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Unit Growth to Drive Shake Shack’s Revenue in the First Quarter

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Analysts’ estimates

For the first quarter of 2019, analysts expect Shake Shack (SHAK) to post revenue of $126.9 million, which represents a rise of 28.0% from $99.1 million in the corresponding quarter of 2018. The net addition of both company-owned and franchised restaurants in the last four quarters is likely to drive the company’s revenue during the quarter.

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By the end of the fourth quarter of 2018, Shake Shack operated 124 company-owned restaurants, which represents an increase of 29 units from 95 company-owned restaurants at the end of the first quarter of 2018. During the same period, the company has increased the unit count of its franchised restaurants by 11 units. The addition of these new restaurants and the restaurants opened in the first quarter of 2019 are expected to drive the company’s revenue.

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

Shake Shack had opened its first innovation kitchen at its home office in Manhattan during the third quarter of 2018. The company has been testing its new menu items, kitchen designs, and digital initiatives before introducing them to other restaurants.

In September 2018, the company introduced Chick’n Bites as an LTO in West Village Shack. The company has rolled out menu item in all its restaurants during the first quarter of 2019. The company has implemented a monthly shake program, where the company introduced tiramisu shakes in January and salted vanilla coffee shakes in February. All these initiatives are expected to drive SHAK’s SSSG during the quarter.

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Peer comparisons

During the comparable quarter, Chipotle Mexican Grill (CMG) has posted revenue growth of 13.9%, while analysts are expecting Wendy’s (WEN) and Jack in the Box (JACK) to post revenue growth of 5.0% and 3.8%, respectively.

Outlook

For 2019, Shake Shack’s management expects the company to post revenue in the range of $570 million–$576 million with franchised restaurants expected to contribute $15 million–$16 million. The company is also planning to open 3640 new company-owned restaurants, and 16–18 franchised restaurants this year. The company’s SSSG for the year is expected to be in the range of 0%1.0%.

Analysts expect Shake Shack to post revenue of $576.9 million, which represents a rise of 25.6% from $459.3 million in 2018.

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