Why Shake Shack Shares Are Rising After Earnings

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Shake Shack  (SHAK) - Get Report shares rising because management said it is seeing sales momentum in the beginning of the current quarter, while first quarter results missed the mark.  

The stock rose 3.85% in post-market trading Monday. 

Here were the Q1 results versus analyst estimates: 

  • Revenue: $143.2M v.$160.5 million 
  • Same-store-sales: -12% year-over-year v. +3.6%
  • EPS: 3 cents v. 0 cents

Shake Shack booked an operating loss partly due to a non-cash impairment charge $1.1 million, even though the company still would have missed operating profit estimates without the charge. 

Revenue did grow year-over-year, as lockdowns hadn’t started in January and February and licensing revenue rose 26% to $5.1 million. 

But it was the words on the earnings print that got the stock going, not the numbers. 

Management said it has begun rehiring, a sign that revenue momentum is moving in the right direction. Plus, the company said it is seeing week-over-week sales improvements. It’s unclear if that means sales gains week-over-week or a slower drop-off in sales. The momentum is driven by the company’s digital channel, a dynamic also cited by Chipotle  (CMG) - Get Report on its earnings report. 

Here what the company said:

"Despite the challenges, some positive signs have begun to emerge. Since the low point during the last week of the quarter, the Company has experienced steady increases in domestic sales driven by growth in its own digital channels and the expansion of its integrated delivery partnerships.” 

The stock had fallen 13% for the year into earnings, not far behind the S&P 500’s fall of 12%. 

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