Shake Shack(SHAK) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2021, Shake Shack reported a revenue of $203.3 million, a year-over-year increase of over 38% [22] - System-wide sales for the full year exceeded$ 1.1 billion, growing over 47% year-over-year and more than 25% compared to 2019 levels [23] - Shack-level operating profit margin was 16.4%, up 40 basis points year-over-year [22][34] Business Line Data and Key Metrics Changes - Same-Shack sales rose 20.8% year-over-year, closing the gap to 2019 Same-Shack sales [22] - Average weekly sales reached $74,000, an increase from$ 72,000 reported in the previous quarter [23] - The licensed business generated $118.4 million in sales, up 50% year-over-year, driven by new openings and increased holiday air travel [28] Market Data and Key Metrics Changes - Urban Same-Shack sales were 4% below 2019 levels, a significant improvement from down 15% in the prior quarter [24] - Suburban Same-Shack sales were 9% above 2019 levels, showing strong performance across all regions [25] - The company opened 6 new licensed Shacks in Q4, including its second in Shenzhen, China [19] Company Strategy and Development Direction - The company plans to open 45 to 50 company-operated Shacks in 2022, with a focus on new formats like drive-thru [16] - Shake Shack is committed to digital transformation, enhancing guest experience through digital tools and personalized marketing [15][30] - The company aims to maintain its value proposition while navigating inflationary pressures by implementing price increases of 6% to 7% [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery as urban centers and travel patterns normalize post-COVID [12] - The impact of Omicron on staffing and sales was acknowledged, with expectations of continued volatility in the near term [11][27] - February showed a steady uptick in Same-Shack sales, up approximately 13% year-over-year, indicating potential recovery [11][27] Other Important Information - The company ended Q4 with$ 382.4 million in cash and marketable securities, positioning it well for growth [36] - Labor costs were reported at $57.9 million, or 29.6% of total Shack sales, down from 31.1% in the prior quarter [33] - The company is focused on elevating its workforce, with a 13% increase in hourly starting wages [13] Q&A Session Summary Question: How should the comment on protecting margins be interpreted? - Management clarified that the planned price increase of 6% to 7% is necessary due to persistent inflation and cost pressures, with a focus on long-term sales recovery [40] Question: What is the pricing elasticity and how does it affect pricing power? - Management believes they have strong pricing power, supported by a tiered pricing approach and positive reception to previous price increases [45][46] Question: What are the expectations for average weekly sales post-Omicron? - Management expressed confidence in returning to pre-COVID sales levels, emphasizing the importance of urban recovery and consumer behavior [56] Question: What is the long-term outlook for restaurant margins? - Management maintained that long-term guidance for margins remains unchanged, with a focus on rebuilding profitability [66] Question: What marketing initiatives are planned for 2022? - Management indicated plans for fun collaborations and increased digital marketing efforts to create buzz around the brand [68]