Same-store sales growth
In 3Q17, Shake Shack’s (SHAK) SSSG (same-store sales growth) fell 1.6% against analysts’ expectation of 2.6%. To compare, in 3Q16, the company posted SSSG of 2.9%. As the base for the calculation of SSSG includes only 39 restaurants, the company has claimed that a small swing could have a huge impact on its SSSG.
Same-store sales growth drivers
The fall in Shake Shack’s SSSG was largely due to a reduction in traffic at its restaurants, which lowered the company’s SSSG by 3.8%. However, 2.2% of the decline was offset by higher menu prices and a favorable product mix. Due to the devastation caused by Hurricane Harvey and Hurricane Irma, Shake Shack lost 33 operating days during the quarter, which contributed to the fall in its SSSG.
Shake Shack continues to focus on menu innovation and the enhancement of customer experience through the implementation of digital advancements to drive its SSSG. During the quarter, the company launched the Hot Chick’n sandwich as a limited-time offering, and it has received a positive response from customers.
Moving to technological advancements, Shake Shack has announced that there was higher guest engagement and traffic on its app. Also, check size was higher on the app than at restaurants. By pushing more personalized marketing initiatives through its app, the company was able to drive greater frequency and spending, leading to growth in the company’s SSSG.
Peer comparison and outlook
During the same period, Chipotle Mexican Gill (CMG) and McDonald’s (MCD) posted SSSG of 1.0%, and 6.0%, respectively. After posting a strong performance in 3Q17, the company raised its 2017 SSSG guidance from a fall of 2%–3% to fall of 1.5%–2%. The company expects its SSSG to be driven by the introduction of new menu items, such as chili, burgers, hotdogs, and fries, and the enhancement of customer experience through the implementation of digital advancements. Next, we’ll look at Shake Shack’s unit growth.