Restaurant Finance Monitor


Shake Shack provided a fourth quarter update at the ICR conference on Tuesday, and SHAK has gone up 22% in a little over two days. Let me say, first, that I am neither long nor short SHAK stock. I have always had the highest regard for management, still do, and, obviously, so does everybody else.


(1) Sales have been sequentially improving, domestically, market by market, internationally as well. Suburban are locations improving faster than urban. October was down 21% overall, urban down 33%, suburban down only 4%. Licensed sales also sequentially improving, down 10% in October.

(2) Digital sales now 60%, tripling YOY, 1.4M new users, over 90% retention since May

(3) Developing state of the art drive thru locations, first one to open in ’21, 5-8 more in ‘22

(4) Currently there are 300 locations. After opening 20 in ’20, planning 35-40 in ’21, thinking about 45-50 in ‘22. Licensed internationally: 23 locations opened, a few closed, expect 15-20 in ’21, 20-25 in ’22, mostly in Asia.

(5) Curbside pickup now in 70 locations

(6) Shack Track pickup windows (8 now) will be in new units, sometimes with vestibules.

(7) New product innovation continues, including veggie burger. Lots of community focus.

(8) Using Uber Eats, also building direct delivery capability

(9) New payment systems are being developed, e.g. Apple Pay and Google Pay

(10) Improved use of data platform for targeting/marketing purposes

(9) There were no new financials provided. September quarter showed Adjusted Corporate EBITDA of $8.2M vs. $23.3M, Shack Level EBITDA of 14.8% vs. 23.1% YTY.


Aside from the numbers, the presentation as always, from a conceptual standpoint, was outstanding.

(1) There is an exciting “digital transformation” taking place.

(2) Focus on ESG, Environmental, Social & Governance

(3) Corporate mantra is Stand For Something Good

(4) “Doubling down on  diversity, equity and inclusion”

(5) The “holistic” digital capability is part of the “Shake Shack ecosystem”

(6) 2020 was a “foundational” year, “really just getting started”.

(7) Some great videos were shown: the curbside pickup, Beijing opening, the drive thru

(8) Some cautionary comments were provided: a few international stores closed, there’s going to be continued volatility in sales, both domestically and abroad, “airports will be a question mark for some time”, “it’s going to be a tough winter”, ”there’s reality to deal with”.


We have written about SHAK often over the last few years. We have pointed out that the store level model, as it has evolved (pre-pandemic), and as management has continuously predicted, is far less profitable than was the case when the company came public. We have suggested that the very high rate of company openings is bound to be inefficient, especially when there are so many moving parts such as new products, new venues, new delivery systems, etc. The company has continuously carried the necessary high level of G&A in these formative years and management indicates that this will continue to be the case. The pandemic has cost almost every restaurant company at least a year or two in terms of profitability and cash flow. In the case of SHAK, because of their inopportune positioning with so many urban, airport, malls and destination locations, along with no drive-thru units, it has no doubt cost them several years.

The current analyst consensus estimates (per Bloomberg) for calendar ’21 and calendar ’22 are: $735M and $913M in sales, $0.21 and $0.64 of EPS, respectively. It should be obvious that these earnings “estimates” can only be “guesses”, especially in ’21, by any of us. It should be noted that the highest EPS in their history was $0.72 in 2019, flat with the $0.71 in ’18. Comps in ‘19 had already flattened, traffic was negative, G&A was high. Average unit volumes, and store level margins were coming down, as management had predicted.


The SHAK stock (at $111/share) is now providing a market capitalization of $4.6 billion.  That amounts to about $15M per existing location and obviously almost 200x the “guess” of ‘22 EPS. No question, there is a long runway for growth, but people…..with all due respect to the creation of a “holistic ecosystem”, there are no vaccines, cancer cures , or even electric vehicles  being developed here. Basically, they are selling burgers.

The company raised about $130M in late April at about $40/share, and that represents most of the $179M of cash currently on the balance sheet. I would, ASAP, sell two or three million more shares. $200-300M more cash, with minimal dilution, would no doubt provide a comfort level to the company. In this environment It would no doubt be snapped up, and the stock will go higher still 🙂

Roger Lipton