CEO Randy Garutti is right: Shake Shack has "got to win" on labor in order to keep up with the company's wide-ranging expansion plans.
— Erika Adams
Shake Shack reported mostly positive numbers in its third-quarter earnings report: sales growth of 27.2 percent compared to the same period last year, and an operating profit increase of 20.7 percent.
But when it came to getting into the details of what the company is learning on all fronts, from delivery to digital ordering, the company characteristically avoided sharing any hard data about what it is seeing in these areas.
On delivery, CEO Randy Garutti said that Shake Shack is continuing to run tests with multiple partners, with no update on whether or not they’ll be firming up an official partnership with one service soon. Digital sales are climbing for the company (web-based ordering just launched last week), and they are seeing larger average check sizes in off-premise sales, but Garutti and chief financial officer Tara Comonte didn’t break out how the digital sales were growing as a percentage of total sales.
“None of this is easy, with the addition of the app, delivery, kiosks, and now online ordering, we continue to add complexity to our already-busy Shacks,” Garutti said. “These additional channels can at times complicate our kitchen, and at peak times create certain flow issues in the front house. We love the fact that we are broadening the ways our guests can experience Shake Shack, but our strategy remains one where we roll out these channels thoughtfully.”
When it came to labor cost increases, Garutti noted that the company was going to have to spend more to retain its workforce, between the rising minimum wage and rock-bottom unemployment levels. “Without a doubt, it’s one of our greatest challenges,” Garutti said, calling it an area that “we’ve got to win on.” Shake Shack will continue rolling out more kiosks in more locations moving forward as a potential solution to offset labor costs.
Same-store sales (which Shake Shack measures on a two-year basis) came in at negative 0.7 percent growth, compared to negative 1.6 percent in the same quarter last year. 54 stores are currently counted in the comparable store base, versus 39 stores in the same period last year. Shake Shack currently operates 107 locations, and is expecting to end the year with 123 to 124 locations in total.