Shake Shack (SHAK) reported preliminary fourth-quarter results that exceeded expectations, but investor optimism waned as shares dropped by 6% on January 13. The fast-casual chain reported a 4.3% growth in same-store sales, while total revenue surged 15% year-over-year, reaching $328.7 million.
For the full fiscal year 2024, Shake Shack posted a 3.6% increase in same-store sales and a 15% rise in revenue, totaling $1.25 billion. The company also shared a forecast for 2025, projecting a revenue increase of 16% to 18% and a 3% rise in same-store sales.
CEO Rob Lynch expressed confidence in the company’s performance during a challenging environment marked by concerns about wage inflation, potential commodity inflation, and emerging risks, such as the bird flu. “We felt like it was better than what we’ve delivered in a long time and better than what the consensus forecast suggested, though it may not have been as aspirational as some had hoped,” Lynch told Yahoo Finance at the ICR conference in Orlando, Florida. The company’s stock has risen 85% in the past year.
For 2025, Shake Shack projects a restaurant margin expansion to 22%, up from 21.4%, marking the highest margin in eight years.
Sharon Zackfia, an analyst at William Blair, cited commodity cost fluctuations and ongoing wage inflation pressures as key risks to Shake Shack’s business. Zackfia maintains an Outperform rating on the stock.
Lynch noted that Shake Shack is currently expecting low single-digit inflation in its supply chain and was “positively surprised” by the stability of the beef market, despite earlier projections. Labor inflation is expected to stabilize at 3% to 4% this year.
As the company approaches its 10th anniversary of going public on January 30, 2015, Shake Shack unveiled an ambitious growth target for its company-operated locations. The chain aims to operate at least 1,500 Shacks over time, up from 329 company-operated locations last year, including a record 43 openings. Shake Shack plans to open 45 more company-operated locations in 2025, with new formats such as drive-throughs and smaller stores being introduced.
Lynch also highlighted Shake Shack’s focus on its licensing business, which he sees as a “huge opportunity.” The company plans to open around 35 to 40 licensed locations in 2025, though it does not franchise in the U.S. “There’s a huge amount of white space for us to go and build a licensed business,” Lynch said, mentioning untapped markets in Europe, South America, Africa, and Australia.
However, analyst Zackfia warned that Shake Shack’s aggressive unit development strategy could lead to operational strains. Despite this, Lynch remained confident in the company’s ability to innovate, suggesting that new, differentiated menu items could be on the horizon. “As long as we can optimize it operationally, the sky’s the limit from an innovation standpoint,” he said.
The chain, which originated from a hot dog cart in New York City two decades ago, continues to evolve under Lynch’s leadership, with plans for further expansion and growth both domestically and internationally.
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