Shake Shack (SHAK) earnings report review for the 1st quarter of their 2021 fiscal year
Category: Stock Market and Shake Shack (SHAK)
Date: 7 June 2021 Stock Price of Shake Shack (SHAK): $89.28 Market Capital of Shake Shack: $3.75 billion We take a look at the 1st quarter earnings report of their 2021 fiscal year of Shake Shack , a modern day roadside burger stand serving classic American foods such as burgers, hot dogs, shakes, beer and wine. For the quarter the group recorded revenues of $155.3 million and net income of $0.6 million
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Randy Garutti, Chief Executive Officer of Shake Shack -Spring has ushered in a great energy around the country and in our hometown of New York City. With COVID cases stabilizing and more regions steadily loosening restrictions, we are optimistic that improving trends can continue for our industry."
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 2021 earnings report
Financial Highlights for the First Quarter 2021:
Shack counts (at end of period):
- Total revenue in the first quarter 2021 increased 8.5% to $155.3 million versus the same period last year.
- Shack sales in the first quarter 2021 increased 9.1% to $150.7 million versus the same period last year. Total Shack sales improved further in fiscal April with an increase of 171% versus the same period last year.
- Same-Shack sales1 improved to up 5.7% in the first quarter 2021 versus the same period last year. In fiscal April, Same-Shack sales continued to recover, with an increase of 86% versus the same period last year.
- Licensed revenue in the first quarter 2021 decreased 9.9% to $4.6 million versus the same period last year.
- Shack system-wide sales in the first quarter 2021 increased 3.0% to $228.3 million, versus the same period last year.
- Operating loss in the first quarter 2021 was $10.0 million compared to an operating loss of $0.8 million in the same period last year.
- Shack-level operating profit2 decreased 14.3% to $22.6 million, or 15.0% of Shack sales in the first quarter 2021, versus the same period last year.
- Net income was $0.6 million and adjusted EBITDA2 was $7.1 million in the first quarter 2021, compared to a net loss of $1.1 million and adjusted EBITDA of $14.3 million in the same period last year.
- Net income attributable to Shake Shack Inc. was $1.3 million and adjusted pro forma net income2 was $1.8 million, or $0.04 per fully exchanged and diluted share in the first quarter 2021, compared to net loss attributable to Shake Shack Inc. of $1.0 million and adjusted pro forma net income of $0.8 million, or $0.02 per fully exchanged and diluted share, in the same period last year.
- Net system-wide Shack openings , comprised of nine net domestic Company-operated Shacks and one net licensed Shack.
- Cash and marketable securities on hand was $415.9 million as of March 31, 2021.
Shack counts (at end of period):
- System-wide: 298
- Domestic company-operated: 175
- Domestic licensed: 22
- International licensed: 101
Shake Shack management commentary on their 3rd 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 31, 2021, a period that included 13 weeks.
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “Spring has ushered in a great energy around the country and in our hometown of New York City. With COVID cases stabilizing and more regions steadily loosening restrictions, we are optimistic that improving trends can continue for our industry."
Garutti continued, “In the first quarter and so far through fiscal April, the positive momentum of our financial recovery continued. Total revenue was $155.3 million in the first quarter, up 8.5% from last year, with average weekly sales improving to $64,000 compared to $62,000 in the fourth quarter 2020. We exited the first quarter 2021 with fiscal March average weekly sales of $68,000, and moving into the second quarter 2021, fiscal April improved slightly to $69,000. We know that the return of business traffic, events and tourism to cities like NYC, Chicago and LA will be key to our full recovery. During the first quarter, we opened 10 domestic Company-operated Shacks and have opened another 5 so far in the second quarter, with one to three more through the end of the quarter – for a total of 16-18 openings by the mid-year point. Although our rate of recovery and development plans continue to be impacted by the ongoing uncertainty due to COVID, we are targeting to open between 35 and 40 new Company-operated Shacks this year in both urban and suburban markets. We continue to guide to an accelerated development plan in fiscal 2022 of 45 to 50 Shacks.
Average weekly sales for the 2021 class in the first quarter have been strong at $79,000 per week, more than 20% higher than the rest of the system average, showing how significant the sales opportunities are for new Shack openings now and in the future. Shack Track digital convenience leads, with about a third of the class featuring walk-up windows, about 10% with a drive-up window and many other Shacks featuring curbside and/or an enhanced interior pickup experience."
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “Spring has ushered in a great energy around the country and in our hometown of New York City. With COVID cases stabilizing and more regions steadily loosening restrictions, we are optimistic that improving trends can continue for our industry."
Garutti continued, “In the first quarter and so far through fiscal April, the positive momentum of our financial recovery continued. Total revenue was $155.3 million in the first quarter, up 8.5% from last year, with average weekly sales improving to $64,000 compared to $62,000 in the fourth quarter 2020. We exited the first quarter 2021 with fiscal March average weekly sales of $68,000, and moving into the second quarter 2021, fiscal April improved slightly to $69,000. We know that the return of business traffic, events and tourism to cities like NYC, Chicago and LA will be key to our full recovery. During the first quarter, we opened 10 domestic Company-operated Shacks and have opened another 5 so far in the second quarter, with one to three more through the end of the quarter – for a total of 16-18 openings by the mid-year point. Although our rate of recovery and development plans continue to be impacted by the ongoing uncertainty due to COVID, we are targeting to open between 35 and 40 new Company-operated Shacks this year in both urban and suburban markets. We continue to guide to an accelerated development plan in fiscal 2022 of 45 to 50 Shacks.
Average weekly sales for the 2021 class in the first quarter have been strong at $79,000 per week, more than 20% higher than the rest of the system average, showing how significant the sales opportunities are for new Shack openings now and in the future. Shack Track digital convenience leads, with about a third of the class featuring walk-up windows, about 10% with a drive-up window and many other Shacks featuring curbside and/or an enhanced interior pickup experience."
Liquidity Update
In March 2021, the Company issued $225 million aggregate principal amount of 0% Convertible Senior Notes due 2028 (the “Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. An option was granted to the initial purchasers to purchase up to an additional $25 million aggregate principal amount of Convertible Notes to cover over-allotments, which was subsequently fully exercised during March 2021, resulting in a total issuance of $250 million aggregate principal amount of Convertible Notes. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Shake Shack’s Class A common stock or a combination of cash and shares of Shake Shack’s Class A common stock, at the Company's election.
Fiscal 2021 Outlook
Due to recent sales trends, the Company is providing revenue and sales guidance for the second quarter 2021.
Current Q2 2021 Outlook
Total Revenue: $174 million to $183 million
Shack Sales: $170 million to $178 million
Licensed Revenue: $4 million to $5 million
Same-Shack Sales versus 2020: + mid 40s% to 50% increase
Shack-Level Operating Profit: 15% to 17%
Domestic Company-operated Shack Openings — Through End of Q2 Fiscal 2021: 16 to 18
Given the substantial uncertainty and resulting material economic impact caused by the COVID-19 pandemic, the Company is not providing full guidance for the fiscal year ending December 29, 2021, but is updating full year Shack openings and expense guidance, provided earlier this year.
In March 2021, the Company issued $225 million aggregate principal amount of 0% Convertible Senior Notes due 2028 (the “Convertible Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. An option was granted to the initial purchasers to purchase up to an additional $25 million aggregate principal amount of Convertible Notes to cover over-allotments, which was subsequently fully exercised during March 2021, resulting in a total issuance of $250 million aggregate principal amount of Convertible Notes. The Convertible Notes will mature on March 1, 2028, unless earlier converted, redeemed or repurchased in certain circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Shake Shack’s Class A common stock or a combination of cash and shares of Shake Shack’s Class A common stock, at the Company's election.
Fiscal 2021 Outlook
Due to recent sales trends, the Company is providing revenue and sales guidance for the second quarter 2021.
Current Q2 2021 Outlook
Total Revenue: $174 million to $183 million
Shack Sales: $170 million to $178 million
Licensed Revenue: $4 million to $5 million
Same-Shack Sales versus 2020: + mid 40s% to 50% increase
Shack-Level Operating Profit: 15% to 17%
Domestic Company-operated Shack Openings — Through End of Q2 Fiscal 2021: 16 to 18
Given the substantial uncertainty and resulting material economic impact caused by the COVID-19 pandemic, the Company is not providing full guidance for the fiscal year ending December 29, 2021, but is updating full year Shack openings and expense guidance, provided earlier this year.
Shake Shack (SHAK) stock price chart
The image below 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 the stock has increased by a very healthy 143%
The stock of Shake Shack is trading at close to the midpoint between its 52 week low and 52 week high which to us is a clear indication that the short term momentum and sentiment of Shake Shack stock is neutral right now
The stock of Shake Shack is trading at close to the midpoint between its 52 week low and 52 week high which to us is a clear indication that the short term momentum and sentiment of Shake Shack stock is neutral right now
Shake Shack (SHAK) vs Mcdonalds (MCD) over the last 5 years
The image below shows the stock price history of Shake Shack (SHAK) and McDonalds (MCD) over the last 5 years. Both these firms are well known for their American style food offerings. While they operate in the same space their stock price trends and performances are fairly different. The summary below shows the stock price performance of these two firms over the last 5 years.
- Shake Shack (SHAK): 143%
- Mcdonalds (MCD): 93.9%
Shake Shack (NYSE: SHAK) stock valuation
So based on Shake Shack's 1st quarter 2021 earnings report what do we value the stock of Shake Shack at? Based on Shake Shack's latest earnings report our valuation models provides a target price of $52.70 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 $47.40
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 $47.40
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 2021 earnings report in late September 2021