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Category: Stock Market and Shake Shack
Date: 11 July 2020 Stock Price of Shake Shack (SHAK): $48.29 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Shake Shack , a modern day roadside burger stand serving classic American foods such as burgers, hot dogs, shakes, beer and wine. The group has been hit hard by the Covid-19 pandemic due to lockdowns and stay at home orders severely restricting their business.
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Randy Garutti, Chief Executive Officer of Shake Shack, stated -I've had the privilege of leading this company through many challenging and incredible moments, but I think we'd all agree that this has been an unprecedented test for our world, and for our teams. "
About Shake Shack
Shake Shack is a modern day “roadside” burger stand serving a classic American menu of premium burgers, hot dogs, crinkle-cut fries, shakes, frozen custard, beer and wine. With its fresh and simple, high-quality food at a great value, Shake Shack is a fun and lively community-gathering place with widespread appeal.
Quick facts about Shake Shack
Quick facts about Shake Shack
- 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 287 outlets
- Of the 275 Shake Shack Outlets 98 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: 34.4444 million
- Cash and equivalents on their balance sheet end 2019: $37.099 million
- Stockholders equity in Shake Shack: $322.606 million
- Stockholders equity per share: $9.36
- Shake Shack is trading at 5.15 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- Stockholders equity per share: $9.36
Overview of Shake Shack's 1st quarter 2020 earnings report
Data below refers to the latest quarter's data unless specified otherwise
Shack counts (at end of period):
- Revenues: $141.170 million (up from $132.069 million for the same quarter of the previous year)
- Revenues increased by 6.8% over the last 12 months
- Total expenses: $143.957 million (up from $127.447 million for the same quarter of the previous year)
- Operating expenses increased by 12.9% over the last 12 months
- Some margin squeeze being experienced by Shake Shack is their revenues grew at a slower rate than their expenses
- Net loss: -$960 thousand (down from a profit of $2.546 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.03 (down from $0.08 for the same quarter of the previous year)
- PE ratio of Shake Shack: Since the group is currently loss making no PE ratio can be calculated
- Diluted number of shares in issue: 34.444 million (up from 30.392 million for the same quarter of the previous year)
- Cash and cash equivalents: $87.806 million
- Cash and cash equivalents per share: $2.54
- Cash and cash equivalents makes up 5.27% of Shake Shack's market capital
- Cash and cash equivalents makes up 8.4% of Shake Shack's total assets
- Stockholders equity in Shake Shack: $322.606 million
- Stockholders equity per share: $9.36
- Shake Shack is trading at 5.15 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
Shack counts (at end of period):
- System-wide: 287
- Domestic company-operated: 166
- Domestic licensed: 22
- International licensed: 98
Shake Shack management commentary on their 1st quarter 2020 earnings
NEW YORK--(BUSINESS WIRE)-- Shake Shack Inc. (“Shake Shack” or the “Company”) (NYSE: SHAK) today reported its financial results for the first quarter ended March 25, 2020, a period that included 13 weeks.
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “I've had the privilege of leading this company through many challenging and incredible moments, but I think we'd all agree that this has been an unprecedented test for our world, and for our teams. Our message across the company has been consistent—to lead with hope, while acting on reality, and to make the necessary choices today to ensure our strength and growth continue for many years to come. Our Shack teams have been heroic, continuing to adapt our operating models and business strategy in true entrepreneurial spirit. By doubling down on our digital strategies and with increasing engagement through both our own, and third-party delivery channels, we have continued to see week-over-week improvement in sales in all regions, since the lowest point at the end of March. I am incredibly proud of how hard our team members are working to support our communities and guests during a time when providing hospitality is more important than ever."
Garutti concluded, “We continue to make disciplined adjustments to our cost structure based on reduced operations, but we’re remaining flexible and have started the rehiring process for some of our furloughed team members as our business slowly improves. It’s difficult to predict when and how quickly we will fully rebound once stay-at-home regulations are lifted, but our first priority will continue to be to keep our teams and our guests safe, as we carefully re-open Shacks. While we've paused development during this cash conservation moment, we have a number of Shacks across various levels of design and construction completion and plan to resume development as the operating and construction environment continues to stabilize. Given the actions we’ve taken to bolster our balance sheet, we are in a strong position to resume execution of our long-term strategic growth plan as we continue to come through the other side of COVID-19. You can bet that when the day comes where friends, families, coworkers, travelers and everyone in our community chooses to gather again, Shake Shack will remain a place they choose to do so."
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “I've had the privilege of leading this company through many challenging and incredible moments, but I think we'd all agree that this has been an unprecedented test for our world, and for our teams. Our message across the company has been consistent—to lead with hope, while acting on reality, and to make the necessary choices today to ensure our strength and growth continue for many years to come. Our Shack teams have been heroic, continuing to adapt our operating models and business strategy in true entrepreneurial spirit. By doubling down on our digital strategies and with increasing engagement through both our own, and third-party delivery channels, we have continued to see week-over-week improvement in sales in all regions, since the lowest point at the end of March. I am incredibly proud of how hard our team members are working to support our communities and guests during a time when providing hospitality is more important than ever."
Garutti concluded, “We continue to make disciplined adjustments to our cost structure based on reduced operations, but we’re remaining flexible and have started the rehiring process for some of our furloughed team members as our business slowly improves. It’s difficult to predict when and how quickly we will fully rebound once stay-at-home regulations are lifted, but our first priority will continue to be to keep our teams and our guests safe, as we carefully re-open Shacks. While we've paused development during this cash conservation moment, we have a number of Shacks across various levels of design and construction completion and plan to resume development as the operating and construction environment continues to stabilize. Given the actions we’ve taken to bolster our balance sheet, we are in a strong position to resume execution of our long-term strategic growth plan as we continue to come through the other side of COVID-19. You can bet that when the day comes where friends, families, coworkers, travelers and everyone in our community chooses to gather again, Shake Shack will remain a place they choose to do so."
COVID-19 Update
The Company remains focused on safeguarding the health of its employees, guests and communities as it navigates the challenges presented by the COVID-19 pandemic. As previously disclosed in the Company's press releases issued on April 2, 2020 and April 17, 2020, its operations have been materially impacted. Effective March 16, 2020, the Company closed all dining rooms and temporarily shifted to a "to-go" only operating model in all of its domestic company-operated Shacks. As mandated shutdowns and stay-at-home orders went into effect across the country, the Company experienced an immediate and drastic reduction in sales levels compared to the prior year.
As of April 29, 2020, 17 domestic company-operated Shacks were temporarily closed and the majority of Shacks were operating with reduced hours and in a limited capacity. As of April 29, 2020, 61 of its 120 licensed Shacks were temporarily closed, including all Shacks within Japan and domestic stadium venues. U.S. airport locations have also either fully closed or significantly slowed as air travel has diminished to a near standstill.
Despite the challenges, some positive signs have begun to emerge. Since the low point during the last week of the quarter, the Company has experienced steady increases in domestic sales driven by growth in its own digital channels and the expansion of its integrated delivery partnerships. The Company's licensed business is also starting to experience small signs of recovery with dining rooms re-opening in Korea, Hong Kong and mainland China in a limited capacity. However, there can be no assurance as to the time required to fully recover operations and sales to pre-pandemic levels. As the Company starts to plan for dining rooms to re-open domestically, albeit in a restricted and modified capacity, it will work closely with local authorities, Centers for Disease Control ("CDC") guidelines and its landlords during the process, and will clearly follow any and all social distancing and other safety restrictions and recommendations.
As the Company moves through this transition and sales ramp up, it expects to incur some labor inefficiencies as it adjusts to new protocols and operating models with a goal to remain efficient as possible while still offering safe and high quality service to its communities. The Company will also incur additional costs and investments in supplies necessary to keep its teams and guests safe, such as face coverings, gloves and additional secure packaging for all orders, directional signage and cleaning supplies, which are all expected to be ongoing for a period of time. Given the dynamic and unpredictable nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on its financial condition, results of operations or cash flows in the future. The Company will continue to monitor the rapidly evolving situation and guidance from international and domestic authorities.
The Company remains focused on safeguarding the health of its employees, guests and communities as it navigates the challenges presented by the COVID-19 pandemic. As previously disclosed in the Company's press releases issued on April 2, 2020 and April 17, 2020, its operations have been materially impacted. Effective March 16, 2020, the Company closed all dining rooms and temporarily shifted to a "to-go" only operating model in all of its domestic company-operated Shacks. As mandated shutdowns and stay-at-home orders went into effect across the country, the Company experienced an immediate and drastic reduction in sales levels compared to the prior year.
As of April 29, 2020, 17 domestic company-operated Shacks were temporarily closed and the majority of Shacks were operating with reduced hours and in a limited capacity. As of April 29, 2020, 61 of its 120 licensed Shacks were temporarily closed, including all Shacks within Japan and domestic stadium venues. U.S. airport locations have also either fully closed or significantly slowed as air travel has diminished to a near standstill.
Despite the challenges, some positive signs have begun to emerge. Since the low point during the last week of the quarter, the Company has experienced steady increases in domestic sales driven by growth in its own digital channels and the expansion of its integrated delivery partnerships. The Company's licensed business is also starting to experience small signs of recovery with dining rooms re-opening in Korea, Hong Kong and mainland China in a limited capacity. However, there can be no assurance as to the time required to fully recover operations and sales to pre-pandemic levels. As the Company starts to plan for dining rooms to re-open domestically, albeit in a restricted and modified capacity, it will work closely with local authorities, Centers for Disease Control ("CDC") guidelines and its landlords during the process, and will clearly follow any and all social distancing and other safety restrictions and recommendations.
As the Company moves through this transition and sales ramp up, it expects to incur some labor inefficiencies as it adjusts to new protocols and operating models with a goal to remain efficient as possible while still offering safe and high quality service to its communities. The Company will also incur additional costs and investments in supplies necessary to keep its teams and guests safe, such as face coverings, gloves and additional secure packaging for all orders, directional signage and cleaning supplies, which are all expected to be ongoing for a period of time. Given the dynamic and unpredictable nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on its financial condition, results of operations or cash flows in the future. The Company will continue to monitor the rapidly evolving situation and guidance from international and domestic authorities.
Shake Shack (NYSE: SHAK) stock price history
The image below, obtained from Google, shows the stock price history of Shake Shack over the last 5 years. And its been a decent time for Shake Shake investors over the last 5 years. 5 years ago Shake Shack stock was trading at around $53 a share and its currently trading at $48.29 a stock. That's a loss of -8.9% suffered by stockholders of Shake Shack over the last 5 years.
The stock of Shake Shack is trading at a lot closer to its 52 week low of $30.01 than it is to its 52 week high of $105.84 which to us is a clear indication that the short term momentum and sentiment of Shake Shack stock is very negative right now.
The stock of Shake Shack is trading at a lot closer to its 52 week low of $30.01 than it is to its 52 week high of $105.84 which to us is a clear indication that the short term momentum and sentiment of Shake Shack stock is very negative right now.
Recent coverage of Shake Shack (SHAK)
The extract below discusses Shake Shack vs Beyond Meat as obtained from Fool.com
Since Shake Shack (NYSE:SHAK) went public in 2015, it's been on my watch list. I like the company's brand recognition, average unit volumes (AUV), and opportunity for expansion. But I've never added shares to my portfolio; there's always been just enough to keep me on the sidelines. And I'm glad for that. It's underperformed the market average since its IPO.
When the stock market crashed earlier in 2020, most of my watch list stocks got a lot cheaper. This included Shake Shack, which tanked to all-time lows. However, I ultimately pulled the trigger on a different stock on my watch list: plant-based meat company Beyond Meat (NASDAQ:BYND). Its stock price fell, even though its business is thriving. That's why I believed it was the better buy. But now that the stock has climbed higher, is it still the smarter pick right now?
Read the full article here
Since Shake Shack (NYSE:SHAK) went public in 2015, it's been on my watch list. I like the company's brand recognition, average unit volumes (AUV), and opportunity for expansion. But I've never added shares to my portfolio; there's always been just enough to keep me on the sidelines. And I'm glad for that. It's underperformed the market average since its IPO.
When the stock market crashed earlier in 2020, most of my watch list stocks got a lot cheaper. This included Shake Shack, which tanked to all-time lows. However, I ultimately pulled the trigger on a different stock on my watch list: plant-based meat company Beyond Meat (NASDAQ:BYND). Its stock price fell, even though its business is thriving. That's why I believed it was the better buy. But now that the stock has climbed higher, is it still the smarter pick right now?
Read the full article here
Shake Shack (NYSE: SHAK) stock valuation
So based on Shake Shack's 1st quarter 2020 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 $43.10 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 $38.80.
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 $38.80.
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
Next earnings release of Shake Shack
It is expected that Shake Shack will release their 2nd quarter 2020 earnings report in late August 2020