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How Long Will Shake Shack Continue to Trade in the Red?

PART:
1 2 3 4
Part 2
How Long Will Shake Shack Continue to Trade in the Red? PART 2 OF 4

Why Analysts Lowered Same-Store Sales Growth Estimates for SHAK

Same-store sales growth

Same-store sales growth (or SSSG) is expressed as a percentage. It measures the increase in revenue from existing restaurants over a certain period. Same-store sales growth is driven by ticket size and traffic. It’s an important metric for investors to monitor.

Why Analysts Lowered Same-Store Sales Growth Estimates for SHAK

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Revised estimates

To improve its SSSG, Shake Shack (SHAK) launched Bacon Cheddar Shack in June 2016. The company has also launched Blueberry Pie Oh My, Shack Shandies, ShackMeister, and Chocolate Cookies & Cream shakes.

Despite all these menu innovations, the widening gap between the rising cost of eating out and falling prices in grocery stores could have compelled analysts to lower their SSSG estimates for the next three quarters. Analysts are expecting SSSG to improve in 2Q17. Currently, analysts are expecting Shake Shack to post SSSG of 1.3%, 3.6%, 2.8%, and 4.2% in 3Q16, 4Q16, 1Q17, and 2Q17, respectively, compared to the earlier forecasts of 2.3%, 4.5%, 3%, and 4%, respectively.

Why Analysts Lowered Same-Store Sales Growth Estimates for SHAK

Revenue estimates

Although analysts lowered their SSSG estimates for the next three quarters, they increased their revenue estimates for the next four quarters from $286.9 million to $296.2 million. After 2Q16 results, analysts are expecting the company to open more restaurants in the next 12 months than earlier expected, which has prompted them to raise their revenue estimates for the next four quarters. The new estimates represent growth of 31.7% from $225 million.

Peer comparisons

In the next four quarters, Chipotle Mexican Grill (CMG) and Panera Bread (PNRA) are expected to post revenue growth of 9.4% and 5.3%, respectively. Next, we’ll look at revised EBIT margins and EPS estimates for Shake Shack.

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