Is Shake Shack on the Rise?
Same-store sales growth
Previously, we discussed how Shake Shack (SHAK) is expanding outside of its core Manhattan market and how new markets are taking shape.
Over the long run, same-store sales growth will become critical to measuring the performances of those restaurants that have been open for more than a year. Naturally, new restaurants opened during 2015 are excluded.
2015 highs
2015 has been the best year for the company in terms of same-store sales growth. The company experienced double-digit same-store sales growth in each quarter of 2015, a level not achieved since 2013, as you can see in the chart above.
Let’s analyze the most recent quarter in more detail. Shake Shack’s same-store sales grew an impressive 17.1% in 3Q15. This 3Q15 growth looks high because the comparable quarter a year ago was much easier to compare with. Same-store sales grew just 1.2% a year ago in 3Q14. This is also true for each of the first two quarters in the first half of 2015.
Same-store sales growth is important in the sense that it directly impacts a restaurant’s top line. This is one of the main drivers of revenue, and that’s why investors must pay close attention to this metric when assessing their investments in restaurants such as Shake Shack, Yum! Brands (YUM), McDonald’s (MCD), or Starbucks (SBUX). These companies are accessible through the Consumer Discretionary Select Sector SPDR ETF (XLY), which holds 10% of its portfolio in restaurants.
Given the importance of same-store sales growth, in the next part we’ll discuss factors that led to Shake Shack’s double-digit growth in all three quarters of 2015.
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