What Really Drove Shake Shack’s Revenue in 1Q16?
In 1Q16, Shake Shack saw a 43.3% rise in revenue over $37.8 million in 1Q15, driven by unit growth and same-store sales growth.
![Rajiv Nanjapla - Author](https://media.marketrealist.com/brand-img/bB9owEikP/200x200/rajiv_mr-raj-n-1595895224444.jpg)
May 16 2016, Published 4:43 p.m. ET
![uploads///](https://media.marketrealist.com/brand-img/QU1oZ2Odl/480x251/uploads/2016/05/215.jpg 480w, https://media.marketrealist.com/brand-img/QU1oZ2Odl/640x335/uploads/2016/05/215.jpg 640w, https://media.marketrealist.com/brand-img/QU1oZ2Odl/768x402/uploads/2016/05/215.jpg 768w, https://media.marketrealist.com/brand-img/QU1oZ2Odl/1024x536/uploads/2016/05/215.jpg 1024w, https://media.marketrealist.com/brand-img/QU1oZ2Odl/1280x670/uploads/2016/05/215.jpg 1280w, https://media.marketrealist.com/brand-img/QU1oZ2Odl/1440x753/uploads/2016/05/215.jpg 1440w, https://media.marketrealist.com/brand-img/QU1oZ2Odl/1600x837/uploads/2016/05/215.jpg 1600w, https://media.marketrealist.com/brand-img/QU1oZ2Odl/2160x1130/uploads/2016/05/215.jpg 2160w)
Revenue sources
Shake Shack (SHAK) earns its revenue through company-owned restaurant sales and franchisee fees and royalties collected from domestic and international franchised restaurants.
In 1Q16, revenue from company-owned restaurants formed 96% of SHAK’s total revenue.
1Q16 performance
In 1Q16, Shake Shack (SHAK), which forms 0.02% of the holdings of the iShares Russell 2000 Growth ETF (IWO), saw a 43.3% rise in revenue over $37.8 million in 1Q15. SHAK’s revenue rise was driven by unit growth and same-store sales growth.
For 1Q16, SHAK reported revenue of $52.2 million from its company-owned restaurants, a rise of 44.7% compared to $36 million in 1Q15. The revenue rise was driven by 9.9% same-store sales growth and an increase of 13 company-owned restaurants.
In 1Q16, SHAK’s revenue from franchised restaurants stood at $2 million, a rise of 14.3% compared to $1.8 million in 1Q15. Compared to 1Q15, SHAK increased its franchised restaurant count by nine, which was a major driver of revenue growth in the segment.
However, SHAK experienced a slowdown in energy-related markets such as the Middle East. The strong dollar also negatively affected SHAK’s revenue from its international operations.
Peer comparison
In 1Q16, Panera Bread (PNRA) posted a revenue rise of 5.7%. SHAK’s other peers Chipotle Mexican Grill (CMG) and Jack in the Box (JACK) posted falls of 23.4% and 2%, respectively.
Outlook
Strong 1Q16 results have prompted SHAK’s management to raise its revenue guidance for 2016 to $245 million–$249 million from its earlier guidance of $237 million–$242 million. However, analysts have forecast SHAK’s revenue to be $251.1 million, a rise of 31.8% compared to $190.6 million in 2015.
In the next few articles, we’ll discuss SHAK’s revenue drivers.