Shack Shake Shares Surged on Earnings Beat


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Shake Shack, known due to its tasty hamburgers, crinkle-cut fries and frozen shakes, announced late last week its profit for the quarter had doubled and increased its revenue forecast for 2016. The news helped to send shares of the company up over 9%.

The quarterly results arrived as restaurant companies are battling weaker demand and intense competition in particular from supermarkets, where prices of food are at lows not seen for some time.

Net income for the third quarter at Shake Shack increased to $3.8 million equal to 15 cents a share from last year’s $1.5 million equal to 10 cents a share. Company executives said prices are being raised at some locations in an attempt to offset labor costs that have increased.

Overall revenue increased by 40% ending the quarter at $74.5 million. Sales at same-restaurants were up 2.9% in the quarter, said the company. Those sales increased 4.5% during this year’s second quarter after increasing 9.9% during the first quarter.

Shake Shack increased its revenue forecast for 2016 to between $264 million and $265 million from its previous forecast of between $253 million and $256 million. In addition, it reconfirmed its growth for same stores of between 4% and 5%.

The hamburger chain is expecting to open between 21 and 22 new locations across the U.S. in 2017, which would be up from the 19 new locations targeted for this year. The company is also planning to open another 10 licensed restaurants in 2017, which is in line with the number for 2016.

Early bulls following Shake Shack predicted the restaurant operator could match Chipotle Mexican Grill in growth. The burrito maker was hit hard last year following a number of lapses in food safety as its sales were clobbered and its stock plummeted.

Critics of Shake Shack warned that it would start having problems of recreating excitement around its original restaurants in Manhattan, which often have lines out the door, as it grows into areas that are not as densely populated.

Many of the large chains have had trouble attracting people into their restaurants, but Shake Shack has led the way for most. Since midweek when the burger chain posted its earnings, shares have increased 12%.

As a comparison, sales at same stores increased the previously mentioned 2.9% at Shake Shack, but dropped by 22% at Chipotle.

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