Categories Analysis, Consumer, Trending Stocks
Shake Shack (SHAK) bets on store expansion, innovation to tide over crisis
Quick-service restaurant Shake Shack, Inc. (NYSE: SHAK) has been expanding its store network globally, and added several new outlets in the final months of 2019. The first quarter proved unpleasant for the company, like most of its peers, due to the covid-19 pandemic.
Last month, the company disappointed shareholders with lower-than-expected revenues for the December-quarter and poor guidance, mainly reflecting weakness in comparable sales. However, there is optimism that the growing footprint, combined with innovations in menu offerings and cost-cutting initiatives, would help it get back on track.
Margins Woes
The store network has enough room for continued expansion, which gives the company an edge over its more saturated rivals. If the past performance is any indication, however, it is unlikely to complement the steady top-line growth with a proportionate uptick in margins. Despite conditions being favorable for the food industry, Shake Shack’s margins remained weak last year.
[irp posts=”50780″]
Like many Wall Street firms, the near-term prospects look bleak for Shake Shack as it might face difficulty in executing the expansion plan in the next few months. It is certain that the general slump triggered by coronavirus will reflect on its performance, putting pressure on cash flow.
High Valuation
The stock, which was valued pretty high before the recent plunge, is not very cheap even now. With not many factors playing in favor of the company, investors would want to wait and watch. Market watchers, on average, recommend holding the stock, with a price target that points to handsome long-term gains. It needs to be noted that even at the current lows the stock is trading several times above the projected full-year earnings per share.
Weak Q4
For the final three months of last year, the fast-food chain reported earnings of 0.06 per share, which was unchanged from the year-ago period. Revenues grew in double digits to about $151 million, despite a decline in same-store sales. While earnings topped the Street view, revenues missed.
Last week, the stock plummeted to the lowest level in two-and-half years, but regained momentum later. The stock, which on Tuesday traded sharply below last year’s peak, is down 30% since the beginning of the year.
Most Popular
AAPL Earnings: Apple’s Q2 sales and profit beat estimates; iPhone sales down 10%
Apple Inc. (NASDAQ: AAPL) on Thursday reported better-than-expected profit and revenue for the second quarter of 2024. There was a 10% decrease in iPhone sales. The gadget giant reported revenues
Shopify (SHOP) is all set to report Q1 2024 results. Here’s what to expect
Over the years, Shopify Inc. (NYSE: SHOP) has steadily expanded its footprint in the online retail market through constant innovation, like the recent launch of a mobile POS device for
eBay (EBAY): A look at how the ecommerce company fared in Q1 2024
Shares of eBay Inc. (NASDAQ: EBAY) were down over 2% on Thursday. The company reported its earnings results for the first quarter of 2024 a day ago, with revenue and