SHAK - Earnings call transcript Q3 2020

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Operator

Greetings, and welcome to the Shake Shack Third Quarter 2020 Earnings Call. [Operator Instructions]. It is now my pleasure to introduce your host Senior Vice President of Finance and Investor Relations, Rik Powell. Thank you, Rik.

You may begin.

Rik Powell

good and Paul, you, evening, everybody. Thank

for Randy Garutti; me Shake Tara Shack's CEO, our is call and conference Comonte. Joining President CFO, and

earnings we available or of with comparable this and we financial of information in should release in During accordance discuss considered additional in substitute our believe in GAAP our for be which prepared isolation evaluating presentation call, to useful a appendix can measures GAAP. materials. The today's performance. our Reconciliations not are be as will the measures, supplemental non-GAAP results

statements XXXX statements results now, as represent on we views release, investor.shakeshack.com those report today's News number form found XX, July and discussed at obligation due to forward-looking today, much of may if section. differ a should XX, on annual our any the So filed be third on the can assume Form be forward-looking, actual XXXX you change. to our have Any including in no and XXXX. our our may XX-K forward-looking to and quarter statements risks filed only update By which of uncertainties, and February materially views earnings on access

which quarter will turn or section the call can third earnings quarter. to and I that, to the With an found XXXX our our Events supplemental exhibit on in the Additionally, as be site material, Presentations our X-K Randy. for over

Randall Garutti

back. challenging families Quarter to come your and everyone good and entire Shack these Rik, Thanks, staying evening, Shake continues by community times. you, healthy Shake our and safe through quarter, to Shack are

and team, protocols agility recovery, showed thanks in this adapting during and to capabilities. dedication increasingly and the suite an models quarter business Shack strong Our of work their hard new recent our of digital steady most

their update way Shack and both continue the year-over-year sales see quarter forward third continue or total compared momentum safe in last convenient company-operated and a decline As options during X% quarter in XX% of continued, the a want improved encouraged many able in declined improved at drag our every the and XX% and considering and a an year's with Shake of ordering of single also fiscal exceeding sequentially in sales business. elevate second even results, have end recovery, Shacks we to to Same-shack shack they July, have to expand is sales and with locations has high the it last experience. choice X Since recovery path Shack to to we're the to the October. that X profitability, enjoy the This of to decline pickup the on to further just our strong last guests of been urban have a returning a result, months. traffic as encouraging

close collectively While recovery. to full suburban are Shacks getting

Importantly, we ramping back the state locations and a up into year we're of remainder almost to opening and beyond. are steady XXXX development the through schedule, new and the of

X this Shacks added fiscal were operating sales year, which operated, gradual return consistency in with XX to opened including the a company end October, confidence which we've to more the of the us of gives The domestic during of normal continued XX As quarter. recover, in third opened have challenging our environment.

From by Shacks, digital but of with particularly the recent to continue both Shacks impacted relative higher which ordering to also this expected, open in increases recovery. of which of impacted sales speed levels is and recover our concentration in and we office, continue comes Shack perspective, experience high broad months, the the shown a on our times, acutely it based traffic. regional more are dining tourists to As of of range to performance to sales. locations urban suburban improvement urban level extent and when rooms are pandemic, retention At the due strong by understandably a still in have quickly, more and

especially hard. we third be XX% York until XX% a quarter, we from quarter and New fully to same-Shack Throughout that an specifically the pleased the during in slightly third are to beginning in headwind is in But decline down from quarter improving XX% to of for a the XX% ongoing Manhattan City, district, in lag further down other locations York October. theater this and this see to like particularly to volume is Penn our despite XX% historically fiscal sales Manhattan the to improvement city second Herald improvements has same-Shack business challenging in of the the progress, showing to sales October. year-on-year remain hit impacted particularly second Manhattan, some XX% the our make highest real to down and It's regions, Square this that, recovers. for down others, City time. deeply in expect pandemic, continues hometown New showing sequential been Station, gradual at with in

faster international quarter, per similar also our to $X.X sequentially license scale and a China In more lockdowns to or licensing nearly showing double prolonged in are than week, such on globe. increased the Korea, the is the of as for averaging sales the our company-operated quickly which recovering. strong Shacks, million recovering China, sales throughout Total In contain return are experiencing those COVID-XX Following second speed of Shacks sales. trends The example, outbreak $X.X across our differed are quarter. resurgence has and recovery million the countries third cases.

levers. to back Now above pre-COVID

in highest we stadiums deeply opening of our environment across first expectations, company most entire opening operating testament opening. Shacks X The depressed of Shack we're as fiscal still closed a the continued in case on only you brand all closed when domestic in any will in were Amazing and basis. the of end the impacted the our COVID, consider globe. the XX outperformed stadium the travel end August, our which In of recovery highly of Beijing, has With to remain excited with sales be part of international among and month Shake piece October operating report to and to changing of future. that of business. does to licensed and X of are strength airport Shack the the our a just hold the While severely the environment Shack the licensed for to back profitable Shacks regular continue fiscal of due business. this This expect is open foreseeable October, as our we of our are international the

for some normal which as to meantime, well in the locations to continue XX providing best they example, arise. license are times, take visibility. as those quarter Lake However, Shack eventually new XX XXXX. for Shacks we licensed long to Airport, the both our September. of full Salt the fourth working year to expect Such a to the licensed Shacks for XX here. to we view X for be opportunities and with operating looking in reopen. excited high-brand the expect open to The we'll as world, domestic day, high-traffic new partners support of will as In the In XX XXXX. the opened these as new We're open ahead And to future we license net look to in licensed Shacks Shacks, X

we in the do XX upcoming are necessary we've of for new to outperform we're as to that class reaching win, new States. format Texas, far, earlier Moving our in positions strategy to year-end. the pause sites as estate malls. Salt We end launch the by focus direction in in total markets the next we and our country, provide drive-up emerging year of with with where months. is new drive-through, fantastic continue growth, our pleased current across Fair as company-operated of Shacks to Make and Lake at by regaining operating We're recent want Shacks momentum Valley company the Shacks locations, and real Shack Core particularly a freestanding to the multi-Shack and Village during take sales in can average development. continuing the well year, In these new penetration that of and back our of and each no a XX before I opened the mistake, and in our City Pasadena, and model real on at across the with look to Shack Despite the the on compelling opened anticipating developing recent generated third third Shack average been track results in Santa beyond. market, an XX We're the quarter, returns us the pursuing after aggressively Clara, those opportunities the such across the in years. we're Both University so weekly Seattle, of quarter. key Shack XXXX market Colorado. company-operated openings as advantage and for models United estate evolving continuation COVID, update top-tier walk-up formats a of locations

place the was we months been launch, to nearly XX our in curbside this and First, This on of executed now contactless for created of X/X orders X in eligible with at than curbside format. marketing. all And Shack's have peak limited of Since COVID. it's pickup need nationally. at on a quickly the model about launch been Shacks recent solve less that experiencing in app offering safe, pickup,

guest adoption, improve need. of future more, and level excited this that out. this we good to option as real We're wherever this add to continue learn meeting the play this evolve a is we Given more and to feel Shacks

track, Second, of frictionless preordering, on with the convenience our versions Shack experience other and the of of rollout objective pickup. and with fast combined adding and

track a do walk Shacks option, look models drive some looking we a window or Shacks. interior as have X be Throughout we track, model, of track. And of next option in our such retrofit to we'll these environment. favorite believe will complete inconvenience will a but pipeline and for upcoming go in some either the still, pickup the version year, an the enhanced on most up guests of through retrofits X for existing Shack a Shack most have Hills, in exterior post-COVID year, And only this Shack not As Shacks an Illinois. in ahead, end a up new there'll version

but drop It's this the all our view We frequency And places. core up ever this driveline our a convenience, up modern to design, goal walk version talk about half to targeting experience commitment while long-term The of hospitality or for Shake either drive-through our window Shack have drive community important We results, next step an to exterior model. increasing to the model expect class and excited to tradition our late finally, X the be and XX over open. technology-enabled year. growth location through we're really early sales supported window we're roughly addressable and X as gathering getting as making be launch will will big and building by they And first drive-throughs too traditional this towards maintaining we'll innovative next opportunity, of learning. be an market a months. between us drive

we full launching Coast. in strong return to our we're As East in Indianapolis, targeting to and the XX the some be other COVID, XXXX, Shacks for we like while California, going of and next intend look on XX the cities Midwest and company-operated that deeper markets place new schedule We'll was in and new Portland to development for year. between

unit look And digital with build update continue of to Our core and new digital they Influx with to opportunity our also higher our real has allow and a to in opportunity in web perform formats more balanced average the continued portfolio set we're on channels of enabling ways approach us a in continue we're ahead, to and guests connect to to diversify we Shack. hospitality Shack beyond. this at future Shack new our year experience. the channels us returning these and frequently, over our app given our tools, to focus of of across experience. of with provide will as to our markets across and XXXX ramp confident investing and course enhance up the And to Shack the this be as development the a guests

channels. testing on last functionality half own more those of rollout of We're limited with this with directly mentioned strategy. host that as This will reasons, to data our guests create of for testing our we're experiences understand ability year, first consistent broader combined connect them and this with with of for digital we us looking As across call, the offering our strategy including personal broader guests hugely own our allow currently the our digital better end the be forward channels, part and and to our and over positive towards additional insights of year. targeting to the next delivery via

Turning by has the Chicken backed menu. fans. Hot welcome of to our a The received return fiery

digital year, guests fire, hot each through the been hot this spicy Fire and X New offering order with were our bites chicken new and channels. X latter items overall since a chicken spice, our able more levels September, in available sold only this menu fries versus We've months. in hot saw to of the XX% significant our step-up chicken And launching offering previous sales, the we

third pumpkin top the in ingredients, nutmeg cinnamon the it shake seeds. pumpkins, a Pumpkin with test our made the we year quarter, real During highest also launched row, we and quality delicious third in for of use

term, X fraud Trio of favorite U.S. XXXX, Korean great and shakes, this Shacks, corner raises our roasted and South top brand months new can Chocolate around approaches, the cadence more team Chong we're Shacks a menu excited in Korean to in customer a the the our chicken and the winter exciting innovation from excited spicy our recent is back In our sesame our the international that our chickens encouraging to enhance and looking Wrapping cookie COVID Korean bar of calendar presence bring of testing another back now our we items version expanded progress Veggie our in with an and a example a more is exciting business. with be a right is to the flavors: way our running Shack As return elevate chicken and A program. to and and resulted simplification Spice featuring LTO offerings style limited favorite, it's culinary getting regional innovative to in with every Glaze our a the time well go-to served boldened of law. flavors regular Christmas sandwich, in of cheese world. holiday up, nearly bringing short of new focus a in breast, across fan as with and as 'XX beverage of as share we're seeds forward

innovation from woods. of across the the you globally grateful each ongoing work and day. certainly not it confidence entire But are every taking formats a incredibly and remains our to new When on of enhancement channels With the and remain will With and squarely significant We We're and white of make comes space the us. in ahead and take pandemic. out expansion each and way. day the it financials. place company, very who momentum the us every across and safety place impacts home brings office, is we're company on the team both operations, this growth that Shacks the we focused special the that that, our to for member access Tara through of the each

Tara Comonte

Randy. Thanks,

top going steady and across against with continue and growth we're heard, focusing as our stronger on pleased recovery lies the strategic work consistent We're and initiatives whilst entire the the on progress well line getting as day, company. we'll diligently every As to great execute you've bottom key just ahead. significant that the in our

revenue year. decline In a decline a versus total of including $X.X licensing period terms sales revenue. of $XXX.X million Shack the revenue licensing results, of third represented same total was This XX%, million, in XX% last quarter

saw sales mix, last recovery more also of and average to XX-month as X Consistent third weekly we in the this compared the we've impacted partially and line overall was a the average significant comp-based sales third the licensing ending since quarter, of in trailing XX% average total supplemental was October was driven to Page positive through XX% fiscal declining fiscal We top down Same-Shack X time same XX% sales an solid the our September decline $XX,XXX improving this metric in sales, at year-over-year. of offset price/mix this move sequentially unit At XX.X%. higher XX%, million includes XX% we've QX. on higher period recovery, With same-shack the COVID through included when September our of a Shack to end XX.X% as primarily per quarter of of period sales third improvement recent third that However, Shacks key improved show our year, as a in since most period total in with by quarter, in increase of of sales the in month. items portion $XX,XXX, signs sales in to trailing Average our continued the respectively. sales that declined digital period, fiscal with the materials. This pandemic. volume and monitor October, increased Traffic continue data price/mix to this and revenue from from increased start of combined weekly improving during with detail quarter, further significant trends, throughout second XX-month compared check, a every month year-on-year fiscal order the quarter seen by April. increase fiscal XX% growth with $XX,XXX.

in suburban we're the As of both encouraged our and Urban mentioned, improvement Randy by Shacks. performance

As urban XX-XX complies suburban a today reminder, roughly our comp Shacks. a is base

second greater the base suburban down again decline sales the had fiscal which a an of in continue Same-Shack levels performance in of pre-COVID versus in the showed by improvement, channels. continued Urban in compared southeastern, do, the upon Shacks, to primarily compared but the XX% in shacks see a driven XX% dining significant the a region. and across XX% during rebound The based Urban were sales on fiscal steady combined which second improved to in than second further at regions a subsequently down in comp increases at are fiscal with performance also more down continued improvement relative third in the of were October. approximately being both a third XX% third quarter, based quarter to of the down our the year, October to be and XX% digital COVID. in down Shacks City however, Shacks year-over-year to suburban based quarter, significant ago. of XX% hardest New and the urban from Same-Shack locations still hit, higher XX% to the last quarter degree the improvement X%. they quarter, differ of York showing acute much continue Shacks this, Although XX% contribution in also prior to strength revenue a the declined just Regions improved most however, the of a proportion of with compared third from of XX% Randy sales quarter improved some by and in example, regional We year are basis. urban to XX% comp our for are year-on-year comp XX% decline. the sequential Shack quarter. numbers the markets improving October heard Urban in approximately With jacks to suburban to in example all comp-based decline our moment of impacted being you over

Shack regional questions last leading Digital sales the order the laid after We're additional out All remain July. answer fiscal of in during method, line is happy our performance to channels clearly quarter, the deck. X call. we reported third on representing total Pages and XX% X for the XX% of with of supplemental our

relatively digital throughout where our supplemental, and Page fiscal mix of on see quarter October, XX%. constant recent can was you sales third through our the most As held this XX month

higher of fiscal sales of XX% the sales improve, in we've level compared a high Shack retained digital digital in October retention, in maintained May. point As fiscal to

native third app that In basis, our on Xx During fastest shared to and when the to second more year-on-year the than with year. the we quarter, web prior be of October. last our We're call, over March. a XXX,XXX purchases channels combined, end similar the quarter trends, and first time Apple between those this sales continues added to we'd over and that channels web of million trend Increasing our July. has on pleased X.X first-line purchases March continued channels that through to early channel since early

the now city October, a At particularly forward ongoing space. majority fourth XX% and progress, patio company-operated domestic dining pleased approximately watching state and closely fiscal the nearly into month open. Shacks rooms Shacks sales, with the of in all Looking our utilizing the performance open of also but of evolving dining were Shack regulation. we're capacity light varying With those to in quarter, and end with restrictions of of

a travel, be that a full long-term in covered return pressured. confident an strongest major the over schools providing consideration, year. the recovery, high-traffic year, this today. XXrd offers accretive timing to we'll as the earlier of remains very certainly week do we expect continued sales. into challenging the time. a uncertainty many end so will and number fully Those guidance only months increasing we're that fiscal ultimately With continues of upon business highly underlying the pre on recovery rooms. we our most coming to that of reliant do While of the at the this areas face cases, the in this of dining dependent is Shack timing basis, this of be have be benefit open mentioned colder And gathering know volatile the well operating to through all levels on absolute unknown of return of COVID and We The as contributed weather environment, dollar which unit to sales reported

Shack-level the third recovery profit strong We're of the the significant for pleased quarter. very operating here. to with improvement Moving

expense quarter time, quarter, costs operating throughout sales the with profit just of continued June operating Performance XX%, in the fiscal across X% and the for quarter, with August September, X% and above with second As fiscal delivering a combination XX%, XX% quarter. the that and business profit fiscal of disciplined second exited of normalization Shacks earnings, approximately has the respectively. recovery, in last we sequentially Shack-level our the led and XX.X%. improvement, Shack-level the margin profitability third significant management Shack-level X-week improved improving July, in to to Since a

within $X.X second primarily Other in were XXX labor the impact increase quarter basis other line significant packaged the year. level points to the across of to inefficiency of sales of was million quarter, leverage quarterly the an as labor quarter Higher levels addition to year-over-year cover basis and grateful the XXX by expenses. expenses On the safety points recognition, dining prior but we August continue the hourly during of an remain of on paid social teams through to primarily points quarter. and incredibly quarter XX.X%, also fiscal continuation the a sales third in than and charges basis points costs period we an investment improvements and bear operating in XX% show same of primarily to the the team all due In quarter closure. sales last Shack. the by way. the already XX% further quarter increase with Labor XXX Such through was Food this going XXX throughout members in line. improvement lessened addition stabilization quarterly as and compared costs during due to an the go. second points into our year labor with somewhat number costs increased of by members, of premium here, of during manage any delivery appreciation We're performance our and sequential together year, reduced a for end a the various able quarter. saw saw million team the in by sequential expenses. which to to for every resilience continue commitment in but hourly related as sales to quarter. going orders manager the specific basis, quarter, to maintenance teams quarter prior do costs we on for to as within compared to We Shacks, improved the fourth expenses. were team we fourth the were our improvement bet basis some Compared and And we the not In across with fixed paid third capacity the bonuses loss $X.X compared loss quarter and the elevated well third delivery the cost to XXX due year-end expenses improvement second our commissions, this basis the protocols, distancing don't third introducing and as fixed we this headwinds second continued food on a to limited improvement in increased savings also extended for combined sales. of leverage pleased points and September, improvement although to the we'll Shack basis and all paper open those quarter, pay packaging. commissions This The the anticipate Due our we compared guaranteed shown extended XXX recovering to of expect be sales, in bonus pleased of into in. increase changes of was to the an to of enter had quarter to shack-level in we're Shack the major the will beef. due packaging the Shack And of partially remain in offset support the our the we paper fourth due in

of as expectation quarter, significant a due the the COVID our I sales to number as pressure will ongoing face our the across as onset well that back look of to mentioned, we As colder fourth of is environment the regions. weather challenges

Shack-level improvement pressure. Shack-level to first specific the in however, our operating profit, performance any certain fixed With in sales leverage management being combined safety the P&L, our to teams the face margin in and expect the always quarter ongoing fourth with guests, also elevated cost pandemic, in the operating Strong costs we to of the our continue continuation terms priority. continued with will highly costs, recovery of of of on correlated

Moving With $X.X in we've strong noncash third million through on in gradually investments our related quarter to the sheet, million, which $XX areas the increased balance to including was continued and a items. recovery key quarter G&A, business. the third across

remain While to to particular opportunity investing slowly ahead. but on on also recruiting and and significant initiatives, growth opportunity. growth meaningfully. the development, digital in preparation long-term we're those as that of for quickly ahead, committed marketing, order team the the and in bringing back in we size We focus our have we on benders In bullish reap

out remainder expect of the deferred fourth third expense through of our the yet spend look level but fourth related were not quarter with the to Preopening as we quarter total $X.X rent same to $XXX,XXX approach noncash XXXX. Shack quarter in spend this As locations for of was possession have the opened. expense G&A we year, million,

year. a and quarter back to fourth increase XX meaningful this should will is development to first that Now the the to which half opening for is more expected units spend number in opening XX the back as full of through sequentially XXXX. ramp of we up to complete and those mentioned schedule than schedule, double this year's A we open

team. pleased and to of time complete diluted pandemic, inventory fully we to like phase around Project focus achievement in rolled final Project million confirm now challenges loss net savings a system a and team is our pro I'd an $X.XX had incredible which our thank automation this On conditions. for or challenging the such the Shack fully Concrete, centers operating basis, exchanged despite has of forma within adjusted management entire We're supply, of share. to for Concrete and and their a $X.X that the continued per Finally, Shack-level work successful out all global invoice with on

rate compensation, quarter the XX.X%. a year higher is at prior full of tax forma in included expectations of tax appendix approximately line credits. this And adjusted slightly in Year-to-date, state the time. reconciliation XX% is that our the our with of is and rate rate to tax a quarters, supplemental materials. year our Similar and to in guidance full lower our stock-based mix of impact Excluding combination pro than tax primarily earlier third the was in due given

end that to that, in for up the the do generated road with Our foundation is back quarter at performance our capital construction balance across with do, XXXX recovering ahead turn for as in balance a performance but of And to flow however, quarter. expenditure us. volatile ramps focused us. development I'll on growth map robust during quarter very new free improvements time, an back fourth positive comfortable challenging securities million. profitability We're business. We cash significant of strong from of of to remain our schedule pleased company sales and for have our is the and our Randy. ahead our clear sheet, in the expect and the We're was pleased with strong we're digital increase as cash We the Shack used $XXX.X the you

Randall Garutti

in of is more hard places, in opened trials of It's of we've Thanks, ever today's Throughout of Tara. the all not Madison I over Park. each do want our have occasion. we've Madison the Shack share could back and the call milestone work this Wisconsin. be Of perseverance our Shack the end from this on count noting us could we in We XXXth loyal none this seen suppliers challenges. a community, dreamed recently to they last journey, than our us XX-year good purpose teams investors. them for that world. of had to coming Square proud into want team our first and I the guests enjoy ways with to I our also to hospitality something their members, that today. uplifting our want fans lean inspiring -- more creating Shack stand our carrying are to team I first to got provide all, thank Above and us to experiences, Shack ever is Shack while stuck could have us before. are back that always where in for in

ahead that, your and healthy. families we safe, stay stay up can You call with open operator, questions. And go the and for

Operator

[Operator Instructions].

Tamas question Oppenheimer Company. Our Michael comes from first from &

Michael Tamas

you the Obviously, October on several but well. I over the gave hope numbers, months. as sales cautious pretty you us everyone sound next

locations. strategies talk off-premise general? locations parse right urban Is now? you a the happen? locations, of you to suburban about suburban you your just just where of there nice between And you're that your maybe can that that out some think can clearly is and for are So anything Or improvement kind in going what seeing sales driving is

understand a So to differences? trying those of couple just

Randall Garutti

everything days start. sales. first Yes. we've I X previous Thanks, Michael. given all, of I'll mean, of but the

better look basically everything So every you that sequentially through obviously right? stands. improvement month October gotten at October. have where mid-quarter, throughout tremendous and with has everywhere, so seeing our quarter, you're single region the exactly through If having been COVID you best

have I up So date, cautious. year basically, to you quarter-to-date, to be think

have increasing. As Volatility, COVID look election coming cases up. we you at out an

right there's think a I unknowns our in of country globally. and lot now

economy. case You Europe impact how may and look at their that in

team I cautious. at Shack extraordinary you've continued X/X the to I I with recovery happy our that momentum We're how be mean, just and moved us seen, think has forward as which we level, has think recapturing, to really is work. have -- profit our of the nearly really,

feeling head good being being way next season, new what success, we're disciplined set no cautious in into approach our our We're for prudent back, and in and up spiking preparations. we're really as outer cases comes cost coming we sure months. make our So in a about cautious, our these few we momentum, and but management, the why

Michael Tamas

down you about solid. I seems sales just bit, your the and margins margin relationship sales Great. And pretty then a can between doing little XX% talk are almost XX% when margins? a mean,

others little reopen potentially dining back create to anything a to something have full longer as maybe this some get and trying as a the strength? of the in just of their rooms that's here. So bit in recovery, there that back industry sort just margins pre-COVID sales choppiness understand, back quarter above you level. And term, margins about talked getting is kind full Is in unique continue could to to think that of get

something of COVID? Or about you sort side you are that the achieve? other a can margins path that how there on guys is that? guys of thinking to you So Is think

Tara Comonte

we're yes, mean, pre-COVID to And really a back that third Michael, as margin we you in think teams The mean making alluded that doing I I progress the that Yes, XX.X%. the incredible quarter obviously, pleased to with at getting are job good the Shacks up in an and improvement improving remarks, to line number on with and with performance prepared I these quarter. can the also sales. that does in patterns. throughout follow see the

as higher in of sort so specifically I nothing environment. are was margins line the quarter And call item into type across improvements company. why as in It If on reported. winter we would labor tanking And bonus, that's when And continue numbers, anything, as in in on we've comes our we in the we've also paper it teams. put still got after to that paper made than those equally of this that cautious there's of that as the as looking food line. premium the work pay, out and an particularly we line, further some the head packaging headwinds really and we're those they extended great focus to yearend in

path updating expand margins the to today, to longer start when on And due of business. we're at term, pretty to help even the improve now, and bottom recovery. to any and we're very growth we're anything we're in the those delivering But got small to still But margin back healthy company. not term, were improve. And growing we've obviously extent to of right focused numbers long that the outside of comes more a -- updating and digital then before and to those back successful long some that to the at are it top line will we So on those sales, very target expansion, focused term. date not those opportunities getting looking format continuing to

Operator

Truist. comes with Jake Bartlett question next from Our

Jake Bartlett

progress September And inflection My it's there you what making. whether and to just was indoor frame, I'm on and the and available think being if then congrats And all really additions in in you the sales question that, which chicken the drivers or dining also can just biggest the drivers hot would How increasing October. kind hard the demand, October? whether to it's of and you're the August biggest frame the about wondering maybe the improvement September increasing sandwich. out are to from curbside you the work

Randall Garutti

Yes. continued point. economic of around dining at Jake, I they've We gradual think had we've We've dining our this quarter many people had rooms had recovery really been a all sense, an are open. returning. in the macro third rooms Obviously, X/X through more open important.

That's the Chicken, right? And biggest People love fun So one. always thing digital. helps. a really I item. towards Hot was great you're come for it menu But a commitment regions. helps. our continued that the That be and they seeing across and And just obviously obviously, it work it. everywhere, that, back You're think seeing would it

Shake our said important that to are coming look through Both to with That's If and through you continue really held And and in to Shack something sales of a we continuing launch people we've sign still end XX% earlier, getting digital. roughly a how basis really are at to has Shacks, its deep our app, we'll excited hope, making XX% to channels third-party continued are I providers limited our return. in in our year we as that. on investments towards. service using from good of the business work the sales on delivery statistic great of that to there. be We're keep delivery better. better and a out We're partner felt this

right keep our continues, for is be So and it's parts, of has lot a to trend a everything, goal goes. moving to X that we how months. to see straight a of just And now. the really very we'll but of including it positive There's been going. our right? And hope a and combination That clear teams ability pivoting. trend forward-looking lot positivity And keep that reasons

Operator

next comes Our of question from O'Cull Stifel. Chris

Unidentified Analyst

This on Chris. for is actually Alec

opening it you recent XX%, in of full development seems kind these at year, up past? And any Can pleased sales sort to of help will years seen you perform you're openings talking pretty kind with Your Are to resumption performance. have levels? prior volumes, next the? relative we XX% how schedule a of of shortening suggest frame

Randall Garutti

terms barely in we're all same press. right? now. right doing time this We open them of We different not the huge quietly kind by doing that of try at are market openings to strategy. Well, really We're around, pretty actually

I great some the class We've as you that that some before, think it this about this ones shacks late, surprisingly when I well given opened of COVID talked opened -- the we've And we've got last and look mentioned, impact, that's right? has of doing be at country's of real Denver Pasadena. flagship in We've in area. the the standard Creek going Shack a free university in in to Cherry one got Colorado Seattle, new shopping we're destinations. village Upcoming, this great outdoor year.

there to kind we've So as company is which this average, performing. of we we I continuing is that allow. a been of class, how craziness the without noted, I And hope the be different exciting. growth, think above will we're excited The perform year, about right, kind usual

limited the of open sense. many dining we a by with or in restaurants, these no way, So limited works. digital them when And we open,

going come. shacks opened returning more year get at So in just over to our the excited We're and XX the to to to and get for those really restaurant open internationally. a that just on Philippines. time. back XX had adding we are things that we've adding to we've that's we've XX We had this on, been to next called super pause, seen, today We ahead in previous And as look to And we work. to really but the got continuing we're country, XX to exciting, out. growth

I to surface keep we year. for think our scratch goal and back barely that the all at towards unit of we're getting And And looking opportunity. is we're increase So models the next opportunity going. it the

Operator

Instructions]. [Operator

comes question Bernstein with next Our Jeffrey Barclays. from

Jeff Priester

actually Jeff Bernstein. Jeff for is Priester on This

the into dig little higher to wanted Shacks a average bit. Just

mine or an customers per what to pandemic, digital of of maybe added entrees of adding they are trying in the for in Just trended or dig may on is kind it's of the latter, the learnings if restaurant? the individual parts not order the a increase on side order have it's into how they if more have from number of ordering just just customers over the any additional number things of exploring it whether kind each or

Tara Comonte

check, broken when of the that mean, ITO to continues we I is But sort was be channels. pandemic is Yes, back we've our by always some. other haven't Tara. than on down we look through This And the case and digital entree. average seen higher what average the Shack

as it's and pandemic higher significantly sales, it as much has before, representing through of as the percentage a overall increased. increased So that mix higher well was

about And that shift I'm so really, that sorry that that's of kind force. of. is the strange sort

customer sort is a when hard But see that's So true tell to that impacted really these we of when we shift And XX.X% always certainly look price/mix. looking check it's always that's what pandemic, that going a you're and at last order. checks. per that per of items months this generally to people X of we the at look it's the sort more through consumer be case. But it's behavior the at

generally through nice when like a But that. LTOs tools things is have items larger group check a using for think of orders. So host whole it's we doing team long and really marketing increased the speaking, we job

Operator

comes Our next Northcoast James with Sanderson Research. from question

James Sanderson

I wanted little store margins. a detail dig bit to about more into

September? levels, As then I I that about would weekly have through. in the understand average your follow-up at you sales, And October remain drive a that XX% can saw assume we like margin the stay I store they on if

Tara Comonte

Well, we're statements margins. not giving any forward-looking today all around at

the are. results So and the just that best you with world is trust keep think, as volatile as we I changing in do, can they a X is up-to-date this as

has through you them this at each one P&L degree our line So volatility. and items look a that of in had fair of can each pandemic, of

make today where But base paper it has packaging to stabilized, elevated. for think but enough forward-looking hopefully, you it I levers giving So understand wouldn't to would And big -- we're are. we're helpful example, the basis. that continue statements on color be and will to pleased that be be

marketing things. by environment mix labor, on various have COVID broader other will impacted like in, a mentioned, the it headwinds but and and coming line there relates potentially with the teams I to done and as As other the delivery great job OpEx we're back be COVID things continue to just still the

given sort additional to to but we've today. data the hopefully, So gives talk nothing of you color, some

Randall Garutti

generally, got that can month higher you And XX-week you thing James, X saw the into third op the is profit in off that month, understand period which in contribute in a just Shack-level other to September.

So when comparable a generally, XX-week it's not about thinking compare you're XX-week a to to that.

Jake Bartlett

good. Very

technology the not Now the things boards a prototype. quick will if of any other that technology drive-through described you'll the drive-throughs like maybe window or to accelerate payment that drive-through sure have other on you've processing will just digital digital at, follow-up you're enhancements. whether up menu at the that, looking I'm throughput, link

Randall Garutti

haven't yet. We

make I to cook we to our the to drive-through world, for want not KPI operations order. the We're to to drive-through us, fastest of -- the take that. continue We things time. think right? do And will still in going that we're going

not the we're most fastest. going burger the for highest -- So quality, for we that done. we've going will premium We're always not

likely really want good have want to simple. pretty we'll digital that way. also a some it order option, keep technology in this So involved We you that. We'll to be someone's if

like Shack through we'll to and and you that just more available you their Track to want really engaging Shack. however more in option preorder, If have they get for and travel people

to we're can it. questions I to going lot answered. where this some So year. go. noted, we've We'll building of as see rate them. this this A And really of a to be we're want to about got And commitment be number We first make excited

Operator

& Cowen Vieten with comes Co. next from Our Brian question

Brian Vieten

Okay.

development the these what over kind on secure to But and to just maybe guess than bit smaller savings there maybe I context of some are drive-thru, as years, follow-up higher of to non another for in finding cost. one a of the lower it I $X opportunity competitors $X drive-throus, developers the for mix your little in the a time. it's Tara, with was million past sort think that talked of couple landlords, that next XX% cost. just the have spoken for a offset of the Just the And sites you've presumably you restaurants Are of will Appreciate drive-. build million? historically of drive-thrus these around

Tara Comonte

ahead learning of us. I think we is this, this have all of all that of

yet. built drive-thru We a haven't

mentioned, year. As the that late is Randy next

have right I once data back reserve to think points. of some So you to we will come those the we

Some of formats these through new drive X of is them.

Some build spend if those for early they remarks, of not do, on a But mentioned market them, is expanding higher addressable really We're them. that excited may it's and in yet we Randy touch even these but And new in us. very prepared built. our X as CapEx result AUV to focused we're we'll see. formats days opportunities about expanding

to back of you we've come we'll So those when got some learnings.

Operator

Our Drew next question Baird. of comes from North

Unidentified Analyst

been I a attracting purchasing app. think mentioned first conference lot on that brand your time remarks you prior earlier on customers to calls the new in the or prepared or of you've

So with on I wondering engaging if of customers? you've data, can customer, maybe newer demographics guess how more any I been collecting the share you there's brand to are perspective the customers that your was legacy relative that now

Tara Comonte

as channels, you out. very rightly digital really it comes have Yes, that with purchases we're point to Yes. we're numbers when really new pleased continued the we those on strong

So of tech infrastructure marketing nothing sure now in And demographics. And that we stages terms both leverage the that build today really early to those specific digital digital numbers. share out really, with of been continue we'll We've it. pleased of infrastructure, acquisition continue that very to in to that. we're can still very to behaviors and those make

our that own on come exist into We're doesn't channels. Webs It your on focused pick delivery service today Apple they're currently and a channels. Now have as up order. to our bringing

the customers. behavior, these sort puzzle everything all them to -- to else more point, a within across allows and demographics focus across Shack and piece and to could better will really all we final focus that to sort those on almost that you relationships forth. in Shake of and that your to the be frequency offering anyone of bringing segment those of And start So build us can where holistically ecosystem. talk And referrals on to so on on those within channels on so and that

We're far. right at journey. We so about really the progress of the that the about good progress excited we're beginning very feel scenes. behind the So

out lot building been that have data that a infrastructure, and but -- particularly those tools we to learn. As

days. So early

Operator

Our Raymond comes Dan from James. next question with

Unidentified Analyst

fourth Brian. closing the Dan pre-COVID seasonality last out It's could on through color about average perhaps How provide has on year? typically sales for the quarter, weekly the quarter? year, Thinking played volumes in you Docherty out some that say,

Tara Comonte

as nothing want we quarter mean, give to it would specific fourth today. I Yes. Honestly, expectations. really relates that to you

step see is we've a a states something portion as volatile to our a step the honestly. in I for dining forward, with talked to period we've regions a about capacity today COVID patios this, we're and significant our city and and think that and of a majority we sometimes are of to colder relevant that's where And an help waiting even issues. changing whether using fact still you enter got some outdoor environment of seasonality as go capacity back restrictions about those weather got Shacks

specific we So this. fourth sort volatile a as is and outlook less the sort of an as guidance think something seasonality, relevant specific not quarter. Hence environment of in that giving for

Randall Garutti

our We past weekly seasonally, Generally, if generally. you third very average in the quarters. just can you slower in strong And is at sales quarter look you Yes. have quarter years our do right? see see fourth

that's said, different then the generally, year. trend. Tara kind as a So of And this is

on So has every we'll that. it month eye began. can see -- October, as increased sequentially We're keeping since COVID been see. through an you It's

plays if seasonality really that see that's now. same good So out news. We'll

Operator

no over comments. Instructions]. for are [Operator further would floor like closing this I to management At back to questions. there time, the turn

Randall Garutti

care. appreciate a you taking Take busy soon. our I the Thanks busy I time. seeing your it's a the and Appreciate Shack for so Look everybody to time. really support night team. much. know and forward

Operator

Thank you. This concludes conference. today's

at for disconnect time. Thank this may you You your participation. your lines

Shake Shack (SHAK) 29 Oct 202020 Q3 Earnings call transcript