Why Wall Street Expects Shake Shack’s Revenue to Rise in 2019

Management’s 2019 revenue guidance

Shake Shack’s (SHAK) management team expects the company’s revenue in 2019 in the range of $570 million–$576 million, which includes a contribution of $15 million–$16 million from franchised restaurants. During the period, management expects to open 36–40 company-owned restaurants and 16–18 franchised restaurants. They’re also expecting the company’s SSSG (same-store sales growth) in the range of 0%–1%.

For 2019, analysts expect Shake Shack to post revenue of $577.4 million, which represents a rise of 25.7% from $459.3 million in 2018. The revenue growth is expected to be driven by the net addition of new restaurants and positive SSSG.

Why Wall Street Expects Shake Shack’s Revenue to Rise in 2019

To improve its efficiency and strengthen its roots in established markets, Shake Shack’s management expects to open 85% of its 2019 company-owned restaurants in existing markets. In the international market, management is focusing on Asia for expansion.

To drive its SSSG, Shake Shack is focusing on menu innovations, enhancing customer experience through the implementation of digital advancements, and automating its administrative process through “Project Concrete” to allow employees to focus on customers’ experience.

During the third quarter, Shake Shack opened its first innovation kitchen at its home office in Manhattan. The facility is used to test new menu items, kitchen designs, and digital initiatives. Chick’n Bites, which were introduced in mid-September, was the first item to come out of the innovation kitchen. The innovative kitchen has also created new menu items, which include cold-brew floats, and Mexican spiced hot chocolate.

The company has also introduced a monthly shake program, where it will vary its flavors more often. In January, the company served a tiramisu shake, and in February, it’s serving a salted vanilla coffee shake.

Peer comparisons

During the same period, Chipotle Mexican Grill (CMG) is expected to post revenue growth of 8.8% while revenue at McDonald’s (MCD) is expected to fall 0.5%.

Next in this series, we’ll look at analysts’ EPS expectations for 2019.