SHAK - Earnings call transcript Q4 2020

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Operator

Greetings, and welcome to the Shake Shack Fourth Quarter 2020 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Rik Powell, Senior Vice President of Finance and Investor Relations. Please go ahead, Mr. Powell.

Rik Powell

good And Jerry. you, evening, everybody. Thank

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

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

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

the X-K our our posted for Additionally, we an our the over on which Events And Randy. earnings call supplemental and section to to be materials, quarter. quarter that, have fourth found XXXX can Presentations the as turn I'll in site, exhibit with or

Randall Garutti

Shack you, these times. safe are and families Thanks, staying through good Rik, and our We and community entire Shake everyone. your evening, hope challenging healthy

overcome and the other our while way of grateful so came continued recovery I'm communities. our our each way XXXX, proud led on chapter the that close supporting our Shack has family obstacles we the of and business the As and

uplifting of pandemic. on remains thriving more this other We side to experiences an ever. we're while the create at this volatile, the a Shack to are than community moment reality And today working endless pursuit on build

our the from take on weather QX through full days more loss financial closures. results and due results Focusing with Shack step nation. across experience did to caused extreme encouraged It a partially built our partial that or February momentum XXX than operating back, progress, the we're January. the

However, a turning from COVID year the weeks looking we on continued few short forward are just away of dial to recovery. and a

see third to fully take northeast certain to and recovery of X Looking to $XXX.X the year system-wide despite the the will dining in those fiscal closed. varying rooms with At and in with be strategic delivered as grow of the pipeline acceleration to prior which we the sales when by positive growth third roughly pandemic, southeast, against back the of and initiatives, compared improvement foundation regions Shack. set quarter, will Even our facing XXXX aims remain but for capture at operating pleased getting QX, end all in believe still returns. restrictions, as the hurdles urban and there great on strengthens hit we're our business December. the opportunity the To We've our across compared time, right many sales the to our for same-Shack in to Despite under Shacks new sequential November to that We and that ways. a suburban growth. under people much to opportunity were accelerated robust of with evolving we'll positive the regions following of us new quarter. to Full And do market got development on down formats the our such the markets, in quarter. that XX.X% of areas: in markets with gather allow down executing and with we in we'll so, lockdown, country our report it addressable work Shake resulted existing the sights of improving of ongoing we're to especially hardest still closed QX, to real our be each as meet XX.X%, challenges, development demand degrees again, close revenue track and million, continue estate we versus exited know concentrating the there. Shacks first, half flat our

on digital our tools investments Shack capitalizing the channels, on Second, down those in the and adoption Track. of doubling especially

orders the XX we've traffic, dining. which added far, for flow in-Shack and guest of experience So exterior windows, the have improved

addition now delivery these windows. orders app through X/X about of In and are web orders, to picked up

curbside available show to than great potential. Shacks XX more at program Our also continues

to for Shack not terms this by boost on experience working that every suburban we a our hard removing given past. further opportunity an term, Although curbside allows in guests especially all as long their format, see Shack convenience that in Across existed sales location, the layout increasingly of feasible Shake friction at is our we're points markets. Shacks, level to

we smart Third, to menu and Elevating of classics offering are expansion back core of menu our existing buzz including chicken, categories, products. custard. on and focusing worthy the frozen beverage getting our LTOs, eyeing

the over and stack company-operated up representing year, in accelerate X in XX new unit year-end a XX than more for Finally, between XX% the can opportunities Shacks about Shacks, and Shack XX to career development, we total, to we to benefits into jobs the next we Diving are continue excited while our we'll ever. growth, creating teams, XX ramping and safest increase development targeting offer, good for this possible to to to XXXX Shacks XXXX stand our for really count enhancing building something years. be communities, we our

including designs. Despite And to broadening multi-format we we'll digitally City. Florida. ways each a formats the markets, footprint of strategy class in urban Shack our one. and and Tampa, looking Northeast incorporating In Shack New incorporate those significant allows roughly formats, Shacks building new see of headwind, company-operated approach we'll Shacks today, ongoing our of York have areas windows, us have be new the COVID of walk-up such the windows, in pickup current XXX across and even will drive-up we Track, a broad And a opportunity Portland, led opportunity just country our will number markets California, the some XX% growth be of At pickup as XXXX, Track to mix enhanced within form of in markets, each existing including such the be experiences. suburban For market, interior which of while hometown will expand curbside in our Indianapolis and more. rest

more. average drive-thru than formats, with overall in to airport Orlando learn, through to like More million year there come in see Shack a business, later with gathering gradually for ever to continue X experience. each and as sales our in incredibly our business here overall continued elevate world, leaning Minneapolis, this those around back Detroit build the with convenience much digital that Shifting safety places years, communities also number fourth. us Shack our enhanced You'll planned and as our XXXX and partners the fourth offering into and but to to license quarter was a stadium more new City, heavily excited improving the comes our others in our of businesses. our and the while planned we're for of drive-thru, third $X.X to to places the tools. recovery continue just is next journey tough and Within and going Kansas first we post-COVID the world about and in especially us the that many We opportunity saw from steady quarter million in ever, to great and markets, added are weekly the domestic enrich in an $X.X neighborhoods the

United first this our due particularly to in However, by weekly taking with couple quarter pandemic. million volatile Kingdom. remains fiscal just environment highly step company-operated January, to volatility fourth business, from significant like continues affecting in be to evident the of months of in back sales lockdowns Asia the and was $X.X license the year, the a This our and impacted the

over impacts increased XXXX. in trends in also the QX in sales lapping to year February. last million of weekly recently to started $X seen that However, we're Asia earliest COVID just the improve now have Year-over-year of

United of closed our Many closed, how clear play no with of continue will sight in or line locations season while our the limited. sports in have remains beyond. States, or 'XX airport is stadium greatly remain business so out Here traffic to for the reduced travel

grow license we're to worldwide, XXXX, Shacks the rollout a tremendous business. throughout most and XX and Shacks see brand to this, We white licensed new We trusted. to in ahead able get of strong targeting for licensed Throughout Shacks space some be our we has real our in years. and in and route intend business, Asian increasing year our substantially term and as XX coming globally brand. the to and markets. compelling 'XX, our international scale significant view on a near in focus XX open these hold we premier level to critical hopeful China recovery to as However, of part the highly over with next all global this It's we'll and we see we efficiently estate between and between some look which continue, 'XX, year. operations towards of the We're broader the business the vaccine a accretive back remained XX of

Moving on products. to our

ingredients to deliver an elevated delicious, on uplifted classics pride working quality We're serving bring versions of experience, to commitment As ourselves from the premium continually craveable and part guests. our sourcing fun items. menu of we and made our to modern,

company verified. Animal milk who cage-free and buns growth that non-GMO hormone-free hormones. As proud source Welfare not eggs, to use raised fresh, XXX% I we humanely source Policy, and our in farmers are from outlined do proteins and vegetarian-fed, artificial We're use antibiotic

Chick'n expect perennial continues with and suppliers. guests strategy ingredients to to back. bring a from be quarter our best best-in-class the Hot to one successful we The lineup, featured serve Our our fourth favorite

company family Kimchi. Korean-style on have our in off small in high some a developed - we in our we amount so focused Portland, and a huge and chicken, limited kicked with kimchi buzz, Oregon, As so sourced much incredibly that and sold out. launched our a Shacks run operated our of with demand even This of increasingly menu, Choi's featuring January Korea, with guest from extended South XXXX in partners South chicken media offerings

chicken and LTO as this exciting an for frozen lineup categories such well items plan as cold to custard. the burgers, expansion year, premium of veggie featuring and continue We as beverages

strongest Our later confidence Winter one hit exciting a selling premium-priced adding in and menu trios quarters. of Citrusade coming our us the year. some the to this the big giving got We've beverages up flavors lemonades, new been keep lemonade X of has next to

we'll and our more be looking those. brownie current chocolate sugar menu, Shake year. for the have On popular tuned hot our black and throughout batter custards stay offerings, do shakes frozen to So with been vanilla

Our more over marketing these to targeting year, allow capabilities, our our we'll and our Shack communication building product well across time invested as as been on digital data more which improved us in We've seamless with initiatives guest strategy. in digital suite, this heavily channels. we've personalization on focus culinary will drive along moments insight both and experience

Our on national partnerships, others, including across and digital series an moments recent the including the users marketing some organic a YouTube robust chefs some through best digital examples collaborations, country. of campaigns worthy to innovative creating program. fun already continue top We'll engage buzz be of social of from through Waze,

entry-level program team. maintain for development future to Up to Finally program XX-week employee Shack. to air We Board promotions a promotions. managers a from environment initiatives community teams Shift Fund. systems workplace. careers one Shift designed and for committed and by Rights in Up environment we're working and we UV made opportunities Education and and an the skills the of in Food working recruitment our of financial a to the to Shift Shake proud created is safe awarded We possible extremely includes encouraging of continued ambassadors within. and been this of decision accelerated the we We're growth, year year the continue enhanced to job as training recently we're A leadership enabler provide building state-of-the-art the invest a most LGBTQ+ the keep And of with the most and light educational our professional, Up, teams of teams progress third leaders progression nonprofit, purification Campaign in Shacks. for Equality guests clean call of a a in growth support our and ensure through Index in for brand And dining to key to safest the our with our to initiatives goal proud we're our partnership is like Human and within and XXX% new Corporate in creation for going the company. and the the have program score row promotion launched for in importantly,

every the Our support Shack, goal on investment the ensuring we team program ladder for of in learning, entire that those for our of can breaking hour this down prioritize the paying spent progressing and up our all and includes exist and with barriers at opportunity diversity, team. inclusion equity fully

Lastly, Shack opportunity continuing to a proud and Shake DE&I promoted of on a and equal build a women already we more to minorities. the for to strong over ranks life. all the everyone with that committed build rise through people, of career share have we to to going place we're believe where company than has that even X,XXX those XX% in through foundation XX% We're is and XXXX, to challenges under-represented promotions

know team's an from Tara been environment Now our this pandemic. to recovery that, office team thankful I an ensure proud financial of while this our to more has and leaders, support performance. do. and all we workers. tough We're on with incredibly update for have so a together, home for to work, much our continue members restaurant incredibly also over And remains for who team I'm and pass I'll the so

Tara Comonte

evening, Randy. Good everyone. Thanks,

normalized weeks fourth our calendar a additional this Before quarter that our where few we a we've week, with financials, pre-release in reminder for XXrd get and ago. the consistent our into performance an contained quick the appropriate, fiscal

quarter quarter compared million the third solid you we to year total sales in This full year, fiscal $XXX.X compared Same-Shack additional sales positive improvement Shacks. to down an price we of sales to by quarter decline XX% our third in sequentially. increase in As across traffic XX.X% the the a quarter due prior in to and during step annual the total was took of same-Shack XXrd XX% same-Shack the Similar an just channel down sequentially, also nearly from in-Shack declined increased continued due heard, of the in of the quarter all improved week, continued X% average in down Shacks, the third suburban a flat to strong XXrd quarter in approximately to forward compared driven decline in another quarter, fourth fourth quarter the in digital third sales the Urban for $XX.X from and the third fourth recovery. although When fourth. gradual XX% $XXX.X from years, the of menu mid-December and week the inclusive and delivering XX.X% prior underperforming exited the saw continued increase to XX% performance. our on versus Suburban sales company-operated with improvement improved quarter. in still primarily to growth million year recovery million. fourth XX.X% XX% the of sales, revenue, improvement excluding to revenue

end fiscal compared the delivering our see average an we continued and with last year. of $XX,XXX, were X% fourth XX-month trend. the in weekly growth the of majority increased continued significantly further the increase improvement average with our This pleased average weekly to sales the the volume of just was pandemic weekly million, lower impacted quarter, sequential by $XX,XXX in January, same-Shack this and seasonality to $X suburban quarter, the beat seasonality trailing X.X% down of As sales sales quarter, X% Shacks fourth to during a in unit sales in resulting over with improvement vast Average of year. the were typical fourth of a

the year. and by days the Through X winter the on February by the capacity, with was across of until weekly the closures. operating our Randy Despite traffic been weather full country, were period dining February, impacted resulted a same approximately XX% sales which versus cold trends has and of with As last mentioned, continued volatility marked in we extreme in decline business. impact, the the snowstorms of sales underlying both pleased fiscal weeks same-Shack XXX partial recent COVID average $XX,XXX, first and

and urban As about mid-March however, of in remain initial since we the near-term approach especially COVID, the in our extensive business. do, sales outlook, mark cautious X-year we impact our

we further optimistic recovery more we're However, warmer and enter as look spring continued to out increases gradual a vaccine distribution as as we and weather.

opportunity weather January stayed terms mix of sales ongoing first in increase own and year. with perform of to high this our nearly sales Shack year, of sales closures ongoing levels at much the to than recent the dining through the XX%, in and the fourth them other of our February, new continue in weeks at increasing In targeted frequency during guests Consistent contributors mix, X app channels being additional digital with XX% digital those million X X February, app start our year. colder Shack last and this purchases and web of the fiscal of fiscal main higher quarters, well. has with we've mid-March have over within web, weeks quarter were first more XXXX on channels delivery XXX% of personalized the ability momentum as welcomed fiscal and the channels. same above last XX% in room In and Since and manner see period important to a versus communicate up we in representing our the

today way, $X.X digital-only million, and Looking and for moving they number impressive of highlighting terms overall when of annualize at a our strength both we importance sales, in clearly weight an another of digital digital QX AUV business. our equate digital, the forward to

delivery uplift our orders channel. and of We're through with and early second unique than We're roll we've Apple our to increasing our We integration One in date guests since in impact of menu piece handful late ecosystem. our guests Shack XXX ability goes lever potential this working for some company-owned at its of we're selecting in new key Shacks The that incorporate whilst phase, nearly pricing, end the to the partners our time in and now opportunity strategy. capability testing quarter. curbside curbside too channels It's pricing channels over launch with and been as third-party given early to digital this of expected we Shacks, average experience, course, into marketing on trying as strong a reach, a confidence enhancement December, the in-Shack to of testing guest of the piloted XX% with the pricing increase, order locations. future full sales our to all own offer on look and focus the broader but of like attractive our And January, that help to any digital web we curbside still in on forward this target to our strategy longer-term this third-party will to we've you I'll sales relation in our higher the early the rollout sales over here values they're when of to gives delivery extended migration delivery looking As seeing within performance those designs channel. we to nearly of out a initiatives early price and and us across within the update half most maximize nationwide the ensuring XXX,XXX stages own We we orders is share to option, delivery prices expand that guests own growth. for more. what, all channels, lower of as offset additional integral third-party see opportunity is our in our of as X% the marketplaces. come higher to adoption the costs learn

XX.X% in fourth full year. the margin profitability. for Moving quarter and the XX% Shack-level on to operating was

closely As and guest very we we protecting safety, sales growth. manage moved the costs to and maximizing targeted through year, continued experience areas while the

points digital expense year-on-year included their proportion quarter in with benefited relative Food fourth week, COVID quarter in driven in the XXrd by a teams. of near Shack costs mentioned, mix. primarily included the and same sales, increase commodity bonus quarter to for fourth protocols. in costs and the Shack to expect a broadly and costs. which occupancy of XX.X% term, period other were than last due fourth were XX.X% sales, in operating XX packaging and retention costs high the approximately previously line was lines, with higher due staying In costs stable year-end prior quarter higher year. fixed place our program to levels to put line basis the quarter of with Shack As we paper underlying The we the remain the packaging the relatively prior Labor due

in total, through the a and our between fourth $XXX the of the our program, bonus, in investment manager guaranteeing teams million a year-end to $XXX reminder premium end XXXX, the gave COVID bonus members part bonus additional and quarter. throughout year of where, paid we broader These programs. hourly pay team of bonuses course of onset of were As to out of to an close a each $X we addition variety the the over in of

members our count years. nearly during our increasing tough growth each work, to support their grateful We equity jobs our eternally be these XX% our over and to managers to participation. grants the continue commitment the managers created last over time-off implemented team and hard home business encourage employee of times. first every paid voting across X,XXX and including office general election our issued to Shack program further to We and new by coming one We for perseverance year,

opportunity to and spending becomes them. flexible year also, to of January X our our care up this this in from dependent opportunity parental year. additional hours a expanding the leave We're as of including we eligibility of members, available paying wages benefits the starting increase Shacks to majority our our vaccinated broader to account, compensation increased part team for get launching length continue to As commitment this and teams the

critical our development. are their invest teams Our committed in and to enabler continue to we for most growth, asset and are well-being and

primarily Station continued XXXX expect in training and to out, Station Penn points new sequential basis support XX the members was to adjustment, which an of the costs Shack as in offset efficiency we favorable be for the Occupancy nearly week, additional occupancy inflation hiring experience in as in of year, Looking quarter basis in and to the XXrd range team XX.X% lower mid-single-digit expense and all short-term sales increased sales as the sales team the Compared quarter of environment driven operating we increase by we may labor partially in we fourth of versus week, scaled sales in to increased growth to XX were mix, due a preparation offset Other adjustment due the million, COVID-specific delivery current certain points third in quarter back of Shack the in with improvement elevated a across XXX compared the in looking expenses by XXrd the the fourth the by up commissions. in expected maintenance elevated XXX by rent the by recovery. Shack of the for return. forward, higher increase the quarter, remain offset support and closure Shack. XXXX, expenses as was fourth safety remain was our points $XX.X the operating costs in operating lower XXrd expenses. the a team to were benefit fourth near delivery related onetime prior slight the the commissions basis the quarter, due Other And the part fiscal of gradual the expect impact supplies fourth to expenses to XXXX, again the prior partially a sales improvement the higher basis G&A sales, to of in delivery well accelerated week $XXX,XXX together Penn to return points investments our other of compared by ahead. quarter quarter of deleverage. X.X% sequential driven term

XXXX adjusted including throughout we continue continue of we ramp and formats, our a We new expect data drive-thru to to is this spend our G&A our with fiscal as Shack-level expect XXXX total this number, increase in as test our the to Within million expected enhance to schedule, in year additional opening G&A up $XX from broad capabilities. between stage million, $X labor, compensation first At $X million. year, range to this a existing an million ways be markets be our for compared million, a share digital particularly fourth most the $XX robust and step-up and performance equity-based our around and Preopening quarter, categories. the accordingly, achieve following XXXX, higher development $X.X expense expense sizable can was we half increase in impact the preopening year. schedule preopening especially from unforeseen both Shack see COVID. cost plan in was this quarter in openings, back efficiencies a continue operations, find where to to by to per across increase Shack the optimize of third with we'll On a new for driven basis, XXXX X we

million. We and fourth both Penn of New to in the in Impairments our an impairment Station $XX $XX on which disposals million, the York, charge and to combined $X.X loss were charges. fiscal preopening expense home XXXX expansion be termination driven were Shack quarter a space million early of between related of office expect lease, our by with noncash

our to down us impacts presented the the opportunity office of with dispersed One from continue be home rents-related of our space, headquarters majority many the last team year and more were lower York our the to acceleration lease. write of in New the which period has some correspondingly our a of of geographically workforce, resulting G&A been located. the some going forward maintain over of City, where members We'll will the

particularly fully more exchanged diluted of in country, to certain fully functions. On teams a forma embrace widely opportunity pro adjusted the and back-office However, of an of or our $X.XX the $X.X we we basis, loss situated those per share. for across million loss be had some net

rate during tax full stock-based XX.X% of supplemental the A of can appendix and tax materials. with for year, the our tax our XX.X% the compensation, forma impact the in rate reconciliation fourth line in expectations. pro Excluding found quarter was of full be our adjusted

the income, specific Given on the resulting time. a this our terms recovery in at caused by COVID-XX pandemic uncertainty the be full XXXX tax rate we not guidance of issuing timing sales and the of taxable will impact

pro in normal be of is impact operating rate, XX% However, adjusted and XXXX a line in compensation, expected our levels. stock-based excluding with between the XX%, environment, tax to forma

sheet. balance to Moving

quarter and the marketable cash was at Our million. $XXX.X securities balance fourth end the of

generate up, operational although winter storms this positive cash Shack our we're easier, construction up for capital ramp life level, use digital through at continued as confident recovery, new way long but have still February flow a and didn't Wrapping investments. journey we through XXXX expenditures make as in well beyond. continue any we'll We and we to go this an as the certainly in to cash

strengthened that, continue you, an confidence We have an expanding generations We'll to that talented format business ahead, as focused with by further robust opportunity the turn class Randy. for invest we opportunity, a for I'll incredible to long-term foundation growth and a passionate it With to a back come. world against strategy, and on digital team. build

Randall Garutti

park years always began dog end with today in I has cart notes we support our to a a Investing roots Thanks, few communities in XX to ago. our hot a ESG. on since want Tara. been as

Good our good, something mission publishing efforts. and more be stand to we'll ever As ESG Something second the in for For annual we expand on And quarter. Stand are we focused continue second report than our our to evolve

our company-wide Shacks we our we resource and proudly program. bias make materials. meals We're other open our stay even This energy Air we built to can the accountability call ROAR sustainable launching we to regeneratively to We've pay, commitments pay, and named and you eggs. are opportunity As well cage-free teams, supply local X and to others. running nonprofits. We training made optimize we workers your change. premium thoughtfully, of guests as for healthcare provided positive back to and beef unconscious operator, plan addition convenience and investments through expanding with supported double a management to impact To our and the And in and promoting mentoring today, and as the we by Fund, diverse transportation increasing workers such in donations initiatives down families, on chain improved with our as questions. over give buying more any Justice operations sustainability frontline We year, stay workforce, healthy, the public confident of grow commitments non-GMO-certified and continue Equal and as We XXXX. our local use and to go ranched grow, a grateful to Initiative, our positive additional towards groups, employee the communities XX,XXX safe. ahead and for please Fresh that, to

Operator

Instructions]. [Operator

first The Credit Silberman, question Suisse. from is Lauren

Lauren Silberman

that been to consistent sales start, Or over plus mix what pretty just XX% months. sustained suburban that have being digital versus extent Shacks? is sustained? how even digital urban at several Shacks? then it digital in different suburban just And are So sales of to sales you how can about dollars - the mix, digital last And Is the reopen? mix markets versus or across share the minus urban is digital differs that composition as

Tara Comonte

with we're take digital very staying pleased me Lauren, that. high. let mix yes, Yes, the

you you mean incredibly look we've eyeball have get actually that dollars extent I in been of retained. within got high you kind - February. which can in levels the of the XX% supplementals, can retention sort of If our to

pandemic. sales So the the the retaining really of digital from point all high

the really sort of been base. It say, Shack of degree, to to entire terms urban across suffice isn't some a they've versus But to suburban. there around headline very really strong Shack. In differs the - a

million or welcomed go-forward purchasers be what X about channels, own basis. that with excited and on our we're super our whether app, can new app-web these us to mean digital, for a and So momentum numbers

Randall Garutti

it, And due delivery Lauren, saw was, pickup to supplementals, add, that in the that obviously you two of mean showed, this increasing and cold a a in I we first of in I'll lot weather. just had year periods we

will how - sales know been. signs of sticky I has none be or think us encouraging what the interesting that exactly

That's will as it and using more people Shack our tools digital as focused said, And Tara digital be gathering return begin last we our we'll to welcome goes. restaurants Shake people back using that where opportunity. be at to year over X and think dining to on. million rooms Shack, of what new Shake as I tools, fans to exciting an open the is interesting and

Lauren Silberman

about exciting Randy, then the you and just, urban And all suburban markets. talked Great. formats in both

I expanding how think on expanding And range just these are historically, designs an you're build cost? average out you build out cost out costs? where seeing average has the been also of provide about $X update million. build Can

Randall Garutti

That's right about think pretty the to Look, the expands. Well, we've Yes. this. about exactly range consistent it. been way

our approximately after while. right, in a million and this I XX-K. that pretty saying I'm in the and there been mean has our is roughly, preopening see about static cost for You'll numbers $X number

I see new invest year, is you'll this though some start in we're formats. of think going what to those to

little are expect to those on the a these So some the it make be to it the to of XX all. of it's format we now, core in great. balance of some give handful the back drive-thrus, going as decent to hold And a spend months, with elevated court location the time, there of we at we're some not amount and coming next But of certainly doing mentioned, bit we When build And should money year. want to will on the exciting. less to Shacks we'll we're spending us. the be really not the But out expect some spend we we some we XX this invest drive-thru to less then expensive And one, going Shacks, to same right this where that have learning some be them, of that choosing of that depends more. some Shacks sales. It do where in deal. of invest able still to food

we'll tuned, where stay it goes see from there. So and

Operator

is Goldman Garber, question from next Sachs. Jared The

Jared Garber

basically before, side Tara, follow-up annualized But you're keeping in AUV I million the kind build sort costs. of digital you how color the top on digital build if mind about $X.X for be Lauren's a just thinking this $X sales, on million, sort a line unit thanks of flip side, Actually, the you acceleration sort of but the with the maybe in rate of should to typical run mentioned of and we that that question at for think current new units, new digital running business?

Tara Comonte

Yes. number. Yes, you heard the annualized numbers right. That QX was digital a

one Shacks, Randy we've we're number. We expect said, on an But rooms cities to back this built So and to as XX%. to impressive and foundation. stay to continue reopen, is at AUV momentum to XX%, digital, the build mean and within it impressive this that of people - incredible out think in as an dining again I at point, and back effective number going come we don't just $X.X million. an come as work it's about

So this not updated and At AUV. target, we average today. roll it million and we're still will somewhere that level point updating in off haven't the that $X time, class

of many Digital now, one I getting to do that. that think others. them, there different right all we our levers the using disposal recovery is back our is first at full focus to and have are and

certainly important part how So but an we of there. no get digital, updates to that, yes, increasingly

Operator

from question Tamas, Company. a Oppenheimer have & We Michael

Michael Tamas

as that going that digital opened something what restrictions knows shifted in a forward? seen where or to the wanted have habits happen ago. of going forward. marketing areas, does may can restrictions, nobody just But of you those you sort happen you inform few anything have do over several follow-up think And about those up? to how did consumer minutes been areas I Randy going Obviously, sort touched less And kind and be you months what those last how it targeting? of whether you've differently like what's in on the on about talk

Randall Garutti

I last right? We and cases great December, it that to peak so now is few varied frame started COVID Look, ease. by especially in this over restrictions think really months, peak region that a just question. time January it's reached Yes, and have

good I are XX% We'd you this: Shacks form of when company. of our opened like today. a the point if our think of that seasonality Shacks Dining to open thing warms them. of limited up. we the lot A have the us. to some About dining rooms a are true benefit things for at been forever. That's our of look room this weather generally, really

So when closed. is progress of especially the hard us the are all digital that places hit need for But it with to have pointing to we we're tools.

sure exciting, City in our thing super we things. you lap, We're guessing Ohio about no just we downs, Upper only actually our you're the York the we're one City, times really offered that app. and year. myself just us script, - that to literally about own just as channel. as happen, guess the that's hopeful City, lapping ordering weeks and delivery builds last launched to those have test, make New York that from last it in or digital get delivery through within couple stay cases West excited And COVID the and whether look launched Texas strengthen vaccinated, when going start from through to as hope I'm people keep and momentum now out, good hit through really want continue hardest to or And New So important more I excited more that. New Side away but happens, we week can we're the business. the for and into And to COVID for that all a we've we our tonight of beginning is January, that we're Shack when my local app. it in as few continue that that. we're tools even be or That that. super just ups see that's one ends. clear there's low. talked so But start leaning done we preferred And I Look, we're excited I to it's we're low York And California really mean, in

get So tools. to restaurants to we're use and our that. digital excited excited We're in people for continue back

lots So do, about all to formats transformation. the the digital in

Michael Tamas

of kind around sales towards Awesome. margins maybe to And different at you bit? little versus talk start we come what margins like just go as you maybe up can way your guys? as about sales to pre-COVID about volumes to assuming dining think off-premise rooms might Maybe think margins? look Or a the some Or Is what best forward? levels. about look that you talk overall put back margins frame the accretive margins like could what's as reopen, elevated remains guardrails

Tara Comonte

terms Yes, faster take get can way to There on line, best the they follow I are to the the that think obviously certain us. term back - these know to yet there'll see that, we profiles learning we've margin within faster is in mean different we full some takes I I'm got on happy about of any extent a so ahead a But haven't The which don't that formats. we we line of short in margins will launched bottom basis yet, them sales. to of recover. be top some that. the go-forward of lot think some our longer term, some that's recovery of some

as can control mentioned, cost date. initiatives where be rolled be a to year, priority, a business, been There's safety where guest where continuing progress is the we with pleased throughout we're driving now, fit, the enhanced, out. spend right the can sales degree So where high see of experience to I across yet

really, the line top focus on experience. with and So

- You've seen quarters, had for to the invest this we last teams. - mentioned continue our we've few in we

off. digital as over aggressive the the come test the to long-term these side continue continue that's the across will just earlier long build and term, for some we way we of drive on as go continued that not for new we foundation that back costs formats. think the to of will answered I expand accretive maximizing strategy. actually, as packaging short And COVID-specific this, way top elevated on as out of really but a have just sales recover, costs going profitability this line, roll those And country, to we're course, through the continue we I we're focused term. But the to so the to We other again, question,

Operator

We have a question from John Morgan Stanley. Glass,

John Glass

in there could Shack both learnings you the and in, Tracks I if them sales ask First, from some curb benefit put of small the handful think side. just maybe I early was where a the about

those you a So X%? a in do Or yet some there's I obviously, you over days. do XX% know it an lift, overall? it's - could early And what time cases. you said But days? the do do there bigger to sense expectation have is Is check what sales early have

Randall Garutti

every John, we're tweaked factors a right, about it's many early. too super by just month challenging, way are it. Yet, super the with do normal because first a opened What at lot been I've it. with love is of clarity this. new seeing is it say recently, separation for to - Shacks time that can it, it And so of the excited compare. sales I And unfortunately, compares it's the are we Shacks flow. about nothing and it, live, watching so witnessing having other what

can When One just And food. a it's smoother. can get separate it's things smoother. get get love of to a Shack really area, we just out couriers window, delivery we and things And has hard Track problems forever your biggest that. we busy, in Shake when been Shack's have have

So why tools. for should that we're sales absolutely all look, a of it That's doing long-term our us. and goal building is opportunity it into Track be why Shack our we're increase

that evidence they generally otherwise the when it, of people we do is, have People do. are some curbside average it. whether said, choosing today, higher you As or the is check using and are

we excited but this see figure as go. direction, all good in dining be Track. how those things, a So there's return we Shack recovery we figure good have - as to it's into believe, out, going a to pointing lot of do out, on are to but normal people most as some rooms, flow we've got to I'm

John Glass

in terms - I way meaningful, if got just a about price we've to a wanted to second revisit directionally I'm my learned as wanted you've Maybe I is willing is. talk to total you it. delivery impact talked digital what just digital just ever be the sales, think it's question, wrong, that sales, I And as what margin, about of don't specifically think talked percentage you delivery about of but delivery. maybe given increase. and you're to and the just

standpoint commission portion X% what think one, has drag price last been on a the do And offset quarters? So by that in what trial from that increase? of of couple of you the is just margins

Tara Comonte

I mean, today. haven't put and John. haven't we delivery until Yes, this up point, you're right, we out

number. certainly of and So an it's has of within And for part been last XX% a that been delivery It has COVID is business. years, February in environment. the our the important few it

trying is, drive including you app, channels customer delivery engage our maybe have opportunities, long wouldn't channel, - certainly Shake can and own to really a different this consumer last before behavior. We're to reasons that experiences the out be use with the And by Randy, we enhanced and that set loyalty to bringing engagement. to. We of it's to guests to able and for you to customer provide split just home convenience. said been otherwise we and sort build then that look drive really that not delivery we that retention term to the where want acquisition just Almost be at One through and way around frequency business. because don't tools, question opportunities Shack of from marketing way the can in in asked drive to interchangeable, our I've these a of

of channel won't for terms out. It's what uplift In to or to delivery the in X% terms in terms a the its of that with of too literally infancy being over us term. yes, long It's rolled it third-party comes early cost. channel, talk a will in do

on OpEx other delivery drag to COVID-type commission environment. to that the in that to share, have Certainly, biggest continue you remains we'll certainly specifics delivery sits no while the one. is case. we a line. be the the update in expect to And itself but delivery and - elevated that So And line, it to

expensive. directionally, got back you're no Randy mean, sort It's it opportunity, It's bringing ecosystem. right. but a think terms as of I specifics, into we've I in own pointed out, So of meaningful. of lot our

of engage costs direct in allow that own guests forward and still invisible targeted to it it's on that more the third-party it being although us, it as suddenly of personalized as when our that does basis, much sort become deliveries, some in So free but with communicate a it relationship one doesn't to it's us manner us to allows through the opposed third-party a channels, when going marketplace.

Operator

We question John from a have JPMorgan. Ivankoe,

John Ivankoe

some near-end relevant but also for happened sense markets, a know what's most everyone I And competition reality was perhaps of had the But obviously, really urban root that nature if of both independent you to it your entrepreneurial the importantly, markets. I you industry survive of is this along. and, is in the what operators. hoping has to drives lot it for difficult growth. been of suburban a

do a even they where So before. has even near-end or be you talk terms amount weren't rate sense in areas, of a of cash that would relevant that, so the you trade is secondly, competition kind of crossing really, if of your out deals want loosely of must about percent, whether on much to And kind come I have the with - balance perhaps assume your asset desk million, first question. $XXX a sheet, it's deals your at maybe of brand

least of can some talk in there's kind at if of a been of may to near the weakened. term, which, have of - If taking you advantage kind about maybe competition, that way juxtapose

Randall Garutti

John. Yes,

hopefully, still hit Chairman, of remain reopened. competition, has Some you've mean, York, best restaurants New that many So returning city not people that, the or and urban the New barely That to his here I and reopened Meyer, of York. right? the are on in in our York - sitting work. City, with closed in Danny take seen will certainly Founder that rooms along in hardest especially Even takes - so And New for I'm dining friends our areas. time. comes

I Texas, you to go normally. things fairly right? If though, acting generally, go to it's so are different, Florida, you think

fast casual hit casual compete So might they're lot look some at we the fast well. a the more when Whereas winning, of with you our right? harder. dining you traditional been cover, has doing - elevated that food some or They're that of

sweet there, middle some and restaurants I been that in a spot less we our solely our of Look, here sweet been while. think and as it's to have be. I there's we've has spot. level recovered going sat be for will the And think always

pretty will back I'm creates in business, some entrepreneurs, In opportunity, over us are from that. a But great some swinging in meantime, hard believer capturing we're the that is We that come going create it the restaurant form for what the and estate term. probably especially near and benefit great to stuff. real

You saw it.

You and see it commitment our upgrade in more. do to

a estate urban in seeing Maybe got that's where we're sites, given it the real York drive-thru You're look companies, around that. that the we even scenario, in I'm of New City there great looking and - saying, spot. kind that should walking at every at, day have And opportunity. we've whether are wow, suburban, up many

So look we're ramping do, opportunity. looking a then I we're - that sheet look, we've we focused looking you We're been on approach, have the that for be at on net think all we're thankful been sheet we've balance growth. side, constantly up when that win great the And now, balance Shake born, squarely that. we and Right for of at will our since Shack.

taking. the here, it actions in you're we're seeing seeing it our You're guidance in

reason, special us people to of of looking we or we've that great in a meet can any at that our say that opportunities. has This use recover, can sales plans though expect commitment down take We're those cash today. made year. the G&A hiring so brand opportunity for M&A have to we great shared kind that the But want further demand. that you And guidance never. But keep this no for we will road. expenses and even for to always of never because that it we we've You're know seeing time you some

Operator

The question O'Cull, is Chris Stifel. next

Christopher O'Cull

but Tara, has the I steady seemed low average in look sales range. around been with months, pretty comp the the past know $XX,XXX the moved - in has few

in is quarter? So saw a much fourth restaurant as margin there in we be the I'm first quarter-to-date the reason just period different the would wondering, what

Tara Comonte

environment the mean, Well, continues because explained, be not predict. guidance, we're operating I as to giving right Chris, now, to I just hard so

discretionary drivers think That and we've is labor sort fact first the as in packaging right? cost mandatory we continue inflationary combination cost, - in will margin touched as Labor, in first deflationary and sales. moves So with sales our The about follows there increases there. on potentially We'll well quarter touched elevated. or of a beyond. we margin, line, we we're major our don't as the sales business the sales foremost, we expect In mid-single-digit have this recovery. inflation be to expect any major in food and of remain within adding anticipate through on. that that. the staff to continued you low mid Albeit Obviously, line, our gradual to of as

the margin, some the future, to At in point time they'll precise about transition. really the of that meantime, some and impossible I back come So the in And think recover. timing the it's Shacks goes COVID-specific will lessen have additional roll start costs start these we'll as on, And to in to into be costs. off. as sales

when focus, safety, the maintaining things, it we as it in spend really comes comes continuing guest - eye do profit. are to making our enhancing teams, whilst to generally that's money it on have when proven driving So in whilst that just it's the obviously very a the right sales focused experience, to close go. very we the on very initiatives. when And investing right been disciplined decisions that comes to And

precise point on or quarter-by-quarter a right put even to now hard a for too it basis just XXXX. So on

time. to in give being sort without of color you of, at to, little able this a trying So bit point quantify

Christopher O'Cull

with that a is as act Let performance, fashion I to I sales recover, linear margin this in me the recovery. mean, it that Is it there know - going sales ask way.

weekly should function an we or change average So where sales a maybe is a in or step a - step improvement there in expect a or the performance? - step level margin step

Tara Comonte

the Not would would mean, I I but only major labor - talked I is that we've say got I out. think that line call call I to. would I thing - mean outside I of as particular, not, of the those helped other benefit I that guess, occupancy nature. some compare mentioned, XXrd in OpEx in QX the you, which, we as obviously, fixed you have due week, I that is margin at degree items to

adjustment sort from do in to lease. Penn a quarter We of the of fourth year-end also had benefit $XXX,XXX accounting with the termination that

to there other I major But you So quarter-to-quarter. those outside as the to obviously line I items COGS, OpEx, than that are how now. a those, look think labor, called just out really that, depending But nothing else in where big mind delivery and commission one, right out repeat would those so two far, trends other is fluctuate. continues in call on and of that I've

Christopher O'Cull

order available its whether the company delivery has enough a to the the or just to one on goal own platform? one. would raise so you're your Once And marketplaces Okay. really last delivery own marketplace that as ecosystem, prices third-party the on on originates indifferent be

Randall Garutti

Well, best we our okay? want we'll preferred of and to as a channel. look, all we to opportunities. ways that want be those our want however We and price in people it's want That to order item rewarding partnerships the it's channel most in our connect to important the it the the marketplaces driving create most want, the engaging. channels, We the most Chris. important of said, time. And we those that have specific, they strength price, whether thing We believe And people have to great party. is But toolbox with digital will think sales on with areas. all whether the those, - full of in for form it's come over us third various includes

choose where on how And is brought now, And ordering right were Eats, app. I'm I want it Street engage And mix. all. see the have do a I the them our mind, I us We'll And to by to partner So going to on that's to I'm of and to Shack delivery see. we'll app. want to will hopefully, have Shack do that. they'll who tonight, Uber when

Operator

Jeffrey from Bernstein, is question Next Barclays.

Jeffrey Bernstein

I'm comps the margin in just a alone follow-up just Maybe like can reference But some I from the quarter. you Great. quarter improves frame month were color color the of get in you are out. that, can But provide compares Maybe of just a month January, the know - any said, terms X%. a margins playing as difficult on predict just out. comp directional just to said fourth down January, wondering out we maybe of meaningfully to from just of how Obviously, standpoint. very in you that let so so terms it's, a how

Tara Comonte

this we're mean, Jeff, I not guidance Yes. point. mid-quarter at giving

nothing So right current margins really comes to update to now, when it afraid. I'm

Jeffrey Bernstein

no difficult least as about of or mean, of I guidance, would 'XX about as 'XX that's know to back getting see any broadly 'XX, back directional the speaking, industry, the year there's a people XXXX in specific to and or then think of you the And broader back just investments 'XX terms but $XX-plus wondering talk 'XX? full return reasonable I EBITDA. I that's you the thoughts be making kind to can going you give whether in for year levels? to think 'XX assume that cost know to Okay. million 'XX in levels whether But just reasonable 'XX whether the achieved we through at then? in levels kind inflation

Randall Garutti

regular all going a away recovery. but do visual full I change. think a from just this, one sales markets our - Jeff, mean, high begin people, it's to time part still part our That's Square right? to happen. Times recovery, right? be We're and it's encouraged We that's continue a that a to to of company, we travel from that's we're And And all got if some we're see see represent a can't think to being We start - operating going of environment. to we've long be come way to I continued of down encouraged I for back. urban We're need the right? big lap you need help hurt. see about to how away that, to

optimist, going quickly an York to believe believe am recover, more New is and I recover. I going I personally than I most cities expect. are hope, to Now that

that. I think to will But going it's to begin take travel come back.

very detail. any it's think hard to certainly answer in going that I real to we're and to that, So today guide not

Jeffrey Bernstein

it. Got

in of rough any of guidance or it a not of kind annual XXX specific to of points providing any Just giving maybe numbers. to kind EBITDA of guidance, lastly, reference. or sensitivity, frame comp terms point EPS but then, just benefit whether of frame without Again, just from up, a just basis margin or

Tara Comonte

No, on able on Jeff. of certainly to couple so be basis, give a any it go-forward to Apologies. over to now, Yes. that really is accuracy with challenging nothing really - of right predict next quarters. right sort now We've the

is So to look In you lines, think to update what when it trying give in we terms possible on forward-looking this comes at meantime, as what as line going see giving it if we just can't of we year like, will seems to we of point you. but guidance. absolutely these much do quantify sight have color better the to various this

Rik Powell

it's here. Jeff, Rik

is, Page terms what be major of that of guide this numbers, items course, If you area to the of look prepared feel our we are outside XXXX. what in in of provided of at going specific the QX, in in just sort we've think, supplemental you I of remarks the can an sort that without terms XX,

Operator

Charles, is Cowen. question next Andrew from The

Andrew Charles

just of you the opening, southeast. And that's Randy, than the Page you the an seeing talk in about about certainly an within the that we're being guys and dynamic But southeast, at has outperformer you of supplemental talked outpaced X outperformer. northeast average. can more the industry looking been earlier been the broadly data, and for better southeast

for here curious to Just trend strongest just the talking why a been you the the guys, southeast region. little bit hasn't

Randall Garutti

northeast as has of the really back. step just showed They're the But well a pin northeast, regions. the same until February, line, January. you hard mean, a a as had really in was I to these with another. kind yes. reason straight I has in are bit step southeast recovered obviously, supplementals, down, strong generally, smaller or of incredibly It back. one think But this big Well,

really suburban been the I Long the think the Island, Those our Shacks model a New the in York for of suburban market, deem the quickly than Atlanta, in When New when core we have we we quite we've urban. pretty more Connecticut, That's in Shacks, Boston have most good. In what suburbs. look outside right? the to still strong. We've not have but pretty Florida, be named generally Jersey, People City, lot are recovered Shacks of that. whole around the in northeast moving we right? don't normally part, right, same urban southeast, at

that - is it wearing in would was, the thought how outside city was really masks, a of you Jersey I So a tale same a you world mall of in to day, I fascinating and and supplemental it everyone packed and shows couple there came weeks that of then every is New X have same in in was the ago ghost a was that what experience day. of and town, home you was that it charts on And Manhattan, our And to right the in that see X, the perfect. recovery.

it months. last during way looking this I've So we're down, make the - say where it very down? we are does it And are and of way, the with where I'll opposite. Yes, sense examples make this think of we a we're sense that up? Yes. does that said at the business, look, up, that Andrew, couple times are few we X I The

company flow the time. over how see how is is and to to us going go the to encourages that So see recovering

Andrew Charles

get other relative delivery just structure paid think that's to to about When then present orders orders through just favorable commission one also app, or more But you those And for going we third-party collection. marketplaces? cost question. qualitatively, Okay. the nitty-gritty data a benefit you obviously a OpEx, see as to will on commission

Tara Comonte

or haven't difference we sort assumption our there's and quantified through the would expensive if through of any is you food third-party those. think that isn't that delivery costs really there taken in app. order to that the I whether I marketplace that one delivered, channel. high-level get a take But to taken which an were extent is It I Andrew,

being a is then on third-party a versus transaction build delivery rightly owning a able delivery and with transaction remain high. other from remains out, cost It with opportunity a the on data the line, guests transaction a our to remains on delivery while through it just to channel relationship expensive So different. a basis, point you will channel. on drag the an the that long-term But as and go-forward perspective or collection drive OpEx a obviously wildly value

Randall Garutti

with to is do And opportunity site, our market market right, day up that to to one drive comes - to opens Andrew, the there, obviously delivery and The us on up we wake say, on The sales, differently free opportunity our a want right? cost, opportunity app." for now. digitally "Hey, to really

Operator

Bank. a Deutsche have from question We Mullan, Brian

Brian Mullan

of competition some opportunities. on on real and Follow-up decreased the prior commentary increased estate

that even year thoughts capability more for On company I be to goes but that, new the year? company-owned the development get units theory would XX of opening potentially too. what than side, is have might greedy, built maybe in Or to getting now ceiling well. does handle great XX next a it the if the organization given your the can in know be

Randall Garutti

Yes. feel been so to the others that Outside want with But a probably of optimal we're everything make many more been every do to history drive not restaurants. that we're still we sure to and XX through of great to know building we success to And evolution, That's our grow look, a I year a little where get feeling that, year of XX. think appropriate able format gave, last we've today. before few in we the number and year. at company. the about us proven the you lot this going what a to Shacks - year, of gives company, we've the is for look years, out beyond since which a you next we Look, just guide keep for we've look and that. we'll acceleration good opportunity posted next X at

Brian Mullan

Okay. And just a follow-up.

how But here COVID-related On challenges bigger than the several over business otherwise the normal, Just the the the as business, curious Has changed next license remarks. things about opportunity versus Randy, even were... in it some thinking you have of domestic would spoke prepared return your anything to years. you to been? you're how is

Randall Garutti

Yes.

stadium we I where a domestic Airports, really, a companies at is will in travel businesses, looking business, a have places those multiyear flight still big that there's at think that say, go license and comeback. event you the road that opportunity. lot In data, centers it's we have of is, a here. today, have, to look airports, and the long we're

it be to shakes out. will how see So that interesting

we year. just and they're Our partnerships to we They have grow to there as have that that. that continue been X Shacks Shake will X in no the Shacks. hope system. airports But closed strong open. X, perfect Shake Terminal will is are JFK that that here's And example. closed. a - X we of powerful the have when strongest for Shacks is sign in And That's a

company. gone, was LAX it's and And So in our tearing Shacks they're - the because one terminal and completely down is busiest of the of change. COVID it a

were airports So this way. off think, in in really a to an I world, going a weird and said, for little is be That running airports exciting while. we in

So a there's to expect bright for in I going Shake Shack airports. be future

have in out on to Lombardi open get area. The food those. New what type called New is City Vince the from of to in I our of Jersey. different over fed change one more that, it of we're in fast busiest who's New pull driven this We a the means We to that's know entirely on year experience. want second, other we gas roadside want thing one that's do turnpike going the will York we're to areas. open the way traditional and to high-traffic get going - and And of dialogue the Anyone to a what's hope Jersey

of get can getting their to back see we some planes I'm and we So cars, everybody more moving hopeful get But in got again. that.

Operator

to reached Randy for Garutti? we end gentlemen, of the closing And Mr. over and turn the have the Garutti to Ladies question-and-answer conference session. I'd remarks. like back

Randall Garutti

time. and everyone. out questions, another free get over, reach didn't you stay tonight we I anyone Thanks, to Thank we'll and who safe. have question, Really run feel with every us so know has you. - to being we've all appreciate

Operator

conference. today's concludes This

You may and your thank your participation. this time, lines for disconnect you at

Shake Shack (SHAK) 26 Feb 212020 Q4 Earnings call transcript