NEW YORK — The return of crinkle-cut french fries and a limited-time burger offering contributed to strong sales for Shake Shack Inc. in the recent quarter. Executives of the burger and custard chain also credited new store openings, two menu price hikes and increased brand awareness following its Jan. 30 initial public offering for a 56% bump in total revenues.
The New York-based restaurant company, which originated from a hot dog cart in 2001 in Madison Square Park, reported a net loss of $12.7 million for the first quarter ended April 1, which included $13.2 million of after-tax expenses associated with the I.P.O. Adjusted pro forma net income increased 102% to $1.3 million, or 4c per fully exchanged and diluted share, which compared with $600,000, or 2c per fully exchanged and diluted share, in the prior-year period.
Total revenue, including Shake Shack sales and licensing revenue, advanced to $37.8 million from $24.2 million, driven by the addition of 13 domestic company-operated restaurants over the past year and stronger-than-expected same-store sales growth, which increased 12% in the quarter, versus a 3.9% increase in the year-ago period.
Average weekly sales for domestic company-operated restaurants were $89,000, a 7% increase over $83,000 in the prior-year period, due to favorable shifts in sales mix, strong performance from new units opened in the latter half of fiscal 2014 and increased menu prices to offset higher commodity costs.
“I think what we continue to learn about Shake Shack is, Shake Shack is for people who want to understand where their food is from and have a higher expectation of when they go out to get a burger, where they want to get it, and they’re willing to pay a little more for it,” said Randy Garutti, chief executive officer of Shake Shack, during a May 13 earnings call with financial analysts. “We do continue to be really proud about where our pricing is relative to other burgers out there and relative to other fine-casual operators. So we think even after taking that 6% over this last couple of quarters, we’re still really well-positioned with future price opportunities.”
Driving favorable sales mix during the period was a limited-time burger option called the ShakeMeister, which features Angus beef topped with crispy marinated shallots and the chain’s signature sauce.
“Being the fine-casual guys that we are, with our fine-dining background, we’re constantly tinkering in the test kitchen, and having a lot of fun,” Mr. Garutti said. “So we’ve got a lot of fun ideas, and we’re going to continue to run the ShackMeister for a while. It's been a huge hit, and continues to be.”
Added Jeff Uttz, chief financial officer: “We also made a change that has been pretty good for us, where we have introduced a new custard calendar, where we change our flavor every week, and that has started in Q1. We now have a shake-of-the-week flavor. We’ve never had that before.
“So I think the combination of the shift in custard, shake of the week, increasing a little bit of sales because we charge a bit more for that, and some of our seasonal beverages has been what has led to the 9.6% total price and mix shift.”
During the quarter, the company opened three domestic company-operated units for a total of 66 restaurants system-wide, including 34 domestic company-operated, 5 domestic licensed and 27 international licensed.
For 2015, the company expects to deliver $161 million to $165 million in total revenue and low- to mid-single-digit same-store sales growth. At least 10 new domestic company-operated Shake Shacks are scheduled to be opened throughout the year, and at least 5 international licensed Shake Shacks are set to open under the company’s current licensing agreements in the United Kingdom and Middle East.
“We remain cautious in our full-year guidance, in light of a number of factors contributing to the recent strength that are not expected to continue, including the price raises taken in Q4 of 2014 and Q1 of 2015, the return of crinkle-cut fries, and the lift in sales following our I.P.O.,” Mr. Uttz said.
Shake Shack’s share price on May 14 slipped more than 4% to $65.50, down $2.86 from the previous close.
