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Category: Stock Market and Shake Shack (SHAK)
Date: 1 November 2020 Stock Price of Shake Shack (SHAK): $67.52 We take a look at the 3rd 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. For the quarter the group recorded revenues of $126.3 million and net reported a net loss of -$5.6 million.
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Randy Garutti, Chief Executive Officer of Shake Shack, stated -Our business during this most recent quarter showed steady recovery, thanks to the hard work and dedication of our team, their agility in adapting new Shack protocols and models and an increasingly strong suite of digital capabilities. As a result, guests have been able to enjoy their Shack the way they want it, with a choice of convenient and safe ordering and pick-up options, as we continue to expand and elevate the Shake Shack experience"
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 3rd quarter 2020 earnings report
Data below refers to the latest quarter's data unless specified otherwise
Shack counts (at end of period):
- Revenues: $126.3 million (down from $152.4 million for the same quarter of the previous year)
- Revenues decreased by -17.1% over the last 12 months
- Total expenses: $137.9 million (down from $149.6 million for the same quarter of the previous year)
- Operating expenses decreased by -7.8% over the last 12 months
- Some margin squeeze being experienced by Shake Shack is their revenues declined at a faster rate than their expenses
- Net loss: -$5.6 million (down from a profit of $10.4 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.15 (down from $0.31 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: 38.251 million (up from 32.926 million for the same quarter of the previous year)
- Cash and cash equivalents: $174.8 million
- Cash and cash equivalents per share: $4.57
- Cash and cash equivalents makes up 6.7% of Shake Shack's market capital
- Cash and cash equivalents makes up 15.4% of Shake Shack's total assets
- Stockholders equity in Shake Shack: $446.726 million
- Stockholders equity per share: $11.7
- Shake Shack is trading at 5.7 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: 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 third quarter ended September 23, 2020, a period that included 13 weeks.
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “Our business during this most recent quarter showed steady recovery, thanks to the hard work and dedication of our team, their agility in adapting new Shack protocols and models and an increasingly strong suite of digital capabilities. As a result, guests have been able to enjoy their Shack the way they want it, with a choice of convenient and safe ordering and pick-up options, as we continue to expand and elevate the Shake Shack experience."
Garutti concluded, “Since our last update at the end of July, forward momentum has continued and we're encouraged to see significant improvement in both sales and profitability, with many Shacks returning to or exceeding last year's results. Total year-over-year company-operated Shack sales declined 17% in the third quarter, compared to a decline of 39% during the second quarter, and further improved to a decline of just 5% in fiscal October. Same-Shack sales have also improved sequentially in every single one of the last six months, with the third quarter down 31.7% compared to the same period last year, versus down 49.0% in the second quarter, and improving to down 21% in fiscal October. Importantly, our improving top line performance, the normalization of beef costs, and disciplined expense management led to a significant recovery in Shack-level profitability with third quarter Shack-level operating profit margin improving to 14.8%, compared to 2.2% in the second quarter. We believe we are uniquely positioned to exit this challenging period stronger, and with greater opportunity than when we entered, as we double down on multi-format expansion and accelerate our strategic digital investments. As of the end of fiscal October, we are back to a full development schedule, having opened 33 Shacks so far in this challenging year, including 15 domestic company-operated Shacks, and expect to complete the year with 18 to 20 total new company-operated Shacks. Our pipeline for 2021 is strong, and we expect to open between 35 and 40 new company-operated Shacks, many of which will incorporate our new Shack Track and Drive Thru designs centered on the hospitality and experience Shake Shack has been known for, with an added focus on speed, convenience and the integration of our pre-ordering digital capabilities.”
Randy Garutti, Chief Executive Officer of Shake Shack, stated, “Our business during this most recent quarter showed steady recovery, thanks to the hard work and dedication of our team, their agility in adapting new Shack protocols and models and an increasingly strong suite of digital capabilities. As a result, guests have been able to enjoy their Shack the way they want it, with a choice of convenient and safe ordering and pick-up options, as we continue to expand and elevate the Shake Shack experience."
Garutti concluded, “Since our last update at the end of July, forward momentum has continued and we're encouraged to see significant improvement in both sales and profitability, with many Shacks returning to or exceeding last year's results. Total year-over-year company-operated Shack sales declined 17% in the third quarter, compared to a decline of 39% during the second quarter, and further improved to a decline of just 5% in fiscal October. Same-Shack sales have also improved sequentially in every single one of the last six months, with the third quarter down 31.7% compared to the same period last year, versus down 49.0% in the second quarter, and improving to down 21% in fiscal October. Importantly, our improving top line performance, the normalization of beef costs, and disciplined expense management led to a significant recovery in Shack-level profitability with third quarter Shack-level operating profit margin improving to 14.8%, compared to 2.2% in the second quarter. We believe we are uniquely positioned to exit this challenging period stronger, and with greater opportunity than when we entered, as we double down on multi-format expansion and accelerate our strategic digital investments. As of the end of fiscal October, we are back to a full development schedule, having opened 33 Shacks so far in this challenging year, including 15 domestic company-operated Shacks, and expect to complete the year with 18 to 20 total new company-operated Shacks. Our pipeline for 2021 is strong, and we expect to open between 35 and 40 new company-operated Shacks, many of which will incorporate our new Shack Track and Drive Thru designs centered on the hospitality and experience Shake Shack has been known for, with an added focus on speed, convenience and the integration of our pre-ordering digital capabilities.”
Updated 2020 Outlook
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 30, 2020. While the Company is confident in a full, long term recovery, the timing of that return to pre-COVID levels is highly dependent upon the return of the high traffic areas that contributed to many of the strongest Shack sales, including those most reliant on travel, schools, offices and major gatherings, as well as ultimately, fully open dining rooms. The timing of that recovery remains unknown today. With the colder weather and the increasing number of reported COVID cases, it is expected that sales over the coming months will be pressured. The Company has the benefit of a 53rd week in this fiscal year which will be accretive on an absolute dollar basis, but the underlying business continues to face a very challenging and volatile operating environment certainly through the end of this year.
The Company expects to reach a total of 18 to 20 new company-operated Shacks by the end of fiscal 2020. Furthermore, the Company expects to open five to six new licensed Shacks in the fourth quarter 2020, ending the year with 12 to 14, net licensed Shacks in total for fiscal 2020. Looking to the next fiscal year, the Company expects to open between 35 and 40 new company-operated Shacks in fiscal 2021, a number of which should open in the first half of fiscal 2021. Additionally, the Company expects to open 15 to 20 new licensed Shacks in fiscal 2021.
With the continued recovery of Shack-level operating profit highly correlated to sales performance in terms of leverage on fixed costs, combined with the continuation of certain elevated costs specific to the pandemic, the Company expects any ongoing improvement in Shack-level operating margin in the fourth quarter to face pressure.
The Company expects fourth quarter 2020 general and administrative expenses to approach the same level of spend as the fourth quarter 2019. Pre-opening expense for the third quarter 2020 was $1.8 million, however, now that development is back to a full opening schedule, this spend will increase meaningfully, and is expected to more than double sequentially through the fourth quarter 2020 as the Company completes this year's opening schedule.
Excluding the tax impact of stock based compensation, the adjusted pro forma tax rate in the third quarter 2020 was 29.3%, slightly higher than guidance given earlier in the year. The year-to-date adjusted pro forma tax rate was 28.1%, and is in line with full fiscal year expectations at this time. A reconciliation of the Company's tax rates is included in the appendix of our supplemental materials.
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 30, 2020. While the Company is confident in a full, long term recovery, the timing of that return to pre-COVID levels is highly dependent upon the return of the high traffic areas that contributed to many of the strongest Shack sales, including those most reliant on travel, schools, offices and major gatherings, as well as ultimately, fully open dining rooms. The timing of that recovery remains unknown today. With the colder weather and the increasing number of reported COVID cases, it is expected that sales over the coming months will be pressured. The Company has the benefit of a 53rd week in this fiscal year which will be accretive on an absolute dollar basis, but the underlying business continues to face a very challenging and volatile operating environment certainly through the end of this year.
The Company expects to reach a total of 18 to 20 new company-operated Shacks by the end of fiscal 2020. Furthermore, the Company expects to open five to six new licensed Shacks in the fourth quarter 2020, ending the year with 12 to 14, net licensed Shacks in total for fiscal 2020. Looking to the next fiscal year, the Company expects to open between 35 and 40 new company-operated Shacks in fiscal 2021, a number of which should open in the first half of fiscal 2021. Additionally, the Company expects to open 15 to 20 new licensed Shacks in fiscal 2021.
With the continued recovery of Shack-level operating profit highly correlated to sales performance in terms of leverage on fixed costs, combined with the continuation of certain elevated costs specific to the pandemic, the Company expects any ongoing improvement in Shack-level operating margin in the fourth quarter to face pressure.
The Company expects fourth quarter 2020 general and administrative expenses to approach the same level of spend as the fourth quarter 2019. Pre-opening expense for the third quarter 2020 was $1.8 million, however, now that development is back to a full opening schedule, this spend will increase meaningfully, and is expected to more than double sequentially through the fourth quarter 2020 as the Company completes this year's opening schedule.
Excluding the tax impact of stock based compensation, the adjusted pro forma tax rate in the third quarter 2020 was 29.3%, slightly higher than guidance given earlier in the year. The year-to-date adjusted pro forma tax rate was 28.1%, and is in line with full fiscal year expectations at this time. A reconciliation of the Company's tax rates is included in the appendix of our supplemental materials.
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 $42 a share and its currently trading at $67.5 a stock. That's a moderate gain of 53% provided to stockholders of Shake Shack over the last 5 years.
The stock of Shake Shack is trading at a lot closer to its 52 week high of $85.43 than it is to its 52 week low of $30.01 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 high of $85.43 than it is to its 52 week low of $30.01 which to us is a clear indication that the short term momentum and sentiment of Shake Shack stock is very negative 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.
- Mcdonalds (MCD): 86.5%
- Shake Shack (SHAK): 53%
Recent coverage of Shake Shack (SHAK)
The extract below discusses Shake Shack as obtained from NewsHeater.com
Shake Shack Inc. (NYSE:SHAK) went up by 4.22% from its latest closing price compared to the recent 1-year high of $85.43. The company’s stock price has collected -4.95% of loss in the last five trading sessions. Press Release reported 5 hours ago that Shake Shack Announces Third Quarter 2020 Financial Results
Is It Worth Investing in Shake Shack Inc. (NYSE :SHAK) Right Now?
Plus, the 36-month beta value for SHAK is at 1.84. Opinions of the stock are interesting as 5 analysts out of 21 who provided ratings for Shake Shack Inc. declared the stock was a “buy,” while 0 rated the stock as “overweight,” 14 rated it as “hold,” and 2 as “sell.”
Read the full article here
Shake Shack Inc. (NYSE:SHAK) went up by 4.22% from its latest closing price compared to the recent 1-year high of $85.43. The company’s stock price has collected -4.95% of loss in the last five trading sessions. Press Release reported 5 hours ago that Shake Shack Announces Third Quarter 2020 Financial Results
Is It Worth Investing in Shake Shack Inc. (NYSE :SHAK) Right Now?
Plus, the 36-month beta value for SHAK is at 1.84. Opinions of the stock are interesting as 5 analysts out of 21 who provided ratings for Shake Shack Inc. declared the stock was a “buy,” while 0 rated the stock as “overweight,” 14 rated it as “hold,” and 2 as “sell.”
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 4th quarter 2020 earnings report in late January 2021