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Shake Shack Inc. (SHAK)
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Sum up: The ultimate marketing management company is putting lipstick on the pig, for "analysts" to parrot.
Most numbers CONVENIENTLY COMPARE with the WORST / LOWS of Q2, or with very low numbers from previous year when the service / product was nearly non-existent (like "DIGITAL") but is growing now WITH INCREASED COSTS. Burgers-to-burgers numbers are pretty bad, compared with peers. And TOTAL NUMBERS for Q3 include ADDITION of about 19 NEW COMPANY-OWNED Shacks.
"Shack sales in the third quarter 2020 DECREASED 17.1% to $126.3 million versus the same period last year" (that total includes about 19 MORE NEW Shacks - which usually have higher sales at the openings, and correspondingly higher expenses)
"Same-Shack sales ..., DOWN 31.7% in the third quarter 2020 versus the same period last year, compared to down 49.0% in the prior quarter. In fiscal October, Same-Shack sales continued to recover, with a decline of 21% versus the same period last year. Within same-Shack sales: "Urban SAME-SHACK sales were DOWN 43% during the third quarter 2020 versus the same period last year, ..., and improving to DOWN 33% in fiscal October."
"Licensed revenue in the third quarter DECREASED 23.8% to $4.1 million versus the same period last year" - despite few and/or very short lockdowns in international markets.
"Shack system-wide sales in the third quarter DECREASED 18.4% to $195.1 million, versus the same period last year" - despite ADDITION of about 19 NEW Shacks, with higher than "normal" sales during openings, and higher expenses.
"OPERATING LOSS in the third quarter was $6.8 million, compared to operating income of $8.2 million versus the same period last year" - despite ADDITION of about 19 NEW Shacks.
"Shack-level OPERATING PROFIT*, a non-GAAP measure, decreased 46.9% to $18.7 million, or ***14.8%*** of Shack sales in the third quarter 2020, versus a Shack-level operating profit of $1.9 million, or 2.2%"
"NET LOSS was $6.1 million and ADJUSTED EBITDA*, a non-GAAP measure, was $8.2 million in the third quarter 2020" - see how you can make a "profit" when you EXCLUDE all the relevant EXPENSES, and make your NET LOSS not too far from your GROSS.
"OPERATING LOSS for the third quarter of 2020 was $6.8 million, a NEGATIVE OPERATING MARGIN of 5.2%, compared to operating income of $8.2 million, or an operating margin of 5.2% for the third quarter 2019." - and Q3 of 2019 was rightly considered a disaster, followed by disasters in Q4'19 and Q1'20.
"As a percentage of total revenue, GENERAL AND ADMINISTRATIVE EXPENSES INCREASED to 11.5% for the third quarter of 2020 from 10.8% in the third quarter 2019"
As a matter of fact, the OPERATING EXPENSE PERCENTAGES went up substantially in ALL CATEGORIES (except pre-openings and capital expenses, and the wind-down of Project Concrete, of course).
Comparable Shacks are 102 vs 79 last year Q3. Average weekly sales = $58K vs $80K in Q3'19
They also padded the net income(loss) with ADDITION of $1.6M of TAX BENEFIT.
The MOST IMPORTANT thing from this report is that their already absolutely PITIFUL MARGINS KEEP GOING DOWN, EXPENSES KEEP GOING UP FASTER, particularly ones associated with the "DIGITAL" sales. That's what usually happens when companies have to keep "BUYING REVENUES" to create an impression of organic "GROWTH."
Loss per share also seemed lower due to SIGNIFICANTLY HIGHER SHARE COUNT since last year because of huge >20% dilution, which didn't include fully-diluted shares. Loss per FDS would be (-$0.11).
SELECTED BALANCE SHEET DATA (UNAUDITED) as presented in the report is useless.
**Limitations of the Usefulness of These Measures
EBITDA and adjusted EBITDA may differ from similarly titled measures used by other companies due to different methods of calculation.
I am sure that the analysts will be congratulating SHAK management on "great quarter"
Oh, and Director Jeffrey Flug sold his ALL 50,000 shares at $71.08 ($3.55M) on October 27.
For the 3rd Quarter, Chipotle again leaves Shake Shack in the dust ....
Same-Store-Sales: Chipotle + 8.3%
Shake Shack - 31.7%
Total Revenue: Chipotle + 14.1%
Shake Shack - 17.3%
I'm afraid 2021 or 2022 will be SHAK's last year of "good growth" and that's only because it will be compared to depressed sales (due to coronavirus) of the prior year. Once we're fully rid of coronavirus, SHAK will not be able to build enough new restaurants to achieve decent overall growth because of the always-declining sale-store-sales of their base restaurants (which gets larger and larger every quarter).
Over the past 3 weeks (since Sept. 29) earnings estimates for SHAK have stayed the same.
But revenue estimates have all gone done slightly ...... Current Quarter, Next Quarter, Current Year, Next Year .... all revised down slightly.
And the S&P500 has fallen over 1% since Sept. 29.
Yet the stock of SHAK has gone up from 64 to 72 over that same time period.
While WS sell-side "analysts" keep pushing up PTs, their trading desks assign insiders shares dumped at near round prices.
* Randall J. Garutti - Oct 15 2020 - Sale $70.27 - #Sh 45,000 - $3,162,197
* Randall J. Garutti - Oct 23 2020 - Sale $75.04 - #Sh 13,596 - $1,020,176
* Daniel H. Meyer - - Oct 23 2020 - Sale $75.056 - #Sh 14,115 - $1,059,408
* At prices ranging from $75.0000 to $75.3300, weighted average sales price.
Danny Meyer's sell orders are usually multiples of 25K shares (75K on Oct 05, 50K on Sep 03 etc) so WS probably didn't have enough shares sold above $75 to assign to his account, even as much as they pushed to have $75 call options in the money on that Friday, Oct 23, right from the opening bell.
Seems like it's time for analysts to lower their earnings estimates & raise their target prices on SHAK.
Danny & Randy need to sell more shares!
Chipotle just reported total sales INCREASED 14.1% for the 3rd Quarter.
Shake Shack is expected to report a sales DECREASE of 20.4%. for the same quarter (when they report next week).
Can someone explain to me why Shake Shack is considered a GROWTH STOCK ???
Insider dumping accelerates as WS mafia "analysts" are pushing PTs up.
* Randall J. Garutti Oct 15 2020 Sale $70.27 #Sh 45,000 - $3,162,197
Ernst & Young LLP is the auditor of Shake Shack Inc. ($SHAK) and SSE Holdings LLC. (see TRA / Tax Receivable Agreement payments to LLC holders).
=== 10-18-2020 These IMPLODING, SCANDAL-PLAGUED COMPANIES SHARED a Big Four auditor - Regulators are scrutinizing whether the accounting giant ERNST & YOUNG — now widely known as EY — missed red flags or failed to pursue them.
This year, $2 Billion is missing at Wirecard, once a HIGH-FLYING FINTECH DARLING, which is now called "Enron of Germany", $300 million of sales was fabricated at a Chinese chain Luckin Coffee, $5 Billion in undisclosed debt discovered at two U.K. companies - NMC Health Plc and Finablr Plc, which owned the Travelex service. The overall COST to SHAREHOLDERS WAS ROUGHLY $30 BILLION.
ALL HAD BEEN AUDITED BY ERNST & YOUNG. Last year, EY also audited OFFICE-SPACE COMPANY WeWork, which nearly collapsed under the weight of its debt when a planned IPO didn't go through, after potential investors found how much money WeWork was losing, load of debt and no reasonable "path to profitability".
EY missed red flags at some of the companies ahead of their scandals, IT WAS OUTSIDERS WHO RAISED QUESTIONS. Now the regulators are examining EY's work.
EY attracts the audit business using lower fees, to potentially get more lucrative consulting and other business. There appear to be close ties between EY and EXECUTIVES AND BOARD MEMBERS at some of its audit clients. EY, MORE THAN OTHER ACCOUNTING FIRMS, HAS FOCUSED ON AUDITING YOUNG, FAST-GROWING FIRMS. ===
Any reactions here to the earnings report especially the GAAP numbers. Not sure if the adjusted numbers can be compared from period to period. Seems they are fluid in what they consider adjusted.
Can someone post a recent history of analyst estimate changes relative to their price targets. I specifically want to see if there are cases of analysts lowering estimates or keeping them roughly the same while upping price targets.
Is this going to be another lower the revenue estimates so much that they can be them and then the price targets can be raised. What where the revenue estimates before the pandemic hit? Does anyone have a source for historical data on what analyst estimates were in Feb after the ER?
I predict that after the ER that people will look past the recent past and start to value the company the way it was valued before the pandemic. As it it adjusts to the new reality and the business metrics settle in a stable range the stock will be valued at about where it was at that time (Late Feb).
One might adjust it 5-10% lower because of the increase in the share count and perhaps give a small premium due to its popularity with many on Wall Street (NYC based) to partially counter that.
Good luck to everyone going into this pivotal ER (Hopefully they will give some guidance).
* Daniel H. Meyer Oct 08 2020 Sale $70.27 #Sh 25,000 - $1,756,700 Rec. Oct 13 2020While WS mafia "analysts" are raising SHAK PTs and their trading desks are moving up stock price, the insiders dumping accelerates.And while industry "analysts" are painting a picture of great imaginary future "digital" profits, SHAK's COB and largest individual shareholder Danny Meyer keeps dumping his stock, he calls for more / new PPP for restaurants:=== 10-13-2020 "Remember all that Paycheck Protection Program funding that was MEANT TO HELP SMALL BUSINESSES but somehow found its way into the hands of publicly traded companies such as Shake Shack Inc." ====== 10-09-2020 "Danny Meyer: Lawmakers need to pass a stimulus'Noted restauranteur and Shake Shack founder Danny Meyer pulls no punches on THE STATE OF A RESTAURANT INDUSTRY that has been battered by the COVID-19 pandemic. Lawmakers need to cut the #$%$ and pass a stimulus plan, like yesterday."It's BEYOND URGENT, this is not a dress rehearsal," Meyer told Yahoo Finance. What Meyer WANTS TO SEE PASSED IS the RESTAURANT ACT.The $120 billion relief package is a GRANT PROGRAM that would be handled by the Treasury Department. Restaurants, bars, cafes, caterers, etc. would be eligible for relief that COULD HELP WORKERS ON THE JOB AND RENT PAID DURING THE SEASONALLY SLOWER WINTER MONTHS.As for Meyer ? a 30-plus year industry veteran known for his optimism and big ideas ? he has to endure a tough few months as well. Meyer had to close all of his restaurants in New York City and Washington, DC in the spring. In mid-March Meyer WAS AMONG THE FIRST IN THE SPACE TO LAY OFF WORKERS ? some 2,000 in total between restaurants and the corporate office." ===
These numbers are encouraging. the cash burn is stabalizing and considering the heavy exposure to NYC, we're doing alright.
* Daniel H. Meyer Oct 01-02 2020 Sale $64.83 #Sh 75,000 - $1,765,642 Rec. Oct 05 2020
$SHAK insiders stock dumping continues unabated, just as various investment banks' sell-side "analysts" (i.e. sales persons / insiders-pleasing stocks pushers) raising $SHAK Price Targets (PTs) and singing praises for increasing "digital" revenues (like that could go down from almost nothing, and comparing with the worst numbers of March lockdowns, even when their disastrous 2019Q4 numbers came in even before March and clearly reflected pre-COVID19 already poor economic environment specifically for SHAK, in part due to number of bonehead management decisions) - these "analysts are now trying to convince people that "rebranding" SHAK as "digital" burger joint chain (with higher expenses and still lower margins due in part to loss of sales of higher-ticket items like wine and "social ambiance" aspect that allowed them to sell otherwise unjustifiably higher-priced proteins and starch) will be the key to higher "growth" and "profitability"? Like, "Shake Shack's Sales Trends Are Improving After a 70% Weekly Dive" - you don't say, really?! How about comparing 2020 / 2021 burgers and shakes to 2019 burgers and shakes?
What idiot would buy that, even when lockdowns or restrictions end? As "bill" on this board keeps saying - they have a 2000 basis points problem - their gross, operating and net margins keep going down (sure, at some point they will hit the "bottom" but not enough to ever be FCF profitable) while their expenses keep going up (despite quarter after quarter and year after year they promise that they "keep watching it closely" and "will do something" about it.
SHAK is all about the "story" - "from one Madison Square Park hot dog cart to XYZ units" to "NYC beloved" "brand" etc. - and the "hope" of higher "growth" and mythical future profitability. Ask Forever 21, J. Crew, Toys'R'Us, Quiznos, Blimpie's, Red Robin Gormet Burgers, Habit and hundreds of others how it ends up. Broke and money-losing Fatburger / Fat Brands ($FAT, negative BV and sales of less than $20M) chain just bought HUNDREDS of Johnny Rocket units for $25M after taking a loan, and are looking for still MORE ACQUISITIONS, and to expand in California, and texas, and Chicago, and Alaska, and Singapore... And they don't need malls to attract traffic.
All SHAK is doing is keep burning shareholders' cash to "buy revenues" and buying / accumulating total liabilities while shedding tangible assets, with WS keeping supplying them cash in exchange for debt or diluted shares (in last round of dilution, in March, WS bankers scored 30%-35% on new SHAK shares they sold to public) and INSIDERS cashing in their bonuses and options, in addition to fat salaries and tax benefits that flow to them instead of ordinary shareholders via TRA (Tax Receivable Agreement) of holding company SSE.
But never fear - insiders supply the "story" and "investor conference presentations" and WS mafia supplies the cash and Price Targets "analysis" and "hope", and all is well (or will be some day in the future) with the SHAK... what a racket!
Here’s the deal...I tried Shake Shack. We had burgers, fries, shakes, and sodas. We had to wait in line to order and we had to wait to find a seat while other patrons stared at us in anticipation of our finishing our food, so they can nab our table. Overall, the food is good, but wasn’t worth the wait for a smallish burger. But hey, this absolutely rocks compared to a burrito stock - you know who I’m talking about.
Is there any news? I can't see any new upgrade which might cause the spike
Who’s wasting money on overpriced burger stand that nobody’s going to? I guess the thinking is they can wait out the smaller players going bust and be the sole supplier in future. Problem is the smaller players will come back, with govt supports, when environment allows, thats when Shak and other corporate restaurants really tank
What is there in a negative news day that can make this jump?
Is the closing of the private, small family run restaurants good for the corporate restaurant chains?
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