Certainly one of the most important movers on Thursday was the fast-food chain Shake Shack (NYSE:SHAK), which surged about 24% on the day. At one point, the stock hit a recent 52-week high of over $98 per share, and as of late Thursday afternoon, it was trading at around $97 per share.
The catalyst was the corporate’s impressive fourth-quarter earnings, which bested consensus estimates, and its outlook for robust growth in 2024. Let’s have a look.
Dozens of recent Shake Shacks
Shake Shack opened 44 recent company-operated restaurants and 41 licensed Shake Shacks in 2023. Within the fourth quarter alone, it opened 15 company-operated and nine licensed Shake Shacks. It now has over 500 locations around the globe, with more planned for 2024.
Within the fourth quarter, Shake Shack’s revenue jumped 20% to $286 million, while its net income was $6.8 million, or 17 cents per share. That’s up from a net lack of $8.1 million, or 20 cents per share, within the fourth quarter of 2022. For the complete 12 months, Shake Shack’s revenue rose 21% to $1.1 billion, while its net income was $20.6 million, or 50 cents per share, up from a $23 million net loss in 2022.
The corporate’s operating profit, which is sales minus operating expenses on the restaurant level, was $54.6 million within the quarter, up from $43.7 million within the previous 12 months’s fourth quarter. That represents an operating profit margin of 19.8%, up from 19%. For the complete 12 months, the chain’s operating profit rose 37% 12 months over 12 months to $208.2 million, while its operating profit margin for 2023 was 19.9%, up from 17.5% in 2022.
“We ended the 12 months on a high note, with positive traffic within the fourth quarter through the success of our sales-driving strategies and continued margin expansion,” Shake Shack CEO Randy Garutti said within the earnings release. “Our leadership teams are energized and excited as we embark on our 2024 Strategic Priorities and goal one other 12 months of strong growth and margin expansion.”
Just getting began
While its fourth-quarter numbers were solid, Shake Shack’s outlook for 2024 can have been the first catalyst for Thursday’s surge. The corporate is targeting $1.21 billion to $1.25 billion in revenue in 2024, which could be a ten% to 14% gain over 2023. As well as, Shake Shack estimated same-store sales growth within the low-single digits, in comparison with 4.4% in 2023.
Further, Shake Shack’s general and administrative expenses are anticipated to rise from $129.5 million in 2023 to between $139 million and $142 million, although its outlook calls for strong growth in adjusted EBITDA. Shake Shack is targeting $160 million to $170 million in adjusted EBITDA this 12 months, which could be 21% to 29% higher than last 12 months. The restaurant-level operating profit margin is projected to be between 20% to 21%, up barely from 19.9% in 2023.
Finally, the number of recent Shack openings is about to be barely lower than 2023, with 40 recent company-operated locations and 40 recent licensed locations planned for this 12 months.
“In some ways, we feel that we are only getting began,” Chief Financial Officer Katie Fogertey said within the shareholder letter. “In 2024, we plan to enhance the general guest experience, drive sales, lower the whole cost to serve, further optimize labor, show improvement in how we construct and open our Shacks, and make the critical investments in our teams.”
Shake Shack stock soared about 78% in 2023, and with Thursday’s surge, it’s already up greater than 30% in 2024. While the corporate’s outlook is solid, it’s questionable whether its earnings shall be enough to justify its high valuation, especially after this spike. Things could flatten out a bit, so it won’t be the suitable time now to leap on this stock. Nonetheless, it’s price maintaining a tally of and awaiting its valuation to return down a bit.