Shake Shack (SHAK) Outruns Peers in Past 6 Months: Here's Why

Shares of Shake Shack Inc. SHAK have surged 80.3% in the past six months compared with the industry’s 13.7% growth. The company’s performance is driven by strong Same-Shack sales, unit expansion efforts and menu innovation.

This Zacks Rank #2 (Buy) company’s sales and earnings in 2024 are expected to witness growth of 14.6% and 91.9% year over year, respectively. The company also has an impressive long-term earnings growth rate of 37.4%. Let’s delve deeper and find out the factors driving growth.

Growth Drivers

Shake Shack continues to impress investors with robust global Same-Shack sales growth. The metric increased 10.3%, 10.1%, 6.3% and 10.3% in the first, second, third and fourth quarters of fiscal 2022, respectively. During the first, second, third and fourth quarters of fiscal 2023, the metric improved 10.3%, 3%, 2.3%, and 2.8%, respectively, year over year. In the fourth quarter 2023, the company stated benefits from traffic improvements and strategic marketing initiatives. Looking ahead, Shake Shack aims to maintain its growth trajectory, although at a more subdued pace. For fiscal 2024, it anticipates low single-digit year-over-year growth in sales.

To support its expansion strategy, Shake Shack made significant strides in fiscal 2023, opening 41 new domestic Company-operated Shacks and 44 licensed Shacks. This expansion included the introduction of 18 drive-through locations within the US as well as the debut of an international licensed drive-through concept in Mexico and Dubai. Moreover, the company extended its reach to two new markets, the Bahamas and Bangkok.

Emphasizing a forward-looking approach, Shake Shack's management is exploring opportunities in new countries, territories and formats to sustain long-term growth. One such endeavor involves entering the Malaysian market in 2024 through a new development agreement. The company plans to continue its expansion efforts by launching approximately 40 new company-operated stores and nearly 40 licensed Shacks during fiscal 2024.

Shake Shack continues to focus on culinary innovation and limited-time offerings (LTO) to drive growth. During the fiscal fourth quarter of 2023, the company emphasized on enhancing the core menu and introducing LTOs to drive growth. These include the highly popular White Truffle Burgers, Spicy Fries and the revival of the much-loved Bourbon Bacon Jam. Going forward, the company intends to focus on conducting tests on combo meals (at drive-through locations), caffeinated lemonades, Mini Shakes and Sundaes. This and the emphasis on group LTOs rotation will likely drive frequency in the upcoming periods.

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Other Key Picks

Some other top-ranked stocks in the Zacks Retail-Wholesale sector are:

Brinker International, Inc. EAT sports a Zacks Rank #1 (Strong Buy), at present. The company has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have surged 26.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) indicates 4.9% and 30.4% growth, respectively, from the year-ago period’s levels.

Texas Roadhouse, Inc. TXRH currently carries a Zacks Rank of 2. It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 45.4% in the past year.

The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14.1% and 25.8%, respectively, from the year-ago period’s levels.

CAVA Group, Inc. CAVA currently carries a Zacks Rank of 2. It has a trailing three-quarter earnings surprise of 533.3%, on average.

The Zacks Consensus Estimate for CAVA’s 2024 sales and EPS indicates 19.8% and 14.3% growth, respectively, from the year-ago period’s levels.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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