Tag Archives: shak

THE WEEK THAT WAS, ENDING MAY 20, JUST A FEW RATINGS CHANGES – with relevant transcripts, and WEEK TO COME

THE WEEK THAT WAS, ENDING MAY 20, JUST A FEW RATINGS CHANGES – with relevant transcripts, and WEEK TO COME

From earnings reports in prior weeks: Jack in the Box and Wingstop maintained at Neutral and Outperform, respectively

https://seekingalpha.com/article/4489787-jack-in-box-inc-s-jack-ceo-darin-harris-on-q1-2022-results-earnings-call-transcript

https://seekingalpha.com/article/4507053-wingstop-inc-s-wing-ceo-michael-skipworth-on-q1-2022-results-earnings-call-transcript

From a week ago: JIM SANDERSON and BRIAN VACCARO upgrade Shake Shack to Buy and MARKET PERFORM, respectively.

https://seekingalpha.com/article/4507719-shake-shack-inc-shak-ceo-randy-garutti-on-q1-2022-results-earnings-call-transcript

THE WEEK TO COME: only two companies scheduled to report

Thursday 5-26 Before Market Open Jack In The Box (JACK) Q2

https://events.q4inc.com/attendee/445663988

Thursday 5-26 After Market Close Red Robin (RRGB)  Q1 

https://ir.redrobin.com/news-events/ir-calendar/detail/19110/q1-2022-earnings-conference-call

 

 

UPDATED CORPORATE DESCRIPTIONS: TEXAS ROADHOUSE (TXRH), SHAKE SHACK (SHAK), SWEETGREEN (SG), PORTILLO’S (PTLO), PAPA JOHN’S (PZZA) with transcripts

UPDATED CORPORATE DESCRIPTIONS: TEXAS ROADHOUSE (TXRH), SHAKE SHACK (SHAK), SWEETGREEN (SG), PORTILLO’S (PTLO), PAPA JOHN’S (PZZA) with transcripts

TEXAS ROADHOUSE

https://www.liptonfinancialservices.com/2022/03/texas-roadhouse-updated-write-up/

SHAKE SHACK

https://www.liptonfinancialservices.com/2022/03/shake-shack-inc-shak/

SWEETGREEN

https://www.liptonfinancialservices.com/2022/01/sweetgreen-sg-in-process/

PORTILLO’S

https://www.liptonfinancialservices.com/2022/04/portillos-ptlo-in-process/

PAPA JOHN’S

https://www.liptonfinancialservices.com/2022/03/papa-johns-pzza-corporate-description/

THE WEEK THAT WAS, ENDING 5/6, LOT’S OF EARNINGS REPORTS, A FEW RATINGS CHANGES, MORE ACTION IN THE WEEK TO COME

THE WEEK THAT WAS, ENDING 5/6, LOT’S OF EARNINGS REPORTS, SEVERAL RATINGS CHANGES, MANY MORE DATA POINTS IN THE WEEK TO COME  – links to transcripts provided

Starbucks reports, only change is David Palmer upgrading. Nobody wants to be negative. NICOLE REAGAN, JOHN GLASS, CHRIS CARRIL and JON TOWER stay neutral. LAUREN SILBERMAN, JEFFREY  BERNSTEIN, DAVID PALMER and ANDREW CHARLES continue to like it.

https://seekingalpha.com/article/4506511-starbucks-corporation-sbux-ceo-howard-schultz-on-q2-2022-results-earnings-call-transcript

Denny’s reports, NICK SETYAN still likes it.

https://seekingalpha.com/article/4506545-dennys-corporations-denn-ceo-john-miller-on-q1-2022-results-earnings-call-transcript

https://seekingalpha.com/article/4506597-dennys-corporation-2022-q1-results-earnings-call-presentation

Restaurant Brands reports, only change is CHRIS O’CULL downgrading to HOLD. M.Stanley analyst maintains underweight. JON TOWER is neutral, while CHRIS CARRIL AND LAUREN SILBERMAN like it here.

https://seekingalpha.com/article/4506236-restaurant-brands-international-inc-qsr-ceo-jose-cil-on-q1-2022-results-earnings-call

Yum Brands reports. No changes. LAUREN SILBERMAN is NEUTRAL while JON TOWER says BUY.

https://seekingalpha.com/article/4506810-yum-brands-inc-s-yum-ceo-david-gibbs-on-q1-2022-results-earnings-call-transcript

Brinker reports (and disappoints). DAVID PALMER downgrades to IN-LINE.  BRIAN MULLAN, NICK SETYAN, and M.STANLEY analyst are NEUTRAL. BRIAN VACCARO and ERIC GONZALES continue to be positive.

https://seekingalpha.com/article/4506810-yum-brands-inc-s-yum-ceo-david-gibbs-on-q1-2022-results-earnings-call-transcript

Wingstop reports (and disappoints). M. Stanley  analyst, NICK SETYAN, JON TOWER and ANDREW CHARLES all stick with it.

https://seekingalpha.com/article/4507053-wingstop-inc-s-wing-ceo-michael-skipworth-on-q1-2022-results-earnings-call-transcript

SHAKE SHACK reports. Everybody maintains. LAUREN SILBERMAN and BRIAN MULLEN are neutral, while PETER SALEH & NICK SETYAN like it.

https://seekingalpha.com/article/4507719-shake-shack-inc-shak-ceo-randy-garutti-on-q1-2022-results-earnings-call-transcript

PAPA JOHN’s reports. LAUREN SILBERMAN and NICK SETYAN continue to like it while BRIAN MULLAN is neutral.

https://seekingalpha.com/article/4507346-papa-johns-international-inc-pzza-ceo-robert-lynch-on-q1-2022-results-earnings-call

 

THE WEEK TO COME:  MORE DATA POINTS

5-09 After Market Close RCI Hospitality Holdings RICK

https://seekingalpha.com/pr/18781450-rci-2q22-call-on-twitter-spaces-on-monday-may-9th-first-to-use-twitters-audio-platform-for

5-10 Before Market Open First Watch Restaurant Gr FWRG

https://viavid.webcasts.com/starthere.jsp?ei=1537799&tp_key=a214d47caa

5-11 Before Market Open Wendy’s WEN

https://event.on24.com/wcc/r/3723491/E08AEE34680249F3308CCBD4D8C0EEFE

5-11 Before Market Open Krispy Kreme DNUT

https://edge.media-server.com/mmc/p/2m66abcw

5-11 After Market Close Dutch Bros BROS

https://events.q4inc.com/attendee/370340001

5-12 Before Market Open Carrols Restaurant Group TAST

https://viavid.webcasts.com/starthere.jsp?ei=1541750&tp_key=1245ec6318

 

 

 

 

UPDATED CORPORATE DESCRIPTIONS FOR DENNY’S, WINGSTOP, CHEESECAKE, SHAKE SHACK, BJ’S and CHUY’S

UPDATED CORPORATE DESCRIPTIONS FOR DENNY’S (DENN), WINGSTOP (WING), CHEESECAKE FACTORY (CAKE), SHAKE SHACK (SHAK), BJ’S (BJRI) and CHUY’S (CHUY)

Denny’s

https://www.liptonfinancialservices.com/2022/01/dennys-corporation-denn-new-writeup/

Wingstop

https://www.liptonfinancialservices.com/2022/01/wingstop/

Cheesecake Factory

https://www.liptonfinancialservices.com/2022/01/cheesecake-factory-updated-write-up/

Shake Shack

https://www.liptonfinancialservices.com/2022/01/shake-shack-inc-shak/

BJ’s

https://www.liptonfinancialservices.com/2021/11/bjs-restaurants-2/

Chuy’s

https://www.liptonfinancialservices.com/2022/01/chuys-holdings-updated-write-up/

 

 

ICR CONFERENCE PROCEEDS – SHAKE SHACK (SHAK – up 12%), ONE HOSPITALITY (STKS) AND DENNY’S (DENN) PROVIDE UPDATES

ICR CONFERENCE PROCEEDS – SHAKE SHACK (SHAK), ONE HOSPITALITY (STKS) AND DENNY’S (DENN) PROVIDE UPDATES

The ONE Group (STKS – 12.99, UP $0.34 –  strong fourth quarter, Manny is doing the job!)

https://seekingalpha.com/pr/18625788-one-group-announces-preliminary-fourth-quarter-and-full-year-2021-sales-results

DENNY’S CORPORATION (DENN – 16.26, down $0.12 – making steady progress under John Milller, Omicron not helping at the moment)

https://seekingalpha.com/pr/18624177-denny-s-corporation-releases-preliminary-financial-results-for-fourth-quarter-and-fiscal-year

https://seekingalpha.com/pr/18624506-denny-s-corporation-to-expand-market-share-through-partnership-reef

SHAKE  SHACK Inc. (SHAK – 76.97, up 8.64 – continues recovery from Covid, Q4 comps up 2.2% in Q4, sharply improved from down 7.3% in Q3, Street relieved)

https://seekingalpha.com/pr/18625775-shake-shack-provides-fourth-quarter-2021-business-update

 

RESTAURANT STOCKS – Recent Change in Analyst Ratings – SHAK, DNUT & QSR Downgraded, TACO & PZZA Initiated with BUY, LOCO and DPZ Initiated at HOLD

RESTAURANT STOCKS – Recent Change in Analyst Ratings – SHAK, DNUT & QSR Downgraded, TACO & PZZA Initiated with BUY, LOCO and DPZ Initiated at HOLD

Jim Sanderson downgrades SHAK to Neutral, Bill Chappell downgrades DNUT to Hold, Eric Gonzales downgrades QSR to Sector Weight, Todd Brooks Initiates TACO and PZZA at Buy, initiates LOCO and DPZ at Hold

This summary is planned to be a regular feature of Roger’s Review, along with a “heads up” prior to  next week’s reports. We welcome commentary from readers as to how these features can be more helpful.

Roger Lipton

BIG NEWS, AND WE MISSED IT!

BIG NEWS, AND WE MISSED IT!

THE NEWS

We wrote an article two days ago, reviewing the state of the restaurant industry at the one year anniversary of the pandemic.

As part of our “BOTTOM LINE”, advice to publicly held companies, we said “companies, in almost all cases, should sell company stock…..it may be a long time before you see these valuations again.”

Turns out, a week ago, Shake Shack (SHAK), carrying one of the very highest valuations ever seen for a restaurant company, did just that !

SHAK has a $4.8 billion valuation attached to a total of 311 locations, systemwide (183 domestic company operated, 22 domestic licensed, 106 int’l licensed). This values each of the current system locations over $15 million. There is a very long runway for growth and that’s a large reason why this system, with long term (before inflation, of course) AUVs projected to be just above $3M is so well regarded by the investment community.

The other major reason for the valuation is that SHAK was founded by the legendary Danny Meyer, and CEO, Randy Garutti, along with his team, is respected almost as much. Valuation aside, we’ve always given management the highest possible marks, both in terms of operating skills and financial management, and they have proven it once again. Are you ready for the terms of the recent offering ?

THE TERMS

They sold $225 million of senior convertible notes, for a net of $217.9 million, convertible 45% above the $117.53/share last Monday,  or $170.42/share. The notes are due in 2028 and THE INTEREST RATE IS ZERO. The only negative here is that the funds have to be paid back in seven years, unless the stock is above $170/share and who’s to say it won’t be 😊

In the meantime, the $217 M on top of the $184 M the Company had in the bank at yearend gives them $400M to build infrastructure and stores. When you have been given funds at zero percent interest, it doesn’t take much of a return to provide an attractive arbitrage. The company operated locations don’t provide a store level return anywhere close to what it was when the average volume in NYC locations was $7M but a $3M AUV should provide a store level EBITDA in the area of  25-30% annually and that’s a good cash return when the funds cost you nothing.

We suspect lots of other restaurant companies will not be far behind. That’s what ten years of a bull market, supported by worldwide interest rates close to zero, will do for you.

Roger Lipton

SHAKE SHACK PROVIDES UPDATE, STOCK GOES UP OVER 20%, WHAT’S GOING ON?

SHAKE SHACK PROVIDES UPDATE, STOCK GOES UP OVER 20%, WHAT’S GOING ON?

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.

QUANTITATIVELY

(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. 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 (eight so far) will be in all new locations, sometimes with vestibules.

(7) New product innovation continues, including veggie burger. Lots of regional/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.

QUALITATIVELY

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, the Beijing opening, the drive thru  experience

(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”.

A LITTLE MORE REALITY

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.

CONCLUSION

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 or cancer cures being developed here. 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 afterwards the stock will go higher still 🙂

Roger Lipton