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Why Analysts Expect Shake Shack’s Revenue to Rise in Q4

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Analysts’ expectations

Analysts expect Shake Shack (SHAK) to post revenue of $118.82 million in the fourth quarter, a rise of 23.6% from $96.1 million in the corresponding quarter of 2017. This revenue growth is likely to be driven by the company’s opening of new restaurants in the last four quarters.

In 2018, Shake Shack’s management expects its revenue to be in the range of $450 million–$452 million, which represents a rise of 25.4%–26.0% from its revenue of $358.8 million in 2017. The company’s management also expects to open 33–34 company-owned restaurants and 14–16 franchised restaurants during the same period.

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Compared to the fourth quarter of 2017, Shake Shack operated 17 more company-owned restaurants and 12 more franchised restaurants by the end of the third quarter of 2018. These new restaurants, along with the restaurants it opened in the fourth quarter of 2018, are expected to have driven its revenue in the quarter.

To drive its SSSG (same-store sales growth), Shake Shack is focusing on menu innovations and enhancing the customer experience through the implementation of digital advancements.

During the third quarter, Shake Shack opened its first innovation kitchen at its home office in Manhattan. The facility will be used to test new menu items, kitchen designs, and digital initiatives. After successful testing, the changes will be implemented in the company’s restaurants. Chick’n Bites, which were introduced in mid-September, were the first item to come out of the innovation kitchen.

During its third-quarter earnings call, the company’s management announced the introduction of 20 hybrid model restaurants, which would have self-order kiosks and cashiers, by the end of 2018. In the third quarter, the company also introduced browser-based ordering for mobile and desktop in ten restaurants, which would allow customers to order without using the app.

Peer comparison

During the same period, Chipotle Mexican Grill (CMG) posted revenue growth of 10.4%, and McDonald’s (MCD) revenue fell 3.3%.

Next, we’ll look at analysts’ fourth-quarter EPS expectations for SHAK.

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