Shake Shack Q2 profit beats estimates, lifts FY19 revenue outlook

Shake Shack (NYSE: SHAK) reported an 18% growth in earnings for the second quarter of 2019 due to lower interest expense, higher other income, and lower-income tax expense. The results exceeded analysts’ expectations. Further, the company lifted its 2019 revenue outlook.

Net income attributable to the company increased by 18% to $9 million or $0.29 per share. However, adjusted earnings decreased by 6.5% to $0.27 per share.

Total revenue soared by 31% to $152.7 million. Shack sales increased by 31% due primarily to the opening of 40 new domestic company-operated Shacks between the second quarter of 2019 and the second quarter of 2018, as well as same-Shack sales growth. Licensing revenue climbed by 43% due primarily to the opening of 18 net new licensed Shacks.

Same-Shack sales increased by 3.6% versus a 1.1% growth in the previous year quarter. This increase consisted of a 1.3% rise in guest traffic and a combined growth of 2.3% in price and sales mix, combined with the favorable impact from the timing shift of Easter. The comparable Shack base includes those restaurants open for 24 full fiscal months or longer. For the second quarter, the comparable Shack base included 74 Shacks versus 50 Shacks a year ago.

Looking ahead into the full year 2019, the company lifted its total revenue outlook to the range of $585 million to $590 million from the prior range of $576 million to $582 million. The same-shack sales growth is now expected to be about 2% compared to the previous estimate range of 1% to 2%. The company now expects to open 38 to 40 domestic company-operated Shack stores and 18 to 20 licensed Shack stores during the full year 2019.

For the second quarter, the average weekly sales for domestic company-operated Shacks decreased to $85,000 from $89,000 a year ago, primarily due to the addition of newer Shacks at a broader range of average unit volumes.

During the second quarter, Shake Shack opened 11 domestic company-operated Shacks. Also, the company opened two domestic licensed Shacks, which included its first 24-hour roadside Shack in New Jersey, and six international licensed Shacks, which included its first Shacks in the Philippines and Singapore, at the Jewel Changi Airport.

Subsequent to the end of the quarter, the company opened five domestic company operated Shacks, including Shacks in the new markets of New Orleans and Salt Lake City, and three licensed Shacks, including its first international licensed Shack in Mexico City. Also, the company executed a new development agreement to open 15 Shacks in the Beijing market over the next 10 years.

Shares of Shake Shack ended Monday’s regular session down 2.60% at $73.34 on the NYSE. Following the earnings release, the stock advanced over 5% in the after-market session.

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