Shake Shack (SHAK, Financial) is a modern-day “roadside” burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. With its fresh and simple, high-quality food at a great value, Shake Shack is a fun and lively community-gathering place with widespread appeal.
The fast food industry currently is booming as GenX prefers to eat out mostly. Eating out has become a habit among young adults. Shake Shack reported strong third-quarter results in terms of revenue and sales.
Third-quarter results
Total revenue, which includes Shack sales and licensing revenue, increased by 67.4% and was $53.3 million in the third quarter, which was $31.8 million during the prior year quarter.
Shack sales for the third quarter of 2015 were $51.3 million, which marked an increase of 70.0% from $30.2 million in the prior year quarter. Licensing revenue for the third quarter was $2.0 million, which marked an increase of 20.4% from $1.7 million in the prior year quarter. Same-Shack sales increased by 17.1% for the third quarter, which was 1.2% growth in the prior year quarter. For the third quarter, the comparable Shack base included 16 Shacks (which was 12 Shacks for the prior year quarter).
Average weekly sales for domestic company-operated Shacks were $103,000 for the third quarter ($94,000 during the prior year quarter).
Shack-level operating profit, a non-GAAP measure, increased by 105.7% and was $15.6 million for the third quarter of 2015 ($7.6 million in the prior year quarter). As a percentage of Shack sales, Shack-level operating profit margins increased by 530 basis points and was 30.4%.
General and administrative expenses increased to $5.7 million for the third quarter of 2015 ($5.2 million in the prior year quarter). As a percentage of total revenue, general and administrative expenses decreased to 10.8% for the third quarter of 2015 (16.3% in the prior year quarter).
Adjusted EBITDA, a non-GAAP measure, increased by 128.3% and was $13.0 million. As a percent of total revenue, adjusted EBITDA margins increased approximately 650 basis points to 24.5% (which was 18.0% during the prior year quarter).
Net income during the quarter was $1.5 million, or 10 cents per diluted share (which was $0.5 million, or 2 cents per diluted unit, during the prior year quarter).
Adjusted pro forma net income, a non-GAAP measure, increased by 252.3% and was $4.4 million, or 12 cents per fully exchanged and diluted share during the third quarter of 2015, (which was $1.2 million, or 3 cents per diluted share during the prior year quarter).
Updated 2015 outlook
The company expects the following:
- Total revenue to be in the range of $189 million to $190 million.
- Same-Shack sales growth to be in the range of 2.5% to 3.0%.
- Fourteen new domestic company-operated Shacks to be opened in 2016.
Preliminary 2016 outlook
The company expects the following:
- Total revenue to be in the range of $237 million to $242 million.
- Same-Shack sales growth to be in the range of 2.5% to 3.0%.
- At least 14 new domestic company-operated Shacks to be opened in 2016.
On a concluding note
Randy Garutti, chief executive officer of Shake Shack, stated, "The third quarter marked another strong quarter in terms of same-Shack sales growth, as we continued to execute on our strategic plan and drive engagement with our guests. We opened four domestic company-operated Shacks during the quarter and, as previously announced, we will be officially opening our first Shack in Tokyo in the remarkable Meiji Jingu Gaien Park this November, ahead of schedule. 2015 has been an exceptional year for us and, with the opening of two additional domestic company-operated Shacks subsequent to the quarter, we have delivered on our target to open 12 new domestic company-operated Shacks for 2015. Looking ahead, we now expect to open at least 14 domestic company-operated Shacks next year and beyond."
The company plans to enter Los Angeles and Phoenix by 2016. Strong volume and operating success is key to the success of this company. It is reasonably priced and has tremendous growth potential.
(Source: Company's website)
Disclosure: I do not hold any position in the company.
