Earlier this week Shake Shack reported surprisingly strong quarterly sales for a young company. The restaurant prides itself on its antibiotic-free burgers and its hormone-free products.
The company’s profits are better than expected. They rose by 2.3 percent (2.3%) and reach $1.1 million this past second quarter, all while same-store sales, dubbed “same-shack sales” in this case, rose by 12.9 percent (12.9%). For comparison, same-store sales only rose by 4.5 percent (4.5%) in the same quarter of 2014.
Overall revenues rose by 74.7 percent (74.7%) and reached $48.5 million. Randy Garutti, Shake Shack’s chief executive, gave a statement offering a possible explanation – he said that the company’s restaurants saw an increase in customer traffic, as well as an increase in prices, and a return to the beloved crinkle-cut French fries.
He went on to add that “As we execute our strategic growth plan, we continue to identify favorable development opportunities and we have therefore added two new Shacks to our development schedule”. What this means is that they’ve raised their previous guidance to “12 new domestic company-operated Shacks for 2015”.
He also mentioned that looking ahead towards 2016 and beyond, the Shake Shack team expects to open 12 domestic company-operated stores at least, on a yearly basis.
The overwhelmingly positive results from the second quarter have led the company to believe that their same-store sales are going to reach either the mid or high single digits by the end of the year.
Shake Shack is a New York-based restaurant chain founded by Danny Meyer, a famous restaurateur, and the number of Shake Shack stores opened across the planet is currently more than 70.
The company’s achievements are that much more remarkable since it’s getting competition from industry giants such as Elevation Burger, a restaurant chain that has opened more than 50 stores in the country, and Smashburger, a restaurant chain that has opened more than 300 stores in the country.
The company’s stock price has also risen more than predicted by Wall Street. It grew by more than 200 percent (200%) since January, when Shake Shack’s shares were put on sale for a mere $21 a piece. But this past Monday (August 10, 2015) the company reported that its shares closed at $70.64. What’s more, they even went up in after-hours trading by 7 percent (7%).
For those interested in buying a share, most investment analysts have said that they do not recommend buying one at their current prices as they’re a current favorite to sell short.
One issue that was brought up during the conference call referred to how higher labor costs may affect the business, since Shake Shack is known for paying its employees somewhat above minimum wage, and while state officials across the country are mandating higher pay, the decision is affecting restaurants costs in many other businesses.
Garutti assured everyone that Shake Shack gave its employees a good raise a year and six months ago, and that they’ve balanced out costs by moving to the above mentioned crinkle-cut French fries, which are easier and quicker to cook, and have helped the company reduce labor costs.
It’s worth mentioning that Shake Shack raised its prices by 3 percent (3%) back in September, and repeated the action in January. But Garutti informed that the company has no intention of increasing them again by the end of the fiscal year.
Image Source: shakeshack.com