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Shake Shack soars on Q4 recovery. But will omicron erase those gains?

The latest COVID surge has meant reduced sales for the fast casual in recent weeks as it is forced to temporarily close restaurants and limit store hours.
Shake Shack
Photo courtesy of Shake Shack

Shake Shack’s stock surged Tuesday on news of strong preliminary fourth-quarter earnings, but the chain’s CEO also noted that the latest COVID outbreak has had a major impact on operations in recent weeks.

“The last few weeks have been incredibly frustrating,” Randy Garutti said during a presentation at the annual ICR Conference.

The COVID surge has forced some Shake Shacks to temporarily close, and others to operate with limited hours and staffing levels, he said.

Before the omicron surge, though, Shake Shack was in the midst of a strong pandemic recovery.

The fast casual’s same-store sales climbed 20.8% for the quarter ended Dec. 29, compared to 2021. And they were up 2.2% versus the same period in 2019. In suburban markets, same-store sales were 9% above pre-pandemic levels. During the third quarter, same-store sales fell 7.3% compared to 2019.

For the fiscal year, Shake Shack’s same-store sales rose 24.2% over 2020.

Store-level operating profit margin for the quarter was 16%.

The latest numbers present “a good look at what this business can recover” once the pandemic is less prominent and consumers are able to dine out, travel and work in offices more freely, Shake Shack CFO Katherine Fogerty said at ICR.

Shake Shack’s stock price was up nearly 16% Tuesday afternoon. 

The burger chain has been on a development push, opening 36 new company-operated locations and 23 licensed ones in 2021, with plans to open up to 50 units this year. Nineteen of those locations opened in Q4. The chain had previously noted supply chain and other issues would push many new store openings to the back half of 2021.

Shake Shack now has 218 company-operated domestic restaurants and 151 global licensed stores.

Two of the company’s newest restaurants are its first drive-thru locations, one in Minnesota and one in Missouri. Shake Shack is also testing a unit in New Jersey with “limited to no seating inside.” “That could be a format we look at in the future,” Garutti said.

Garutti, who donned a headset at the launch of Shake Shack’s first drive-thru in Minnesota recently, said the development is one of the most exciting things he’s seen in his 23 years of leading the chain.

“To be there, watching years of work and planning,” he said. “We are super excited about what the drive-thru can mean.”

Garutti said he was especially struck by seeing the busy drive-thru, coupled with the bustling dining room.

For Q4, Shake Shack reported total revenue up 29% over the same period in 2020, to $203.3 million. And the chain’s licensed revenue climbed 46.8% in Q4 compared to the prior year.

 

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