Shake Shack 4Q16 Earnings Call Notes

Randy Garutti

Grew sales 20% though comps just 1.6%

“Looking at the fourth quarter, we grew total revenue over last year by 43%, driven mostly by 20 new domestic company-operated Shacks and Same-Shack sales growth of 1.6%. While trends were strong throughout October and November, Same-Shack sales performance softened in December; and this was driven by various factors, primarily the holiday shift contributing approximately 80 Bips of pressure, as well as comparatively colder weather in the Northeast region which makes up a high percentage of sales in our still very limited comp base of just 30 Shacks.

Rethink the restaurant w/ mobile pre-ordering

“Now let’s get to the Shack App. As we look into the future of Shake Shack, we know our business will continue to evolve as our guests’ expectations change. I’m fairly certain that my own young children will experience retail and restaurants in a very different way than I did. When we look at the digital landscape, our future is focused on removing those constraints and friction points that previous generations have accepted as a way of life, knowing that future generations just won’t accept it. For Shake Shack, that evolution begins now with our Shack App. Today, it’s focused on mobile pre-ordering.”

Push promotions through the app

“In mid-January, we turned on the gas and for the first time in Shack history, we chose to reward guests with a free Shack burger anytime they downloaded the app. Through February, the Shack App has been downloaded over 200,000 times and we’ve given away nearly 90,000 free Shack burgers which has translated into approximately 6% of our total orders nationwide. We do expect that percentage to decline now that the free burger promotion has ended and as we’ve set on to a more normal user rhythm.”

Don’t anticipate price increase, but labor is an issue

“No, we do not intend another price increase but as we said, labor is quite a Q4 and we’ve gathered that life really — that levers going to that we have a lot of minimum wage increases here in 2017 we are going to have them again in 2018 and 2019. We do business and the majority of our business will be in the highest minimum wage areas. Will also continue pay our managers better and necessary or play conference. With the best team we can to continue to ramp up growth”

JEff Utzz

Beef and dairy costs down

“Our beef costs have decreased both sequentially quarter-over-quarter and on a year-over-year basis. Beef was down approximately 8% over the prior-year fourth quarter. Our outlook for next year is that beef and dairy will continue to be down slightly on a year-over-year basis for the first half, but up on a sequential basis, with prices remaining flat in the back half of the year. ”