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Shake Shack (SHAK) Gains 33% in 6 Months: More Room to Run?

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Shake Shack Inc. (SHAK - Free Report) has gained 32.9% in the past six months compared with the industry’s rise of 6.6%. SHAK has been benefiting from various digital initiatives, strong same-shack sales and unit expansion efforts.

The Zacks Rank #2 (Buy) company’s 2023 earnings and sales are likely to witness year-over-year improvements of 141.9% and 21.3%, respectively. In the past seven days, earnings estimates for 2023 have witnessed upward revisions of 25%.

Let’s delve deeper into the factors likely to spur SHAK’s growth.

Growth Drivers

Shake Shack has been investing in digital transformation to drive growth. Digital sales continue to impress investors. During first-quarter fiscal 2023, digital sales accounted for 36% of shack sales.

More investments in digitization is aiding the company to sustain its digital guest enhancement strategies in the near term. SHAK’s digital sales retention continues to remain strong. In fiscal 2022, the metric was approximately 74% compared with 2021 levels.

Shake Shack continues to impress investors with robust global same-shack sales growth. During the first, second, third and fourth quarters of fiscal 2021, same-shack sales rose 5.7%, 52.7%, 48.1% and 20.8% year over year, respectively. The metric increased 10.3%, 10.1%, 6.3% and 10.3% in the first, second, third and fourth quarters of fiscal 2022, respectively. During first-quarter fiscal 2023, same-shack sales improved 10.3% year over year.

Shake Shack is committed to effectively strategizing its expansion plans. During fiscal 2022, it opened 36 new domestic Company-operated Shacks and 33 new licensed Shacks. The licensed Shacks included locations in Asia (20), the Middle East region (3), Mexico (2) and the United States (8). During fourth-quarter fiscal 2022, it opened 22 restaurants. Since December, Shake Shack has opened 12 Company-operated drive-thrus.

The company emphasized consideration of new countries, territories and formats to drive growth over the long term. In fiscal 2023, it is planning to open at least 10-15 drive-thrus and 70-75 units of system-wide Shack.

Other Key Picks

Some other top-ranked stocks in the Zacks Retail-Wholesale sector are Chipotle Mexican Grill, Inc. (CMG - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Chuy's Holdings, Inc. (CHUY - Free Report) . CMG currently flaunts a Zacks Rank #1 (Strong Buy), whereas ARCO and CHUY carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chipotle has a long-term earnings growth rate of 31.8%. The stock has increased 61.7% in the past year.

The Zacks Consensus Estimate for CMG’s 2024 sales and EPS suggests growth of 12.4% and 19.7%, respectively, from the year-ago period’s levels.

Arcos Dorados has a long-term earnings growth rate of 9.5%. The stock has gained 20.9% in the past year.

The Zacks Consensus Estimate for ARCO’s 2023 sales implies improvement of 16.6% from the year-ago period’s levels.

Chuy’s Holdings has a trailing four-quarter earnings surprise of 23.4%, on average. The stock has surged 87.6% in the past year.

The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS indicates increases of 10.1% and 23.4%, respectively, from the year-ago period’s levels.

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