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Shake Shack Inc. (SHAK - Free Report) posted robust first-quarter 2017 results, wherein both earnings and revenues beat the Zacks Consensus Estimate.
However, the company’s shares lost over 2% in afterhours trading on May 4 as comps declined in the quarter.
Earnings and Revenue Discussion
Shake Shack’s adjusted earnings of 10 cents per share beat the Zacks Consensus Estimate as well as the year-ago figure of 8 cents by 25%. The year-over-year upside reflects an increase in revenues.
Revenues surged 41.7% year over year to $76.7 million and beat the Zacks Consensus Estimate of $75.4 million by 1.7%. An increase in Shack sales and licensing revenues, led to the improvement.
Behind the Headline Numbers
Same-Shack sales (or comps) declined 2.5% year over year due to a 3.4% decrease in guest traffic, somewhat offset by a combined increase in price and sales mix of 0.9%. Notably, the comps decline compared unfavorably with prior-quarter comps growth of 1.6% as well as the prior-year quarter rise of 9.9%.
The holiday shift in March as well as comparatively colder weather conditions in the Northeast region, which makes up a high percentage of the company’s sales, hurt comps.
Total operating expenses, as a percentage of revenues, increased 140 basis points (bps) to 92.7% mainly on a 240 bps increase in labor costs and 90 bps rise in other operating expenses. However, these were somewhat offset by a decline of 170 bps and 20 bps in general and administrative expenses and food and paper costs, respectively.
As a percentage of Shack sales, Shack-level operating profit margins decreased 300 bps to 25.2% primarily due to increased labor and related expenses.
Adjusted EBITDA (earning before interest, tax, depreciation and amortization) surged 28.9% to $12.2 million. However, as a percentage of total revenue, adjusted EBITDA margins decreased roughly 150 bps to 15.9% from 17.4% in the year-ago quarter.
2017 Outlook
Shake Shack has updated its full-year 2017 guidance.
The company now expects revenues in the range of $351 million to $355 million, up from $349–$353 million projected earlier.
Meanwhile, it projects Same-Shack sales growth to be flat on a year-over-year basis as compared with the growth in the band of 2–4%, anticipated earlier. Notably, this includes roughly 1.5% to 2% of menu price increases taken in the end of December.
Shack-level operating profit margin is still guided between 26.5% and 27.5%, while general and administrative expenses are expected between $38 million and $40 million.
The company now expects to open 23 to 24 new domestic company-operated Shacks in 2017, up from 22-23 guided earlier and 12 net new licensed Shacks, up from 11 announced earlier.
McDonald's Corp. (MCD - Free Report) reported first-quarter adjusted earnings per share of $1.47, beating the Zacks Consensus Estimate of $1.32 by 11.4%. Earnings also increased 18% year over year.
Chipotle Mexican Grill, Inc.’s (CMG - Free Report) first-quarter 2017 adjusted earnings of $1.60 per share outpaced the Zacks Consensus Estimate of $1.28 by 25%. Also, earnings compared favorably with the year-ago quarter figure of a loss of 88 cents per share, given a substantial rise in revenues.
In first-quarter 2017, Yum! Brands, Inc. (YUM - Free Report) posted earnings of 65 cents per share that outpaced the Zacks Consensus Estimate of 60 cents by 8.3%. Further, earnings increased 17% year over year due to lower share count.
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Shake Shack (SHAK) Stock Declines Despite Q1 Earnings Beat
Shake Shack Inc. (SHAK - Free Report) posted robust first-quarter 2017 results, wherein both earnings and revenues beat the Zacks Consensus Estimate.
However, the company’s shares lost over 2% in afterhours trading on May 4 as comps declined in the quarter.
Earnings and Revenue Discussion
Shake Shack’s adjusted earnings of 10 cents per share beat the Zacks Consensus Estimate as well as the year-ago figure of 8 cents by 25%. The year-over-year upside reflects an increase in revenues.
Revenues surged 41.7% year over year to $76.7 million and beat the Zacks Consensus Estimate of $75.4 million by 1.7%. An increase in Shack sales and licensing revenues, led to the improvement.
Behind the Headline Numbers
Same-Shack sales (or comps) declined 2.5% year over year due to a 3.4% decrease in guest traffic, somewhat offset by a combined increase in price and sales mix of 0.9%. Notably, the comps decline compared unfavorably with prior-quarter comps growth of 1.6% as well as the prior-year quarter rise of 9.9%.
The holiday shift in March as well as comparatively colder weather conditions in the Northeast region, which makes up a high percentage of the company’s sales, hurt comps.
Total operating expenses, as a percentage of revenues, increased 140 basis points (bps) to 92.7% mainly on a 240 bps increase in labor costs and 90 bps rise in other operating expenses. However, these were somewhat offset by a decline of 170 bps and 20 bps in general and administrative expenses and food and paper costs, respectively.
As a percentage of Shack sales, Shack-level operating profit margins decreased 300 bps to 25.2% primarily due to increased labor and related expenses.
Adjusted EBITDA (earning before interest, tax, depreciation and amortization) surged 28.9% to $12.2 million. However, as a percentage of total revenue, adjusted EBITDA margins decreased roughly 150 bps to 15.9% from 17.4% in the year-ago quarter.
2017 Outlook
Shake Shack has updated its full-year 2017 guidance.
The company now expects revenues in the range of $351 million to $355 million, up from $349–$353 million projected earlier.
Meanwhile, it projects Same-Shack sales growth to be flat on a year-over-year basis as compared with the growth in the band of 2–4%, anticipated earlier. Notably, this includes roughly 1.5% to 2% of menu price increases taken in the end of December.
Shack-level operating profit margin is still guided between 26.5% and 27.5%, while general and administrative expenses are expected between $38 million and $40 million.
The company now expects to open 23 to 24 new domestic company-operated Shacks in 2017, up from 22-23 guided earlier and 12 net new licensed Shacks, up from 11 announced earlier.
Shake Shack has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shake Shack, Inc. Price, Consensus and EPS Surprise
Shake Shack, Inc. Price, Consensus and EPS Surprise | Shake Shack, Inc. Quote
Peer Releases
McDonald's Corp. (MCD - Free Report) reported first-quarter adjusted earnings per share of $1.47, beating the Zacks Consensus Estimate of $1.32 by 11.4%. Earnings also increased 18% year over year.
Chipotle Mexican Grill, Inc.’s (CMG - Free Report) first-quarter 2017 adjusted earnings of $1.60 per share outpaced the Zacks Consensus Estimate of $1.28 by 25%. Also, earnings compared favorably with the year-ago quarter figure of a loss of 88 cents per share, given a substantial rise in revenues.
In first-quarter 2017, Yum! Brands, Inc. (YUM - Free Report) posted earnings of 65 cents per share that outpaced the Zacks Consensus Estimate of 60 cents by 8.3%. Further, earnings increased 17% year over year due to lower share count.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>