Shake Shack's (NYSE:SHAK) Q4: Beats On Revenue, Stock Soars
Fast-food chain Shake Shack (NYSE:SHAK) reported Q4 FY2023 results exceeding Wall Street analysts' expectations , with revenue up 20% year on year to $286.2 million. It made a non-GAAP profit of $0.02 per share, improving from its loss of $0.06 per share in the same quarter last year.
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Shake Shack (SHAK) Q4 FY2023 Highlights:
Revenue: $286.2 million vs analyst estimates of $280.2 million (2.2% beat)
EPS (non-GAAP): $0.02 vs analyst estimates of $0.01 ($0.01 beat)
Free Cash Flow of $8.41 million is up from -$9.88 million in the previous quarter (beat)
Gross Margin (GAAP): 37.1%, up from 36% in the same quarter last year
Same-Store Sales were up 2.8% year on year (beat vs. expectations of up 1.7% year on year)
Store Locations: 510 at quarter end, increasing by 74 over the last 12 months
Market Capitalization: $3.08 billion
Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE:SHAK) is a fast-food restaurant known for its burgers and milkshakes.
Modern Fast Food
Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales Growth
Shake Shack is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 16.3% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was excellent as it added more dining locations and increased sales at existing, established restaurants.
This quarter, Shake Shack reported remarkable year-on-year revenue growth of 20%, and its $286.2 million in revenue topped Wall Street's estimates by 2.2%. Looking ahead, Wall Street expects sales to grow 14.2% over the next 12 months, a deceleration from this quarter.
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Same-Store Sales
Same-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.
Shake Shack's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 6.3% year on year. With positive same-store sales growth amid an increasing number of restaurants, Shake Shack is reaching more diners and growing sales.
In the latest quarter, Shake Shack's same-store sales rose 2.8% year on year. This growth was a deceleration from the 5.1% year-on-year increase it posted 12 months ago, showing the business is still performing well but lost a bit of steam.
Key Takeaways from Shake Shack's Q4 Results
We were impressed by the quarter from Shake Shack. The company beat across the board on all key metrics from sale-store sales to revenue to profits to EPS. FCF even came in higher than expected and was positive rather than the loss projected by Wall Street analysts. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The stock is up 7.8% after reporting and currently trades at $84.07 per share.
Shake Shack may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
