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Shake Shack: Analysts Expect Positive Same-Store Sales Growth in 1Q16

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Same-store sales growth

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

Same-store sales growth increases a company’s revenue without increasing capital investment. It’s a direct reflection of how much traffic each location is driving without adding more stores.

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1Q16 performance

On the back of the company’s double-digit growth of 11.7% in 1Q15, analysts are expecting Shake Shack (SHAK) to post same-store sales growth of 4.6%.  Shake Shack (SHAK) forms 0.02% of the holdings of the iShares Russell 2000 Growth ETF (IWO)

The company is expecting to boost its same-store sales through menu innovations. On January 14, 2016, Shake Shack introduced the ChickenShack sandwich in all of its company-owned restaurants. Since June 2015, it had been served in only three Brooklyn restaurants.

Internationally, the company has introduced ChickenShack in Turkey and the UAE. The 1.5% increase of menu prices on December 26, 2015, is also expected to contribute to its same-store sales growth.

Peer comparison

In 1Q16, Panera Bread (PNRA) posted SSSG of 4.7% while Chipotle Mexican Grill’s (CMG) SSSG fell by 29.7%. Analysts are expecting Jack in the Box (JACK) to post SSSG of 0.8%.

2016 outlook

Comparing against a difficult double-digit growth, Shake Shack’s (SHAK) management has set its same-store sales growth guidance at 2.5%–3%, which includes a 1.5% menu price increase and nominal expected traffic. Analysts are expecting the company to post SSSG of 3.3%.

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