amounted to $35.8 million, up 80.7% from $19.8 million reported in the year-ago quarter. Adjusted EBITDA margin expanded 430 bps to 13% year over year.
Balance Sheet
As of Sep 27, 2023, cash and cash equivalents totaled $190 million compared with $230.5 million as of Dec 28, 2022. Total long-term debt at the end of the reported quarter increased to $245.4 million from $244.6 million as of Dec 28, 2022.
Q4 & Revised 2023 Outlook
For fourth-quarter fiscal 2023, the company expects total revenues to be between $276.3 million and $281.8 million. The Zacks Consensus Estimate is pegged at $279.9 million.
Licensing revenues are projected to be in the range of $10.3-$10.8 million. Shake Shack anticipates launching approximately 14 company-operated openings and approximately five licensed Shack openings. In the fourth quarter, same-Shack sales are estimated to grow by low single digits year over year.
For fiscal 2023, the company now expects revenues to be approximately $1.08 billion compared with the prior-expected range of $1.07-$1.08 billion. Licensing revenues are now projected to be between $40.5 million and $41 million compared with the previously expected $40 million and $41 million.
In fiscal 2023, Shake Shack expects to add approximately 80 units of system-wide Shack up from the prior expectation of 75 units. Shack-level operating profit margins are projected to reach 19.7-20% compared with the previously expected 19.25-20%.
The company also expects to launch approximately 40 company-operated openings and approximately 40 licensed Shack openings during fiscal 2024.
Zacks Rank
Shake Shack currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Recent Retail-Wholesale Releases
The Cheesecake Factory Incorporated CAKE reported lower-than-expected third-quarter fiscal 2023 results thanks to the soft sales environment. Nonetheless, the company’s top and bottom lines improved on a year-over-year basis courtesy of higher consumer demand, new restaurant openings and operational efficiency.
In the quarter under review, Cheesecake Factory opened two new restaurants. Management now expects to open 16 restaurants in fiscal 2023, along with two new international restaurants under licensing agreements.
Red Robin Gourmet Burgers, Inc. RRGB reported mixed third-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line improved on a year-over-year basis but the bottom line declined.
The downside can be attributed to the shift from deep discounting marketing promotions and the elimination of virtual brands. Also, the Guest count declined 10.4% during the quarter. However, this was partially offset by a 7% rise in guest checks. The rise in guest checks can be attributed to a 7.7% increase in menu prices and a 2.1% increase in discounts. However, this was partially offset by a 2.8% decline in the menu mix.
Brinker International, Inc. EAT reported first-quarter fiscal 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. The upside was primarily driven by improved menu pricing and a favorable menu item mix.
Management continues to anticipate total revenues in the range of $4.27-$4.35 billion for fiscal 2024. It projects earnings per share for the same period to be in the range of $3.35-$3.65, up from the prior estimate of earnings of $3.15-$3.55 per share.
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The Cheesecake Factory Incorporated (CAKE) : Free Stock Analysis Report
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Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
