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Shake Shack (SHAK) posted preliminary fourth-quarter results that beat expectations, but investors don’t seem convinced.
Shares of the fast-casual chain fell 6% on Monday after the company reported same-store sales grew 4.3% last quarter. Total revenue rose about 15% year over year to $328.7 million.
For fiscal 2024, same-store sales are up 3.6%, while revenue is up 15% to $1.25 billion. The company gave guidance for 2025 that included a 16% to 18% increase in revenue and a 3% jump in same-store sales.
Shake Shack made “a lot of progress” last year “in an environment where you’re still concerned about wage inflation and potentially some commodity inflation, and you’ve got some risks coming up here in recent weeks (like the bird flu),” CEO Rob Lynch told Yahoo Finance at the ICR conference in Orlando, Florida.
“We felt it was better than what we’ve delivered in a long time, and better than what the consensus was predicting, but maybe not as aspirational (as) some other people had in their minds,” he added. The company’s shares are up 85% in the past year.
By 2025, it expects to expand restaurant margins to 22% from 21.4%, the highest margin in the last eight years.
William Blair analyst Sharon Zackfia pointed to “commodity cost fluctuations” and “ongoing pressure from wage inflation” as two key risks to the business. It has an outperform rating on the stock.
According to Lynch, Shake Shack is currently projecting low single-digit inflation for its supply chain, and his team was “positively surprised by the stability of the beef market despite some of the projections of this year.”
Labor inflation is expected to stabilize between 3% and 4% this year, he said.
As Shake Shack reaches its 10th anniversary since its IPO on January 30, 2015, it shared a new growth target for its company-operated footprint.
It aims to reach at least 1,500 huts managed by the company over time. Last year, there were 329 company-operated locations, including a record 43 company-operated openings. This year it plans to launch 45 more.
Lynch said the company is adding new formats such as drive-through and stores with smaller footprints.
Also look for Chipotle’s (CMG), calling it “best in class” in opening company-operated restaurants “super fast.” The burrito chain has a long-term goal of reaching 7,000 locations in North America and expects to open 315 to 345 company-owned restaurants by 2025.
