Shake Shack is taking a big bite out of the burger market.
Its revenue increased 67% to $53m compared with last year, the company announced in its third-quarter report released on Thursday. The company’s sales increased 70% to $51.3m and same-store sales increased by 17%.
The company credited these “extraordinary” results with menu price increases implemented earlier this year, increase in brand awareness due to the company’s IPO in January and the return of crinkle fries.
The results announced on Friday “surpassed our expectations”, said Randy Garutti, chief executive officer of Shake Shack. Garutti, who has been with the company since it sold its first hot dog in Madison Square Park 14 years ago, said he did not expect to share numbers as good as these with investors on Thursday.
In the week leading up to Thursday’s report, the company’s stock was up 12%. After the quarterly report was released, the stock went up by 6% in the first hour of after-hours trading.
Garutti noted that the company opened four more Shake Shacks in the US during the three months preceding 30 September. Since the end of the quarter, the company has opened two more Shake Shacks in the US.
“2015 has been an exceptional year for us,” Garutti said in a statement. Shake Shack, which went public in January 2015, has opened 12 new US stores this year. “Looking ahead, we now expect to open at least 14 domestic company-operated Shacks next year and beyond. We remain well positioned for continued success as we capitalize on our unique development opportunities.”
For the year ending 30 December, the company had updated its outlook, predicting that its total revenue for the year will be between $189m to $190m, instead of $171m to $174m as previously expected.
Shake Shack’s better-than-expected report comes at a time when one of its rivals – McDonald’s – is attempting to stage a comeback. CEO Steve Easterbrook took over the burger giant in March and has been working on a turnaround strategy since day one. The plan, which includes all-day breakfast, seems to be working. This quarter, for the first time since 2013, US sales rose by 0.9%.
However, considering Shake Shack’s ambitious growth strategy, it might take more than an all-day breakfast for McDonald’s to keep the newcomer at bay.
To try to protect its turf in the UK from competitors like Five Guys and Shake Shack, McDonald’s is planning to release a range of premium burgers at 28 of its London locations. The burgers will be served with brioche-style buns and will cost £4.69.
On a call with analysts, Shake Shack executives noted that increasing the minimum wage could cause a setback for the company and its competitors. But Shake Shack added that most of its employees are paid a couple of dollars above local minimum wages – with workers in DC being paid $12 an hour and those in Texas $11 an hour. The executives said paying a higher hourly wage allows the company to hire the “right workers”.
Ultimately, Shake Shack is confident that its burgers will continue to sell well. For 2016, the company predicts its revenue will be between $237m to $242m with same-store sales growing between 2.5% to 3%. In addition to opening 14 new US Shacks, the company also plans to open eight international Shacks in the UK, the Middle East and in Japan.
This article was written by Jana Kasperkevic in New York, for theguardian.com on Thursday 5th November 2015 23.14 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010
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