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Chick’n Shack Drove SHAK’s Same-Store Sales Growth in 1Q16

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May. 17 2016, Updated 9:09 a.m. ET

Same-store sales growth

SSSG (same-store sales growth) expressed as a percentage is the measure of a rise in revenue from a company’s existing locations during a certain period of time. Same-store sales growth is driven by ticket size and traffic.

On the back of its 11.7% SSSG in 1Q15, Shake Shack (SHAK), which forms 0.02% of the holdings of the iShares Russell 2000 Growth ETF (IWO), posted SSSG of 9.9% in 1Q16.

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Same-store sales growth drivers

SHAK’s SSSG was driven by a rise in traffic, which contributed 7.3% to its SSSG, while its pricing and sales mix contributed 1.5% and 1.1%, respectively. The company’s management claimed that the Chick’n Shack sandwich was the driving factor behind the rise in traffic.

The Chick’n Shack sandwich, which had been served in only three Brooklyn restaurants starting in June 2015, was introduced in all Shake Shack restaurants on January 14, 2016. Compared to other burgers, the Chick’n Shack sandwich was priced higher.

Continuing with its menu innovations, SHAK combined with Maketto chef owner Erik Bruner-Yang to create the Crispy Peking Chicken in April 2016. Similarly, the company created the Roadside Double, a double swiss cheese burger, at its West Hollywood Shack. The Roadside Double is served only in California. These menu items are expected to boost SSSG in 2Q16.

The warm weather and 1.5% price rise in January 2016 also contributed to Shake Shack’s SSSG.

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Peer comparison

In 1Q16, Panera Bread (PNRA), Chipotle Mexican Grill (CMG), and Jack in the Box (JACK) posted SSSG of 4.7%, -29.7%, and 0%, respectively.

Outlook

SHAK’s strong 1Q16 SSSG has compelled its management to raise its 2016 SSSG guidance to 4%–5%, compared to earlier guidance of 2.5%–3%.

Analysts estimate that the company will post SSSG of 5.2%, 2.8%, and 4%, respectively, in 2Q16, 3Q16, and 4Q16. Overall, for 2016, analysts expect SHAK to post same-store sales growth of 4.3%.

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