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Shake Shack Management’s Guidance for 2015: Key Takeaways

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Management guidance

During the latest earnings call, Shake Shack’s (SHAK) management offered revenue guidance in the range of $159 million to $163 million in 2015. Same-store sales growth should be in the “low single digits.” Management also reiterated that it will grow ten new company-operated restaurants in the US and five licensed restaurants internationally in 2015.

Management further emphasized that, because it will open restaurants outside of Manhattan, which has an average unit volume of about $7.3 million per store (or AUV), the company’s AUV is expected to drop to between $2.8 million and $3.2 million. The company’s operating profit margins are expected to be in the range of 18% to 22%, with an EBITDA[1. Earnings before interest, tax, depreciation, and amortization.] growth of 20% after 2015.

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Costs

During the fourth quarter, increases in commodity costs were due to an increase in beef prices. Shake Shack’s management anticipates that beef prices will remain elevated for fiscal 2015 and until 2017. Management reiterated that its operating profit margins will be lower going forward because of lower average unit volumes (or AUV) from the restaurants it develops outside Manhattan.

In 1Q15, the company will incur a one-time IPO-related expense of $13.5 million, which it will record as part of its general and administrative expenses. The company anticipates stock-based compensation to be high in 2015 as well. Overall, Shake Shack is well positioned to grow steadily in 2015.

Further reading

You can read more about restaurant stocks such as McDonald’s (MCD), Yum! Brands (YUM), and Darden Restaurants (DRI)—which make up about 6% of the Consumer Discretionary Select Sector SPDR ETF (XLY)—at Market Realist’s Restaurants page.

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