Stock Story -
Fast-food chain Shake Shack (NYSE:SHAK) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 16.4% year on year to $316.5 million. It made a non-GAAP profit of $0.27 per share, improving from its profit of $0.18 per share in the same quarter last year.
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Shake Shack (SHAK) Q2 CY2024 Highlights:
- Revenue: $316.5 million vs analyst estimates of $314.3 million (small beat)
- EPS (non-GAAP): $0.27 vs analyst expectations of $0.27 (in line)
- Gross Margin (GAAP): 38.4%, up from 37.2% in the same quarter last year
- Adjusted EBITDA (non-GAAP): $47.2 million vs analyst estimates of $46.5 million (1.5% beat)
- Free Cash Flow of $18.22 million is up from -$2.39 million in the previous quarter
- Locations: 540 at quarter end, up from 471 in the same quarter last year
- Same-Store Sales rose 4% year on year (3% in the same quarter last year)
- Market Capitalization: $3.50 billion
Modern Fast FoodModern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales GrowthShake Shack is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 17.2% over the last five years was excellent as it added more dining locations and increased sales at existing, established restaurants.
This quarter, Shake Shack's year-on-year revenue growth clocked in at 16.4%, and its $316.5 million in revenue was in line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 14% over the next 12 months, a deceleration from this quarter.
Same-Store SalesA company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.
Shake Shack's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4.4% year on year. With positive same-store sales growth amid an increasing number of restaurants, Shake Shack is reaching more diners and growing sales.
In the latest quarter, Shake Shack's same-store sales rose 4% year on year. This growth was an acceleration from the 3% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from Shake Shack's Q2 Results We were impressed by how significantly Shake Shack blew past analysts' gross margin expectations this quarter. We were also glad its revenue and EBITDA outperformed Wall Street's estimates. Overall, we think this was a really good quarter that should please shareholders. The stock traded up 15.5% to $101.17 immediately after reporting.
