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Shake Shack earnings preview: What to expect from Q1 results?

Shake Shack (NYSE: SHAK) is scheduled to report its earnings results for the first quarter of 2019 on Thursday after the market closes. The fine-casual burger chain’s results will be hurt by higher investments in digital and foundational infrastructure as part of the ongoing growth initiatives.

The company has started initiatives for bolstering the store network and digital platform. The company has banked upon the international growth with a specific focus on Asia and also believed its entry into the new markets including mainland China, Singapore, the Philippines, and Mexico to yield another record growth for the first quarter.

Analysts expect the company’s earnings to drop by 13.30% to $0.13 per share while revenue will jump by 28% to $126.88 million for the first quarter. In comparison, during the previous year quarter, Shake Shack posted a profit of $0.15 per share on revenue of $99.12 million.

Image Courtesy: Shake Shack / Facebook post

The company has surprised investors by beating the analysts’ expectations in the past four quarters. Traders expect Shake Shack to post upbeat results for the first quarter. Majority of the analysts recommended a “hold” rating with an average price target of $52.44 per share.

For the fourth quarter, the company posted a narrower loss helped by the favorable impact of the recent tax reform. Total revenues climbed by 29.3% year-over-year driven by the store network and digital platform expansion initiatives. However, adjusted earnings fell by 38% as the results were negatively impacted by a 30% increase in general and administrative expenses.

Also read: Starbucks Q2 earnings results

For fiscal 2019, the company had expected revenues in the range of $570 million to $576 million and same-Shack sales growth in the range of flat to 1%. The average annual sales volume for total domestic company-operated Shacks was forecast to be in the $4 million to $4.1 million range. The company had predicted another year of record unit growth with 36 to 40 new company-operated Shacks, and 16 to 18 net new licensed Shacks.

For fiscal 2020, Shake Shack had anticipated opening about 200 domestic company-operated Shacks and 120 global licensed Shack. Total revenues are expected to reach $700 million for the year 2020.

Shares of Shake Shack opened lower on Wednesday but changed course to the green territory. The stock has risen over 29% in the past year and over 42% in the year so far.

 

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