Shake Shack Inc. reported its financial results for the third quarter ended September 28, a period that included 13 weeks.
Financial Highlights for the Third Quarter 2016:
Total revenue increased 40 percent to $74.6 million.
Shack sales increased 40.2 percent to $71.9 million.
Same-Shack sales increased 2.9 percent.
Operating income increased 17.5 percent to $9.2 million.
Ten system-wide Shack openings, including seven domestic company-operated Shacks and three net new licensed Shacks.
Randy Garutti, CEO of Shake Shack, says “Shake Shack's Q3 performance demonstrates the continued strength and opportunity of our brand. We delivered another quarter of solid results, with 40 percent growth in total revenue and a 28.8 percent Shack-level operating profit margin. We also hit some important milestones this quarter, including our 100th worldwide Shack opening and our first $1 million sales day in our domestic company-operated Shacks. We're executing our multi-format growth strategy with great Shacks in our current markets as well as new markets across the country. We remain encouraged by the great locations we are seeing. Based upon our updated development plans, we now expect to open 19 Shacks this year and 21 to 22 next year, representing growth of 43 percent and 35 percent in 2016 and 2017, respectively. With the recent test launch of our first ever Shack App, we are meeting our guests where they are, and are beginning to lay the groundwork to connect the digital experience with the community gathering place of the Shack. This is just our first step, but we are excited about the endless possibilities the App brings to Shake Shack and our guests."
During the quarter, the company opened seven domestic company-operated Shacks, including the company's 100th opening at the Boston Seaport, its first Shack in Dallas at The Crescent, a second Shack in the Los Angeles market at The Americana in Glendale. Additionally, the Company opened three net new licensed Shacks, including its first Shack in South Korea in Seoul's Gangnam district, as well a third Shack in the Japan market at the Tokyo International Forum.
Third Quarter 2016 Review
Total revenue, which includes Shack sales and licensing revenue, increased 40 percent to $74.6 million in the third quarter of 2016, from $53.3 million for the third quarter of 2015. Shack sales for the third quarter of 2016 were $71.9 million, an increase of 40.2 percent from $51.3 million in the same quarter last year, due primarily to the opening of new Shacks, as well as same-Shack sales growth. Licensing revenue for the third quarter was $2.7 million, an increase of 34.9 percent from $2 million in the same quarter last year, due primarily to the opening of new licensed Shacks.
Same-Shack sales were 2.9 percent for the third quarter of 2016 versus 17.1 percent growth in the third quarter last year. The comparable Shack base includes those restaurants open for 24 months or longer. For the third quarter of 2016, the comparable Shack base included 26 Shacks versus 16 Shacks for the third quarter of 2015.
Average weekly sales for domestic company-operated Shacks remained constant at $103,000 for the third quarter of 2016 compared to the same quarter last year.
General and administrative expenses increased to $7.9 million for the third quarter of 2016 from $5.7 million in the same quarter last year. The increase was primarily driven by higher payroll expense from increased headcount at the home office to support growth plans as well as the costs associated with the Annual Leadership Retreat which occurred in Q2 of last year but are included in Q3 this year. As a percentage of total revenue, general and administrative expenses decreased to 10.6 percent for the third quarter of 2016 from 10.8 percent in the third quarter last year, primarily due to the increased levels of Shack sales.