Shake Shack IPO Filing Reveals Slowing Comp Growth

Shake Shack, which wants to be the next big thing in the stock market for hamburgers filed its red herring for an initial public offering Monday. But the company, which operates a string of 63 restaurants in 34 cities, saw its same-store sales growth slow to 3 percent in the nine months ended Sept. 24, from 5.5 percent in the same period a year earlier. Same-store sales had been growing as much as 7 percent for the full year ended Dec. 2012. Average sales volume per store fell 6.5 percent to about $5 million during the year ended December 2012 - the most recent period disclosed for average volume. Indeed, the company is relatively unambitious regarding comparable sales, and tells investors to expect "low same-store sales growth for the foreseeable future." Instead, the company expects to grow by quickly opening new stores, including at least 10 next year. Longer term, it expects to operate at least 450 domestic restaurants although it doesn't currently have timetable for the growth beyond at least ten new stores annually "for the foreseeable future." The prospective offering hasn't been priced nor have the number of shares been determined. But proceeds are expected to pay off initial investors to the tune of $21.9 million, with much of the remainder to be earmarked for building new stores and renovating existing stores. Shake Shack makes much of its origins in a kiosk in Manhattan's Madison Square Park in 2004 and calls itself " a new fine casual restaurant category," which combines fast casual concepts with "fine dining." The menu includes hamburgers, hot dogs, french fries, shakes and frozen custard, along with beer and wine. In the nine months ended Sept. 24, revenue grew 39 percent to about $79 million. Earnings fell to $3.5 million from $4.4 million. In the same period, the number of restaurants grew 60 percent to 53 from 33. Shake Shack is part of the largest U.S. dine-out segment, the burger market, with more than $72 billion in 2013 sales, according to the company, citing Technomic Inc. The burger industry is estimated to be twice the size of the pizza market, which is the next largest category.