Shake Shack’s shares are sizzling Thursday, one day after the New York-based burger chain showed it can compete in new markets outside of Manhattan, including Las Vegas and Chicago.
The fast-casual purveyor on Wednesday reported a 56% jump in first-quarter revenue to $37.8 million, with same-Shack sales rising almost 12%. The sales growth for both metrics was above what Wall Street analysts had anticipated, sending Shake Shack’s (SHAK) shares higher.
Beyond the benefit of two price increases Shake Shack enacted in September and January, the restaurant company also reported higher traffic and strong results from new restaurants it has opened outside its original home in Manhattan. It also reported strong results despite the fact that the iconic Madison Square Park site, the first Shack ever built, has been closed since October to undergo a renovation that won’t be complete until the end of the second quarter.
“The early indicators of success in markets outside our New York home base bolsters the confidence we have in our long-term expansion plans,” Chief Executive Randall Garutti told analysts.
Shake Shack sought to hedge expectations for recently opened locations in Boston and Baltimore, saying new restaurant locations always experience “a quick honeymoon.” Investors were encouraged that the Shacks located in Las Vegas and Chicago were performing above the company’s $2.8 million-$3.2 million long-term average unit volume targets. That range is much higher than what many other fast-casual restaurant concepts report.
Another metric that rung in higher than Shake Shack sees over time was average weekly sales for domestic company-operated Shacks, which increased 7.2% to $89,000. That was primarily driven by the price increases, as well as higher traffic.
Same-Shack sales, which monitor locations open at least 24 months, are expected to rise a more modest low- to mid-single digits for the full year despite the strong double-digit growth posted in the first quarter. Executives said the lift from sales following the initial public offering in January, as well as the benefit of price increases can’t be sustained throughout the rest of the year. Additionally, the reopening of the Madison Square Park location could cannibalize the higher sales at other Manhattan Shacks, which have performed better as a result of that location’s closure.