Shake Shack stretches traffic streak to 5 quarters

Shake Shack posted its fifth straight quarter of traffic growth in the third quarter, as same-Shack sales rose 2.5% and the burger chain opened a third-quarter record number of company-operated restaurants, according to a company press release.

Financial performance

Total revenue climbed 15.2% to $423.3 million for the quarter ended Sept. 30. Sales at company-operated Shacks rose 15.6% to $408 million, and system-wide sales grew 12.8% to $644.8 million. Net income rose to $17.8 million from $13.7 million a year earlier.

Traffic and pricing

Traffic accounted for 0.8% of the same-Shack sales gain, with price and mix adding 1.7%. Gross pricing ran about 4% for the quarter, and the company added another 1% menu price increase in October to offset inflation. Average weekly sales slipped 3.8% to $75,000, which the company attributed to newer Shacks still ramping up.

Restaurant-level profit margin dipped to 22.5% from 22.8%, as higher labor and operating costs outweighed lower food and paper costs.

Digital channels and menu

Kiosks, the app and the web, which the company now groups as its owned digital channels, made up about 60% of Shack sales.

On the menu, the brand rolled out a West Coast-inspired lineup in July, launched a Reese's Peanut Butter Cup Shake in September and brought back its Black Truffle menu at quarter's end.

"Three components of our strategy continue to drive consistent same-Shack sales growth: strong restaurant operations, culinary excellence that differentiates our brand, and targeted media and digital investments that drive awareness and engagement," Rob Lynch, CEO of Shake Shack, said in the company's third-quarter shareholder letter. "Both our owned digital channels and third-party delivery are driving traffic growth, while our owned channels also enable us to capture valuable guest data and drive higher guest lifetime value through personalized engagement," Michelle Hook, CFO, said in the letter.

Expansion and outlook

Shake Shack opened 21 company-operated and 16 licensed Shacks during the quarter, bringing company-operated openings to 54 so far this year, up from 30 a year ago. It entered South Carolina, expanding its footprint to 36 states.

For the full year, the company expects 60 to 65 company-operated openings, total revenue of $1.6 billion to $1.7 billion and low-single-digit same-Shack sales growth. It now expects licensed openings to land at the high end of its 40 to 45 range.

Founded in 2004 with a single Shack in New York's Madison Square Park, Shake Shack ended the quarter with 738 locations: 427 company-operated and 311 licensed.

Next up, the brand plans fourth-quarter debuts in Panama and Vietnam, and in U.S. regional casinos through a partnership with PENN Entertainment.