Shake Shack Shares Jump After Profit and Sales Beat Consensus

RetailReuters

Hamburger chain Shake Shack Inc, known for its indulgent hormone- and antibiotic-free burgers, rich shakes and crinkle-cut french fries, on Monday reported better-than-expected quarterly profit and sales, sending its shares up 8 percent in after-hours trading.

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The New York-based company founded by celebrity chef Danny Meyer's Union Square Hospitality Group, said sales at established restaurants soared 12.9 percent in the second quarter, far exceeding analysts' call for a rise of 8.6 percent, according to research firm Consensus Metrix.

For the second quarter, Shake Shack's same restaurant sales included 16 domestic company-operated units open for 24 months or longer. The company, which has 37 company-operated U.S. shops, attributed the results to menu price increases and strong results from restaurants in Las Vegas and Chicago.

It now plans to open at least 12 domestic company-operated Shake Shacks a year starting in 2016, up from a previous target of 10 per year. Shake Shack's ability to expand quickly is key to justifying its lofty stock valuation.

Critics worry that the chain's explosive same-restaurant sales growth, which is a gauge of performance for eateries, will fade as it expands beyond dense urban areas such as New York City.

Shake Shack and popular burrito chain Chipotle Mexican Grill Inc are in the vanguard of restaurants that have carved out a niche among consumers seeking less-processed food that is either organic or raised without chemicals and antibiotics.

Such companies enjoy a so-called "health halo" that diners are willing to pay more for, even though their meals can come with eye-popping calorie counts and significant amounts of saturated fat and sodium.

Shake Shack's second-quarter net income was $1.1 million, or 8 cents per share. Excluding items, it earned 9 cents per share, on total revenue of $48.5 million.

Analysts, on average, expected earnings of 3 cents per share and revenue of $42.8 million.

The company, which has just 71 restaurants around the world, raised other key forecasts.

Shake Shack increased its 2015 revenue forecast to a range of $171 million to $174 million from $161 million to $165 million previously. And, it now expects "same-Shack sales" growth in the mid- to high-single digit percentages versus its prior call for growth in the low- to mid-single digits.

Shares in the company, which went public on Jan. 30 with an IPO offering price of $21, were trading at $76.30 in extended trading on Monday.

(By Lisa Baertlein; Additional reporting by Noel Randewich in San Francisco; Editing by Alan Crosby and Meredith Mazzilli)