• Revenue Growth: Fourth quarter revenue increased by 14.8% year over year.
• Same-Shack Sales: Grew by 4.3% year over year in the fourth quarter.
• Restaurant Level Margins: Expanded nearly 300 basis points to 22.7% in the fourth quarter.
• Adjusted EBITDA: Increased by approximately 49% year over year to $46.7 million in the fourth quarter.
• Company Operated Shacks: 329 as of the end of 2024, with 43 new openings during the year.
• Licensing Revenue: Reached $12.1 million in the fourth quarter.
• Net Income: Fourth quarter net income attributable to Shake Shack Inc. was $8.7 million.
• Free Cash Flow: Generated a record $36 million in free cash flow for the year.
• Cash and Cash Equivalents: Ended the year with $320.7 million.

• Warning! GuruFocus has detected 3 Warning Sign with SHAK.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Shake Shack Inc (NYSE:SHAK) reported a strong fourth quarter with a 14.8% increase in revenue and a nearly 50% growth in adjusted EBITDA.
• The company expanded its restaurant-level margins by 300 basis points to 22.7%, showcasing operational improvements.
• Shake Shack Inc (NYSE:SHAK) has ambitious growth plans, targeting at least 1,500 company-operated Shacks across the US, more than four times its current size.
• The company is focusing on internal promotions and leadership development, with programs like 'Shift Up' and 'Lead to Succeed' contributing to high retention rates.
• Shake Shack Inc (NYSE:SHAK) is investing in a new kitchen innovation lab to enhance service times and convenience, which is expected to drive both short-term and long-term benefits.

Negative Points

• Shake Shack Inc (NYSE:SHAK) faced challenges from significant weather pressures and the impacts of the Los Angeles wildfires, affecting same-Shack sales.
• The company is experiencing choppy trends in the first quarter of 2025, with weather and wildfire impacts continuing into February.
• Despite strong performance, Shake Shack Inc (NYSE:SHAK) is cautious about potential headwinds, including volatile commodity prices and inflationary pressures.
• The company is in investment mode, which may impact short-term margin expansion as it focuses on long-term growth and infrastructure development.
• Shake Shack Inc (NYSE:SHAK) acknowledges the need for a more strategic culinary calendar to avoid gaps in comp sales, as seen with the lack of a new product to follow the successful Korean BBQ LTO from the previous year.

Q & A Highlights

Q: Can you explain the increased confidence in achieving a 22% restaurant margin in 2025 despite a challenging top-line environment? A: Katherine Fogertey, CFO, explained that the confidence stems from improved labor management and the successful implementation of a new labor model. This model has shown strong performance, helping offset sales pressures from weather and wildfires. Additionally, supply chain optimizations and operational improvements are expected to contribute to margin expansion.

Q: How did Shake Shack achieve 3.7% same-Shack sales growth in January despite weather and wildfire challenges? A: Katherine Fogertey, CFO, noted that despite 150 to 200 basis points of pressure from weather and fires, the company maintained strong performance due to effective marketing and operational strategies. The pricing strategy, which was around 6% at the start of the year, also contributed to this growth.

Q: What improvements are being seen in store margins, particularly in labor, and how are lower-performing stores being addressed? A: Katherine Fogertey, CFO, highlighted that the new labor scheduling system is enhancing guest experiences and returns. Rob Lynch, CEO, added that improved adherence to labor schedules is driving increased profitability, especially in lower-performing Shacks, contributing to the expected margin expansion.

Q: Can you provide more context on the "at least 22%" restaurant margin guidance for the next three years? A: Rob Lynch, CEO, stated that the 22% margin is a baseline, reflecting current capabilities and initiatives. While there are opportunities for further efficiency and productivity improvements, potential headwinds like volatile commodity prices are also considered. The focus is on operational efficiencies and strategic initiatives rather than significant price increases.

Q: What is the roadmap for Shake Shack's loyalty program, and how will it balance traditional and unique elements? A: Rob Lynch, CEO, explained that the loyalty program will focus on delivering targeted incentives and understanding customer needs to enhance experiences. The goal is to avoid a pure points-based system and instead offer personalized insights and offers that align with Shake Shack's hospitality ethos.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.