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Category: Shake Shack (SHAK)
Date: 7 July 2020 Stock price of Shake Shack: $50.42 We take a look at the latest press release from Shake Shack in which the group provides a business update to investors. For the week ending 1 July 2020, Shake Shack sales was down -39%
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As always, and especially during this recovery period, our priority remains the safety of our team and our communities. Amidst our gradual sales recovery, we've started to open new Shacks again and are looking to the significant growth opportunity that we believe lies ahead for Shake Shack "
More About Shake Shack (SHAK)
Shake Shack Inc. was formed on September 23, 2014 as a Delaware corporation. Shake Shack Inc. Class A common stock trades on the New York Stock Exchange under the symbol "SHAK."
Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crispy chicken, frozen custard, crinkle cut fries, shakes, beer, wine and more. Originally founded in 2001 by Danny Meyer's Union Square Hospitality Group ("USHG"), which owns and operates some of New York City's most acclaimed and popular restaurants—such as Union Square Cafe, Gramercy Tavern and Maialino—to name a few. Shake Shack began as a hot dog cart to support the rejuvenation of New York City's Madison Square Park through its Conservancy's first art installation, "I Taxi." The cart was an instant success, with lines forming daily throughout the summer months over the next three years. In response, the city's Department of Parks and Recreation awarded Shake Shack a contract to create a kiosk to help fund the park's future. In 2004, Shake Shack officially opened. Soon it became a gathering place for locals alike, and a beloved New York City institution, garnering significant media attention, critical acclaim and a passionately-devoted following. Since its inception, Shake Shack has grown rapidly—with 275 Shacks, as of December 25, 2019, in 15 countries and 30 states, as well as the District of Columbia—and we continue to expand globally bringing the Shake Shack experience to new guests around the world
Shake Shack is a modern day "roadside" burger stand serving a classic American menu of premium burgers, hot dogs, crispy chicken, frozen custard, crinkle cut fries, shakes, beer, wine and more. Originally founded in 2001 by Danny Meyer's Union Square Hospitality Group ("USHG"), which owns and operates some of New York City's most acclaimed and popular restaurants—such as Union Square Cafe, Gramercy Tavern and Maialino—to name a few. Shake Shack began as a hot dog cart to support the rejuvenation of New York City's Madison Square Park through its Conservancy's first art installation, "I Taxi." The cart was an instant success, with lines forming daily throughout the summer months over the next three years. In response, the city's Department of Parks and Recreation awarded Shake Shack a contract to create a kiosk to help fund the park's future. In 2004, Shake Shack officially opened. Soon it became a gathering place for locals alike, and a beloved New York City institution, garnering significant media attention, critical acclaim and a passionately-devoted following. Since its inception, Shake Shack has grown rapidly—with 275 Shacks, as of December 25, 2019, in 15 countries and 30 states, as well as the District of Columbia—and we continue to expand globally bringing the Shake Shack experience to new guests around the world
Quick facts about Shake Shack (SHAK)
- Shake Shack is listed on the New York Stock Exchange under share code ticker: SHAK
- Shake Shack has 7 603 employees
- Shacks located in the Northeast and the New York City metropolitan area comprises approximately 44% of the total domestic company-operated Shacks as of December 25, 2019
- Shake Shack has 275 outlets
- Of the 275 Shake Shack Outlets 90 is outside the USA
- Shake Shack sales for 2019 fiscal year: $574.625 million
- Earnings per share for fiscal 2019: $0.61
- Shares in issue: 34.422 million
- Cash and equivalents on their balance sheet: $37.099 million
- Stockholders equity in Shake Shack: $321.985 million
Press release from Shake Shack providing their latest business update
NEW YORK--(BUSINESS WIRE)-- Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK) today provided a business update given the ongoing COVID-19 pandemic. With gradual sales recovery progressing and a strong balance sheet, the Company has restarted new Shack development both domestically and internationally as it looks forward to long-term growth.
“As always, and especially during this recovery period, our priority remains the safety of our team and our communities. Amidst our gradual sales recovery, we've started to open new Shacks again and are looking to the significant growth opportunity that we believe lies ahead for Shake Shack. I am so proud of the resilience of our teams in the Shacks, the innovation across our operating model and our relentless efforts to continue to safely serve our guests. I want to thank our entire Shack family for their hard work and commitment to leading with hospitality during these difficult times,” said Randy Garutti, Shake Shack CEO.
The Company expects to return to its normal quarterly business update schedule. Shake Shack's next earnings release and conference call for the second quarter of 2020 is planned for July 30, 2020.
Sales Update
Same-Shack sales % for week ended July 1, 2020
NYC Northeast Southeast Midwest West Total
(58)% (24)% (32)% (42)% (35)% (39)%
Licensed Business
Cash Update; Investing for Growth
Taking Care of Our Team
“As always, and especially during this recovery period, our priority remains the safety of our team and our communities. Amidst our gradual sales recovery, we've started to open new Shacks again and are looking to the significant growth opportunity that we believe lies ahead for Shake Shack. I am so proud of the resilience of our teams in the Shacks, the innovation across our operating model and our relentless efforts to continue to safely serve our guests. I want to thank our entire Shack family for their hard work and commitment to leading with hospitality during these difficult times,” said Randy Garutti, Shake Shack CEO.
The Company expects to return to its normal quarterly business update schedule. Shake Shack's next earnings release and conference call for the second quarter of 2020 is planned for July 30, 2020.
Sales Update
- Total revenue for the second quarter ended June 24, 2020 was $91.8 million, including licensed revenue of $2.3 million. Shack sales were estimated to be negatively impacted by approximately $3.2 million in the fiscal period June due to nationwide protest activity and resulting curfews causing temporary Shack closures and reduced operating hours.
- Despite the challenging operating environment, the Company opened four new domestic company-operated Shacks in the second quarter; in Sacramento and Los Angeles, CA, Charlotte, NC, and St. Louis, MO, each of which opened with encouraging levels of sales.
- Same-Shack sales declined approximately (49%) in the second quarter compared to the prior year driven by a decline in traffic of (60.1%) and an increase in price mix of 11.1%. Same-Shack sales improved during the quarter delivering (64%), (42%) and (42%) declines for fiscal periods April, May and June, respectively. After adjusting for the impact of the protests, same-Shack sales showed sequential improvement, with fiscal period June delivering a (39%) decline and the second quarter (47%).
- Domestic company-operated Shacks experienced steady sales increases over the last few weeks with most recent average weekly sales of $58,000, an increase of 18% compared to the week ended April 29. The following table presents information about the Company's trends in the second quarter of 2020 and the first week of the third quarter.
- Same-Shack sales for the most recent week ended July 1 were down (39%), with the overall speed of company-wide sales recovery remaining uncertain due to ongoing volatility related to COVID-19. In addition, same-Shack sales remain acutely impacted by New York City, one of the Company's largest regions with some of the highest volume Shacks, which is expected to take a longer period of time to fully recover than other parts of the country. For the most recent fiscal week ended July 1, New York City same-Shack sales were down (58%) versus the prior year, and with this region accounting for approximately 20% of the Company’s total Shack sales in the first quarter prior to the COVID-19 outbreak, it will continue to have a notable impact on total Company sales performance until there is a material recovery.
Same-Shack sales % for week ended July 1, 2020
NYC Northeast Southeast Midwest West Total
(58)% (24)% (32)% (42)% (35)% (39)%
- As various states reopened throughout June, a number of previously closed Shacks also reopened, albeit at significantly reduced sales volumes, and with a notable impact on same-Shack sales. However, these Shacks are still contributing positively to Shack-level operating profit by remaining open. At the current time, six Shacks remain fully closed, an improvement from the end of the first quarter at which point 17 Shacks were fully closed. All remaining Shacks at that time were operating in a to-go capacity only, with closed dining rooms. As of the end of the second quarter, approximately 60% of Shacks were operating with dining rooms open at limited capacity. However, in recent days, some of these interior and patio dining rooms have once again closed for safety reasons.
- As in-Shack ordering has increased over recent weeks, the mix between in-person and digital sales continues to shift. For the week ended July 1, digital sales represented approximately 60% of total Shack sales compared to a peak of 84% of Shack sales for the week ended April 29. The Company expects digital mix to continue to gradually reduce over time as more dining rooms reopen and in-Shack sales recover, with digital remaining a significant component of sales and ongoing growth.
Licensed Business
- Licensed revenue for the second quarter ended June 24, 2020 was $2.3 million with gradual improvement across all regions during the period as Shacks and markets began to reopen. At the current time, 95 of 121 licensed Shacks are currently open, an increase since the week ended April 29 at which point just 59 licensed Shacks were open.
- Licensed Shacks have experienced steady sales increases over the quarter and the last few weeks
- The Company has opened two new licensed Shacks since the end of the first quarter both in Shanghai, China - the first location on May 28 at the Hongqiao Airport and subsequently on June 28 at the Grand Gateway Plaza.
- In late June, the Company announced an expansion of its existing partnership with licensee Maxim’s Caterers Limited, to open a minimum of 15 additional Shacks across South China by 2030, including locations in Shenzhen, Guangzhou, Fuzhou and Xiamen. This expanded agreement increases the total number of planned Shacks for mainland China to 55 by 2030, of which five are open at this time.
- The Company recently signed a licensing agreement for a new Shack at the Dodgers stadium in Los Angeles, which is expected to open when baseball reopens to fans.
Cash Update; Investing for Growth
- At current sales levels and inclusive of all costs, cash flow is positive at the Shack-level. Enterprise-level weekly cash burn has improved to approximately $200,000 per week excluding the temporary premium pay increase for Shack teams and new Shack capital expenditure.
- On June 22, the Company repaid $50 million it had previously drawn from its revolving credit facility.
- The Company had $184 million in cash and marketable securities on hand as of July 6.
- With a strong real estate pipeline, the Company is pleased to confirm it has restarted domestic Shack development. After opening four company-operated Shacks in the first quarter before the full onset of the pandemic, the Company has recently opened an additional four Shacks across the country. The Company has an identified pipeline of leases in negotiation for continued growth in 2021 and beyond, and believes additional and improved development opportunities may be available over time due to the impact of COVID-19 on the overall retail and real estate environment.
Taking Care of Our Team
- Effective April 23, as a thank you to the Shack team, the Company extended a 10% premium pay raise to all hourly employees that is expected to continue through at least July 22.
- Second quarter bonuses were guaranteed at a minimum of 10% of salary for all active Shack managers.
- During the recent closures and reduced hours due to protests and curfews, the Company paid all hourly employees in the field for their normally scheduled hours that had been shortened or cancelled during that time.
- The Company has continued to pay 100% of all health benefit premiums for furloughed employees in addition to covering pay for two weeks for any team members diagnosed with COVID-19.
- The Company is committed to its mission to Stand for Something Good and recently donated $100,000 to the Equal Justice Initiative. In addition, the internal Diversity & Inclusion program, All-In, is leading a host of extensive initiatives and commitments, including the introduction of Employee Resource Groups to create safe spaces and ensure all voices and ideas for positive change are heard.
Shake Shack (SHAK) stock price history over the last 3 years
The image below shows the stock price history of Shake Shack (SHAK) over the last 3 years. And its been a fairly volatile time for SHAK stock but the stock price has done pretty well with it increasing by 45.9% over the last 3 years.
Our latest stock valuation of Shake Shack (25 February 2020)
So based on Shake Shack's latest earnings report what do we value the stock of Shake Shack at? The group has made a loss during the period under the review, however there are other ways to value companies at instead of just relying on the earnings per share. Our valuation models provides a target price of $47.70 a stock.
We therefore believe the stock of Shake Shack is overvalued at its current price. We usually recommend that investors look to enter a stock at least 10% below our target price. Thus a good entry point into the stock of Shake Shack would be at $42.90.
Since the stock of Shake Shack is trading at well above our suggested entry point and target price, we rate the stock of Shake Shake as a sell
We therefore believe the stock of Shake Shack is overvalued at its current price. We usually recommend that investors look to enter a stock at least 10% below our target price. Thus a good entry point into the stock of Shake Shack would be at $42.90.
Since the stock of Shake Shack is trading at well above our suggested entry point and target price, we rate the stock of Shake Shake as a sell