Shake Shack aims to double units, surpass $700M in revenue by 2020

The last quarter of 2017 was good to Shake Shack, according to the company's earnings call this afternoon. Total revenue increased 31.2 percent to $96.1 million, sales increased 31.3 percent to $93.1 million and same-store sales increased 0.8 percent for the fourth quarter and the fiscal year ending Dec. 27, periods that included 13 and 52 weeks, respectively.

"I'm incredibly proud of our team's achievements throughout 2017," CEO Randy Garutti said in a press release. "We delivered another year of robust global growth, opening 26 new company-operated domestic Shacks and 19 net licensed Shacks, representing a nearly 40 percent increase on our base."

Garutti said that 2017 marked a year of digital innovation for Shake Shack, with the launch of the Shack app, self-serve kiosks at select locations and several integrated delivery pilots designed to enhance the guest experience:

Looking ahead, 2018 is shaping up to be another exciting year of growth with 32 to 35 new domestic company-operated Shacks, our biggest year of openings to date. We expect 16 to 18 net new licensed Shacks for the year, with a significant portion of our international growth targeted in Asia, including our first Shack in Hong Kong.

We're also focused on further strengthening our infrastructure to deliver against the significant long-term opportunity we have in our sights.

By the end of 2020, we plan to have more than doubled our 2017 system-wide Shack count and increase our revenue to over $700 million.

Among Q4 highlights:

  • Operating income increased 17.0 percent to $5.8 million, or 6.1 percent of total revenue.
  • Store-level operating profit, a non-GAAP measure, increased 30.3 percent to $23.5 million, or 25.2 percent of sales.
  • Net loss was $13.0 million and net loss attributable to Shake Shack Inc. was $14.4 million, or $(0.55) per diluted share, which included $12.7 million of net expense related to the enactment of the Tax Cuts and Jobs Act of 2017.
  • Adjusted EBITDA, a non-GAAP measure, increased 30.7 percent to $14.9 million.
  •  Adjusted pro forma net income, a non-GAAP measure, increased 20.0 percent to $3.9 million, or $0.10 per fully exchanged and diluted share.
  • Sixteen system-wide store openings, including 11 domestic company-operated Shacks and 5 licensed Shacks.

Fiscal year 2017 financial highlights:

  • Total revenue increased 33.6 percent to $358.8 million.
  • Sales increased 33.6 percent to $346.4 million.
  • Same-store sales decreased 1.2 percent.
  • Operating income increased 21.6 percent to $33.8 million, or 9.4 percent of total revenue.
  • Store-level operating profit, a non-GAAP measure, increased 25.9 percent to $92.3 million, or 26.6 percent of sales. Net income was $6.9 million and net loss attributable to Shake Shack Inc. was $2.3 million, or $(0.09) per diluted share, which included $12.7 million of net expense relating to the enactment of the TCJA.
  • Adjusted EBITDA, a non-GAAP measure, increased 28.7 percent to $64.7 million.
  •  Adjusted pro forma net income, a non-GAAP measure, increased 25.4 percent to $21.0 million, or $0.57 per fully exchanged and diluted share.
  • Forty-five net system-wide store openings, including 26 domestic company-operated stores and 19 net licensed stores, representing a net 39.5 percent increase in system-wide count.

Development highlights:

  • During the quarter, the company opened 11 domestic company-operated stores, which included openings in three new markets — San Diego, St. Louis and Milwaukee — as well as the debut of the company's first kiosk-only, cashless environment at Astor Place in New York City. 
  • The company opened five international licensed stores during the quarter with two openings in Japan — including the company's first store outside of  Tokyo — as well as openings in the Middle East and the United Kingdom.:

Outlook for 2018 fiscal year ending Dec. 26:

  • Total revenue of $444–$448 million inclusive of licensing revenue.
  • Licensing revenue of $12–$13 million.
  • Flat same-store sales, which includes approximately 1.5–2 percent menu price increases taken in December 2017.
  • Between 32 and 35 new domestic company-operated stores opened.
  • Between 16 and 18 net new licensed stores opened.
  • Average annual sales volume of $4.1–$4.2 million for total domestic company-operated stores.
  • Store-level operating profit margin of 24.5–25.5 percent.
  • General and administrative expenses of $49–$51 million, excluding approximately $4–$6 million of costs related to Project Concrete, the company's operational and financial systems upgrade initiative.
  • Depreciation expense of approximately $32 million.
  • Pre-opening costs of $12–$13 million.
  • Interest expense of $2.0–$2.2 million.
  • Adjusted pro forma effective tax rate of 26–27 percent.

Targets for end of fiscal year 2020:

  • At least 200 domestic company-operated stores and at least 120 global licensed stores.
  • More than $700 million in total revenue.

Topics: Operations Management


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