Shake Shack Stock Gains After Q3 Earnings Beat Amid Strong Sales Growth, Strategic Expansion

Zinger Key Points

Shake Shack Q3 adjusted EPS hit 25 cents, beating expectations, with revenues of $316.9 million up 14.7% year-over-year.
Shake Shack opened 17 new Shacks and reported an operating loss of $18 million, while adjusted EBITDA rose by 28% to $45.8 million.
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Shake Shack, Inc. SHAK shares are trading higher after the company reported better-than-expected third-quarter financial results.

Shake Shack reported adjusted earnings per share of 25 cents, beating the street view of 20 cents.

Quarterly revenues of $316.9 million (+14.7%) marginally outpaced the analyst consensus estimate of $316.13 million. Sales included $304.9 million from Shack sales and $12.0 million from licensing revenue.

Adjusted EBITDA was $45.8 million, representing a 28.0% increase compared to 2023. Restaurant-level profit was $64.2 million, representing 21.0% of Shack sales.

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“With strong sales and operational improvements, we grew Restaurant-level profit margin by 60 bps year-over-year and Adjusted EBITDA margin by 140 bps year-over-year. Third quarter also marks the highest 3Q Restaurant-level profit margin and Adjusted EBITDA margin since FY2019,” said Chief Financial Officer Katie Fogertey.

System-wide sales reached $495.1 million, reflecting a 12.8% increase compared to 2023. Same-Shack sales rose by 4.4%.

The company reported an operating loss of $18.0 million, which included a $29.1 million charge for impairments, asset disposals, and Shack closures, compared to an operating income of $5.7 million in 2023.

The company exited the quarter with cash and equivalents worth $310.865 million. Inventories as of quarter-end totaled $5.146 million.

“We opened 17 new Shacks worldwide in the quarter and are on path to end FY2024 on a very strong note, setting a solid foundation for next year,” said Chief Executive Officer Rob Lynch.

Outlook: The company expects fourth-quarter total revenue of $322.6 million – $327 million versus $323.89 million estimate. The company projects FY24 revenues of ~$1.25 billion (prior view: $1.24 billion – $1.25 billion) versus the $1.248 billion estimate.

Price Action: SHAK shares are trading higher by 13% to $128.35 at last check Wednesday.

Photo by YAO23 via Shutterstock

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