$SHAK Reverses Losses and Joins $WING in Sprinting Higher

SHAK’s quarter wasn’t so good, but that’s because it was really cold in NYC and people don’t like to go out and eat hammed burgers in the cold, wet, weather. On the other hand, WING posted a great quarter, even though their delivery service is causing issues with the quality of their drenched fries. Nonetheless, Wall Street is optimistic about both stocks. More impressively, SHAK reversed -10% losses from last night and is now higher by almost 5%.

The fuckers at WING want to be a ‘top restaurant’ and the artery cloggers at SHAK merely want to shove beef-fat into the hideous mouths of the every day American slob.

Both companies intend to expand their brand across the country, located in all of the finest strip malls and shopping centers humanly possible.

Wingstop On Call follow up: sees Q2 comps QTD +2.3% excluding Easter (70 bps effect) (29.00 -0.17)

Notes trends improved at the end of February and March as the co launched its national advertising campaign and delayed tax refunds came in
New advertising is specifically focused on online/mobile ordering, co notes online orders comand a $4 higher average check
notes digital sales comprised 20% of total sales, +15.8% Y/Y

Ended Q1 w/ 1031 Wingstops worldwide
Decline in same store sales affected by 2 factors:
one of its restaurants was closed due to structural repairs for approximately 6 weeks during the quarter (120 bps to the comp)
co notes cannibiliization in 6 co-owned restaurants; estimates 340 bps impact on comp

Still very early in the Delivery process b/c they are trying to ensure the freshness of the food
currently working w/ a 3rd party

has changed their preparation process for french fries to retain their quality (main issue the co was worried about for delivery)
Will continue to test delivery thru July 1, when they will make decision on how they want to implement delivery into their business model
Goal is to be ‘a top 10 restaurant’

Unit growth rate of 18.1% in Q1
Trends in Texas remain and California (2 core markets) remain similar Y/Y, slightly below the system average

Costs were higher due to 11% increase in chicken wings and bones prices Y/Y

For Q2: co expects wing prices to increase Y/Y similar to Q1

‘More to come’ on testing in Las Vegas on how they plan to address increasing wing costs, co hinted at using mix shift towards promotions for boneless and shifts in labor management
notes they don’t expect the wing prices to go back down like it normally does after March madness, (BWLD noted this on its conference call a couple weeks ago)

Shake Shack beats by $0.02, beats on revs; raises FY17 rev (below consensus) on more units; lowers comps (33.12 -0.91)

Reports Q1 (Mar) earnings of $0.10 per share, $0.02 better than the Capital IQ Consensus of $0.08; revenues rose 41.5% year/year to $76.7 mln vs the $74.71 mln Capital IQ Consensus. Same-Shack sales decreased 2.5% for the first quarter of 2017 versus 9.9% growth in the first quarter last year. The decline in same-Shack Sales consisted of a 3.4% decrease in guest traffic offset by a combined increase in price and sales mix of 0.9%. The comparable Shack base includes those restaurants open for 24 full fiscal months or longer.

“We are clearly dissatisfied with our comp result in Q1, but as a reminder our small comp base is made up of only 32 Shacks, the majority of which exist in the Northeast region which was most affected by cold weather and the holiday shift in March. Looking into the remainder of the year, we’re increasing our development schedule and overall revenue expectations, despite the relatively small impact the comp base has on the overall Shack story. We remain committed to executing our strategy of growing in premier locations, investing in our teams and delivering a great guest experience. We are extremely pleased with the early results of the Shack App and this is a key component of our long-term strategy to meet our guests whenever and wherever they want their Shack.”

Co issues downside guidance for FY17, raises FY17 revs to $351-355 mln from $349-353 vs. $356.21 mln Capital IQ Consensus Estimate. Same-Shack sales growth to be flat to prior year (from 2% to 3%), which includes ~1.5% to 2% of menu price increases taken at the end of December. Increased development schedule and sales expectation for the class of 2017 to be between 23 and 24 new domestic company-operated Shacks (vs. 22 and 23), with average annual sales volumes of at least $3.3 million (vs. $3.2 million) and Shack-level operating profit margins of at least 21%. Increase to 12, net new licensed Shacks to be opened in fiscal 2017 (vs. 11, net). Shack-level operating profit margin between 26.5% and 27.5%.