+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Shake Shack is churning out new stores, but there are still some issues

Aug 25, 2024, 17:16 IST
Marina Nazario/Business Insider

More stores doesn't always translate into better results and Shake Shack provides a good case study.

On Thursday, the burger and shake maker reported adjusted earnings per share of $0.10, beating some analysts' estimates.

In a note out to clients on Friday Morgan Stanley said Shake Shack's first quarter was strong in some respects.

"SHAK remains a development machine - driving EBITDA growth - with new stores continuing to perform well," the bank said.

Advertisement

According to Morgan Stanley, Shake Shack opened up seven stores in the first quarter of 2017, three more than the bank expected. But more stores didn't translate into a completely rosy quarter for the firm. According to the bank, Shake Shack reported shaky margins and lower same-store sales.

"Restaurant margins, however, missed by 150bps vs our model, with labor 120bps above our estimate (27.6% of sales vs our 26.4%), and up 240bps Y/Y," the bank said.

"March SSS of down 8% - due in part to the Easter holiday shift - were a significant drag on the overall 1Q comp of down 2.5%, and we don't currently expect full recapture of March's negative performance in April," the bank added.

As such, Morgan Stanley has reduced its 2017 EPS estimate to $0.49 from $0.50. It has a price target of $34 per share, which is lower than the firm's current share price of $35.41.

MI

NOW WATCH: WATCH! This week's episode of The Bottom Line with Henry Blodget

Please enable Javascript to watch this video
You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article