Shake Shack pushes forward with grand expansion plans, but low same-store sales continue to raise questions about the brand's viability.
— Erika Adams
Another quarter, another strangely vague earnings report from Shake Shack. For a company that is seen as a leader in the fast-casual space, there wasn’t a lot of clarity about how Shake Shack’s digital innovations and new menu launches have been panning out. CEO Randy Garutti dodged question after question with some version of “we’re not breaking that data out right now” from start to finish on the earnings call.
Touchscreen order kiosks and tasty veggie burgers are all well and good, but the promise of great things to come without being able to show what’s been working so far can only hold out for so long.
Investing in Digital Orders
Shake Shack was optimistic about the growth it has seen in its various digital ordering platforms, which include the mobile app, delivery, and order kiosks.
The company continued to test out delivery through integrated pilot programs with four third-party providers: Caviar, DoorDash, Grubhub, and Postmates. Once again, there was no update on whether or not it’s close to committing to one service exclusively.
“We’re learning the regional differences between partners, and their willingness to make this a good long-term relationship,” Shake Shack CEO Randy Garutti said on the earnings call. “I think everybody’s shown that there’s a great demand out there. But that’s still wide open for debate whether we would go exclusive or nonexclusive.”
The company declined to break out any data around what percentage of total sales were stemming from digital orders, but did offer up one statistic: on average, digital orders were 15% higher than in-store orders, which is very much in line with what the industry is reporting across the board.
To add to its current digital ordering options, Shake Shack plans to roll out a web-based ordering system later this year.
Shake Shack is really good at creating a lot of hype around its menu. In the last quarter, Shake Shack debuted a probably good veggie burger, reintroduced a limited-time-only barbecue menu (a sign of success from a similar initiative last year), and funneled burgers into thousands of mouths at Coachella. Celebrity chefs collaborated on one-day-only menu items at the company’s original Madison Square Park shop.
Garutti noted that Shake Shack’s first dedicated test kitchen will be opening up this summer in the company’s new home office in Manhattan, so expect more wild, delicious burger creations in the coming months.
Existing Store Sales Continue to Struggle
Shake Shack’s sales at stores that have been open for at least two years were up just 1.7%, which is actually the highest same-store sales figure that the company has reported in the past two years. (It reported negative same-store sales throughout most of last year.) That doesn’t mean it’s a great number, though.
It felt like the elephant in the room on the earnings call: why is this cool, delicious burger brand struggling to maintain its customer base? Analysts tried to pry any sort of added detail out of the numbers, to see if maybe weather or the Easter holiday had affected sales, and were kindly but emphatically told not to worry. The company is growing a ton, Garutti said, and many of its stores are less than two years old in the first place. In time, the numbers will change.
But Shake Shack continues to confidently open stores — up to 35 new U.S. locations set for this year — without being able to provide any sort of real reassurance that those low same-store sales numbers are temporary. It’s a risky move until the company can prove that Shake Shack has staying power.