Shake Shack has double-digit quarter

Shake Shack reported over 17 percent increase in same-store sales. The increase reflects increased menu shifts and more traffic.

Keith Bedford/Reuters/File
Passersby walk in front of the Shake Shack restaurant in the Manhattan borough of New York, December 29, 2014. The chain grew in double-digits last quarter.

You know it’s a good quarter when you need to caution analysts that “we do not expect these numbers to continue.” So it was when Shake Shack reported a 17.1% increase in same-store sales for the quarter ended Sept. 30, 2015. For 2016, the guidance is that full-year 2015 comp sales should be 11% to 12% and then a more real-world increase of 2.5% to 3% in 2016.

Unlike many others in the burger category, Shake Shack’s performance isn’t primarily dependent on price increases. Customer traffic accounts for 8.1% of the gain, with 9% coming from menu prices and shifts in menu mix. Shake Shack took a 3% price increase in January 2015 and CEO Randy Garutti told analysts to expect a 2.5% to 3% increase in January 2016.

Average weekly sales in Q3 were up 9.6% over 2014, a gain the chain ascribes to “robust traffic growth, increased menu prices, favorable shifts in sales mix from menu innovation and strong performance from several Shacks opened in the latter half of fiscal 2014, including Las Vegas and Chicago.

Average unit sales are running at $2.8 million to $3.2 million, and the company expects an average of at least $3.3 million in 2016, with a store level operating profit margin of 22%. New stores typically have much higher opening sales. The record could be set Nov. 13 when Shake Shack opens a freestanding restaurant in Tokyo’s Meiji-Jingu Gaien park (a restaurant modeled after the original Shake Shack in New York City’s Madison Square Park. For 2016, the chain has revised its guidance to call for 14 new company domestic stores, including its first openings in Dallas, Los Angeles, Phoenix and Scottsdale, Ariz.

It’s worth noting that Shake Shack’s same-store sales are computed on the basis of units open at least 24 months. That yields a base of just 16 established stores, of which six are in New York City.

Garutti disappointed those who hoped he would announce expansion of the Chicken Shack sandwich beyond the three Brooklyn stores where it is available now. The chicken sandwich is a top seller at all three stores, he said, but no timetable for expansion was given.

This article first appeared at BurgerBusiness.

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