U.S. markets open in 53 minutes
  • S&P Futures

    4,389.75
    +17.75 (+0.41%)
     
  • Dow Futures

    34,402.00
    +65.00 (+0.19%)
     
  • Nasdaq Futures

    14,967.75
    +105.00 (+0.71%)
     
  • Russell 2000 Futures

    1,805.70
    +7.80 (+0.43%)
     
  • Crude Oil

    90.65
    +1.02 (+1.14%)
     
  • Gold

    1,944.90
    +5.30 (+0.27%)
     
  • Silver

    23.92
    +0.23 (+0.96%)
     
  • EUR/USD

    1.0656
    -0.0006 (-0.05%)
     
  • 10-Yr Bond

    4.4700
    -0.0100 (-0.22%)
     
  • Vix

    16.89
    -0.65 (-3.71%)
     
  • GBP/USD

    1.2256
    -0.0038 (-0.31%)
     
  • USD/JPY

    148.2300
    +0.6670 (+0.45%)
     
  • Bitcoin USD

    26,614.51
    -30.57 (-0.11%)
     
  • CMC Crypto 200

    568.03
    -8.22 (-1.43%)
     
  • FTSE 100

    7,726.53
    +47.91 (+0.62%)
     
  • Nikkei 225

    32,402.41
    -168.62 (-0.52%)
     

Shake Shack earnings: CEO outlines 4 key priorities for the chain

Yahoo Finance’s Brooke DiPalma joins the Live show to discuss the decline in stock for Shake Shack following fourth-quarter earnings.

Video Transcript

RACHELLE AKUFFO: Shake Shack is out with its latest earnings posting a beat on the top and bottom lines, with same store sales rising 5% on the year. Yahoo Finance's Brooke DiPalma has got the breakdown for us. Hey, Brooke.

BROOKE DIPALMA: Good morning, Rachelle. Shares now rebounding, as they're dropping more than 8% after market open, following those fiscal fourth quarter earnings results. Of course, if we take a closer look, revenue slightly beat expectations, coming in at 238.5 million. Adjusted earnings per share coming in at a loss there, but higher than Wall Street expectations of $0.06 there. Same store sales also getting a bit of a boost here, mostly in line with Wall Street estimates of 5.16%, them coming in at 5.1%.

Now if we take a closer look at some key areas of focus, there were four that CEO Randy Garutti outlined in the earnings call, labor being one of them, as the fast food burger chain looks to focus on recruitment, retention, and training efforts. They're also looking at the addition of kiosks to help utilize labor in different ways, perhaps backfilling in the kitchen. But they admitted that they have not been immune to staffing challenges.

Also guest experience coming in as a key focus there, as an addition to its LTO offerings, Limited Time Offerings, that is, as well as partnerships with celebrity chefs that it emphasizes makes it different than fast food chains. Guest experience really something that the company grew upon. Growth plans, though, pretty big here. They expect to open 40 shacks, with roughly six of them in the first quarter.

Drive-thrus a big focus there. They aim to open more than roughly 10 to 15 more this year. They say that those drive-thrus may bring in more annual sales. Overall profitability, though, here in the US, remains a key focus. CEO noting that we know the dynamics of these past few years have impacted our historical margin profile. And Wall Street also keeping a closer look on those margins as we make way into 2023.

RACHELLE AKUFFO: And Brooke, understandably, inflation was also in focus on the call. The company last raised menu prices in mid-October. What did the company say about the state of inflation and potential for any further price hikes?

BROOKE DIPALMA: That's right, those mid to single digits price hikes were, in fact, taken last October. Those were to offset food and paper packaging. That came in at roughly 29.5% of total operating expenses last quarter. Now things that drove those prices higher include fries, dairy, paper, as well as packaging. Beef prices-- the company is looking very closely on that as their top performer. Rather, their main core meal is that angus beef burger. But when it comes to consumer pricing and if prices will, in fact, go up again, the emphasis on margins does, in fact, remain top of mind, that is.

CEO Randy Garutti saying in a call to investors, quote, "We have to make sure we protect our margins. Sitting here today in February, we have no plan to take new price. We'll look at something as we see how inflationary pressures do or do not continue to persist at high levels." He goes on to say that they're going to persist at some level this year. I don't think anybody knows, and we got to make sure that we're providing a great value.

Now, Rachelle, one thing that they are not doing here is becoming massive discount providers. That's something that CEO Randy Garutti emphasized in the call. Right now, they're looking to cater towards those high income consumers that perhaps are trading down, perhaps looking for that truffle burger for 9.99 or more. So very interesting dynamic here. Lots of moving parts, but Wall Street reacting, like we noted before, roughly down 4% in midday trading.

RACHELLE AKUFFO: And interesting, choosing not to go for that race to the bottom when it comes with prices, but still providing something of a value option there as well. Brooke DiPalma, thank you so much.