Shake Shack’s management wants you thinking long-term: They often point investors toward store count and sales targets reaching out to 2020.
But investors need something to do in the meantime, which is why their attention now turns toward Q1 financial results, scheduled for release Thursday after the market’s close.
Wall Street is looking for EPS of $0.08, down a couple of pennies from a year ago, according to the mean of FactSet’s survey of 11 analyst estimates. Sales are seen up some 26%, while “comps” are expected to tick downward a few tenths of a percentage point.
• The conversation about Shake Shack (SHAK) swirls mostly around whether expansion is paying off. In a late April note, Wedbush analysts worried that as the Barron’s Next 50 company looks to become more of a neighborhood restaurant, with more outlets in each market, momentum is heading in the wrong direction.
“We do not anticipate the impact of cannibalization to decline over the near-to medium-term,” they wrote. “We believe year 2 Shack sales and new openings are below expectations and may no longer offset a step-down in comp trends.”
• But SunTrust Robinson Humphrey, writing earlier in April, was more optimistic, saying that the company might even expand more quickly than it’s already suggested it would. “Its success of attracting managerial and hourly talent gives management confidence in maintaining strong execution,” they wrote.
• At a March conference, a transcript of which was available on FactSet, CFO Tara Comonte reminded investors that new Shacks should be expected to return revenues around $3 million, with 20% operating margins. Those numbers, she warned, can’t be expected to match its flagship hometown shops.
”You don’t replicate New York City average user volumes operating margins across the rest of the country,” she said.
• Right now, for what it’s worth, Wall Street might be characterized as cautious: Only 2 of the 10 price targets viewable in FactSet are above current levels. That said, Barron’s has recently reported on some high-profile buyers of the shares, which popped in late April to set 2018 highs.
Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison.
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