Shake Shack Jumps as Sales Beat Backs Up Rebound at Restaurants

(Bloomberg) -- Shake Shack Inc. surged after the high-end burger-and-fries chain reported second-quarter sales that beat Wall Street's expectations and bumped up its revenue outlook for 2019.

• Comparable-store sales, a key measure for restaurants, rose 3.6% -- above the 2.2% average estimate, according to Consensus Metrix. This is the third straight positive result for the company and matches last quarter's pace. The company also sees that measure expanding about 2% in 2019, up from the prior range of 1% to 2%.

Key Insights

• Shake Shack's results show the recent boom in restaurant sales isn't confined to less-expensive chains like McDonald's Corp. and Taco Bell, which also reported robust growth in the most recent quarter. As it expands overseas, Chief Executive Officer Randy Garutti said he's “bullish on the tremendous growth opportunity” in Mainland China.
• The company announced a delivery partnership with GrubHub earlier Monday -- an acknowledgment that diners are increasingly demanding convenience. Sales in the quarter were helped by digital and delivery, the company said.
• Operating income dropped in the quarter as Shake Shack faces higher food costs for items including beef and dairy. The chain is also seeing labor inflation across the country, especially in New York, along with an increase in paper costs tied to delivery orders. It also lowered its full-year restaurant operating profit outlook to about 23%, from a prior level of as much as 24%.

Market Reaction

• The shares rose as much as 7% in late trading. The stock has appreciated more than 60% this year, more than four times the gain for the S&P 500.
• For more financial details, click here.

To contact the reporters on this story: Jonathan Roeder in Chicago at jroeder@bloomberg.net;Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson

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