SHAK - Earnings call transcript Q4 2021

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Operator

Greetings, and welcome to the Shake Shack Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. the to turn Leggett. host, now will conference your over Annalee I

may You begin.

Annalee Leggett

good everyone. you, evening, Thank and

Joining Shake Garutti; and me CEO, CFO, our for Katie Shack's conference Fogertey. is call Randy

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

Some change. XX-K forward-looking a and and actual number if filed to XXXX. Any on of annual represent those results to and be obligation update risks any our due including February views today, uncertainties, XX, materially today's of statements statements only as of discussed we views forward-looking may Form may our no on forward-looking, assume statements in differ report our

included release week we've excluded As discussing XXrd our and investor.shakeshack.com and found in quarter including tonight, sales metrics reminder, the our like-for-like be included financial and to News same details should revenue XXXX detailing We've earnings you can XXXX impact impact section earnings the press year-over-year XXrd XXrd which at of supplemental. Shake a fourth slide when calculation XXXX. section. consistent to access the for XXXX our week have the of the release, the comparison Shack in the in By a metrics, normalize sales to a in week fiscal now,

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

Randy Garutti

Katie in Thanks, and year in highlight prerelease results light on of performance, current color especially earlier initial impacts. quarter evening, be also full revenue of Tonight, I everyone. profitability and will Omicron from and XXXX the giving up Annalee. January. we'll the fourth recovery performance, strong following our quarter's Good

want other I and XXXX, In what due company's positive the and up Average XXXX teams. up an communities Shake thanks. a to deserve for Same-Shack in and at sales outpaced when environment by markets. out versus over start already profitability us, thank maintain highlighted our it's strong than to we X.X% their people. history. moment we way to XXXX push tough movement for travel return like Shack. This sales centers, each at time, after pre-COVID marking versus over and there strength growing sales the and were sales quarter fourth our team. to is stand suburban highest billion, $X.X Omicron amazes always, nearly to and The the weekly staffing first As represented a historical for XX%, to our day record has patterns and get take sales care they This improvement in to important More been to wave elevating urban $XX,XXX. of something hurdle recent both The commitment ever, seasonality take a amidst had urban look challenging our the take of day a can recovery good our in system-wide hold. XX%

also around well, revenue. performed licensed license to in U.S. record the the Our globe contributing Shacks and

impact inflation. margins. cost on of was Our continued goods our labor the Shack a level The offset quarter fourth commodity from operating benefiting still profit and restaurant labor and taking inflation of environment sales, strong wage in is by XX.X%, material

October future. foreseeable of price to pressures, to increase of some took a we this for in in X% offset dynamic order the expect X.X% We But last inflationary year.

experience take premium to into country. another third-party We'll our a committed price key decided price current price per believe continued XX% March, the We'll consider opportunity raising delivery to year, X% profitability raise price value and better QX. to whether X.X% and X% heading as be in markets higher premium reasonable even we've those products. to in on to our of pricing. and restaurant also price expand reasons rates value business, to Given the historically Shack existing protect drive a our a inflation-based new additional We services X% are across eye resulting outlook, proposition of to to channels our has and towards price may close high-quality we'll channels roughly these people XX% later the X% gives the than that's taken for value. margins. more This on us believe in strong own this given be us our for keeping We're we a the in-Shack digital necessary cost delivering Shake year. this best is at be necessary and from proposition for

the While results around lot more we to represented with our started the volatility quarter fourth due much Omicron. recovery, business on year of this a optimism

sales The our But ability January, quarter. staff all keep limited a sharp in fully the first typically and quarter a experiences increase restaurants to of cases, of our seasonal versus decline in Cove fourth open.

events, hour, business of that results in COVID, travelers materially turn per best of to of hours many seasonal outright of as sales The our versus closures than the contributes office reduced to lower people lower the and opting Shack's Shake our general resulted and average gathering saw we due returns, downward. Additionally, sales such drivers combination expectations.

and first our the to continue through these quarter. impact our expect in We trends Shacks sales company-owned business license may

we're February With over back to of quarter steady happy this of indicator on as momentum spring what how of recovery sales Same-Shack sales to approximately people can last of one of timing week. point year. a as more plummeting, fourth XX% rates will the few fiscal the month-to-date uptick an normalized the of look the like occur report in weeks Tuesday No but consumer returns. knows this we're know following we now with kind we'll However, Omicron our move and can a later this wave, Omicron about bullish as environment quite recent

let's each on pillars our of XXXX. So strategic in for check

of into First, of not Human week competitive where staffing elevating managers, Rights we way This named over Equality our the approximately amongst do, teams. couple months. we tough and a candidates, raised to more hourly in and team. commitments those turnover leadership we'll end much operations for biennial they good. promotions our best of our row, hire, teams Shack. were and connection for us of in ladder fourth positions the this inspiration, a being a the the and at of gather our our Yet choice is developing. challenges Quality team, We're the than to our stand benefits we of Corporate Campaign year, we're last also incredibly care remain team increased for is another over XX% people in growth we starting Index as incredible leaders develop of during every diligently of And We'll XX% XXXX, work those LGBTQ as XXX% times In and take with where for proud our level. work like employer year, ahead. an and way of train the people. We exacerbated of up women. them the as pay, and opportunity Omicron half suppliers the XXXX, through XX% alone we internal retreat, still have and work XXXX. wages nearly color, to the And being prepare gave rise our have learning place this through recognized the at for their Shake as us year to Heading leadership host of key partners, at something we'll tenure all of through team score our how of filled these but they here

XXXX, Our guest in our go preferences X I'll specifics second but tools the transformation. and more improving pillar on Shack sharing terms. million to can our more app guests products deeply digital purchases web our into experience, will that and to all we've ways on here, adding since by invested strategic the frequently our come focus their X.X over easily digital enhancing years, our new over begin March more past guest transformation, shifting and is digital the Katie

operations in And drive and on digital omnichannel building digital by year, the times. Track be We'll adding manage on digital our and upgrading more focused personalized improving connection. to Shacks the and digital investing ways leveraging wait also new business marketing community. and experience. brand a tools developing within reward to connect and traffic frequency experience, our current Shack this improve personalization, kiosks to true teams are allowing we're gas enhance We in products to We're grow digital based

we're our company-operated year, domestic development the company-operated Shack. third a of growth weighted year. half, XX back specifically strategic of class quarter development of to Shacks with an with In at ahead AUV million. Looking This of currently XX largest build the XX our pillar, and to opened XXXX, $X.X to Shacks development we to the ever targeting schedule heavily our first better

schedule as for targets, to that of shooting we've level-set want for a I So couple been those years.

of X to between company-operated Shacks X X expect total in in open and QX. We a and QX

the like as feature country. risk expanding this we of have last schedule extended keep we're street feeling timing and permitting XXXX heavily formats the construction in of items suburban critical retail opening over portfolio and class the guidance, big impact quarter. quarter. drive-thru, to really commitment a continued We'll even and around supply you year grow this on as but line There's chain into labor Shacks availability and years final these to will to transform coming while numbers uncertainty The formats of we're already new urban proven excited disruption, fourth posted freestanding. and As availability pushing our and about in the timelines of year's time the

drive-thru drive-thru, walk-up Michigan our expect class upcoming we Orlando to Detroit ever Track XX% past are window. Grove, in Lee’s and Minnesota; opened have Summit, third we December, Maple Rock, outside Missouri. openings Vineland This we Castle of a preparing Shack opened our first or the Now Pointe, week, drive-up and locations, Livonia, In Colorado.

future. including spun the Our we operating on hand markets and for, the shakes, guests. and what open impacted strategy with learning made-to-order addressable forward total a provides to hospitality first market, end to this deepening of really drive-thru can experience already all the of expect long-term we're that is we're drive-thru. so group by XXXX. by And locations the have results addition Unlocking busy use this the to and our family our imagine optimize guests while building resources We cases our We're focused build to the seeing, drive-thrus that investments, a with convenience we XX continuing we're to we'll learning for preliminary tremendous how known traffic on is encouraged and critical by this about up elevated these expand the in how in can can potential of been have look in we're burgers experiences. to balanced new Shack on impact our operating the

to costs and labor the XXXX levels increase anticipate to of historical continue class inflation due for to costs. above to build-out material We XX% sustained costs XX% on

new this region a focus and through continue excited China, pleased Korea, and We the market Mexico drove be to Shacks, continue over in In to on we markets of We're part we'll license be X Monterrey, opening Contributing to Hangzhou city business. new the new Shenzhen. this building in XX this deepening agreement. our this including by as $XXX Malaysia sales. and Shacks, Mexico, our of such targeting in with announce the in the we Macau, license license new of opened of year second of Shenzhen, with in quarter, a to million commitment and proud growth growth this fourth business In more. opening potential was major the launches really We're of expansion to development growth system-wide into our Guangzhou see our as brand-new in also that XXXX, Chengdu. momentum highlighted XXXX

key profitability focus grow asset-light long the over Our business remains international strategy license and our brand a to term.

that side, momentum have On with Upstate air holiday grow York this in increased domestic the to of now and business a we travelers. New a development in in travel, new especially building slate on New new format. QX Applegreen agreement We'll roadside our Jersey from with benefited serving be Shacks

our Fries, LTOs kitchen, new LTOs our after improving always exciting we're highlighting our Recently, experience. hamburger uplifting and culinary our potato program now, on ranch Buffalo on Finally, app. shredded with right which guests. collabs covered our our digital and we working performing great And our our In and exclusively with on our of launch in guest a sauce chicken our ranch new sauce lettuce breast, strongest we classic the and drive our This that Sandwich, Burger channels existing were topped fries, our buzzworthy with Buffalo Chicken early season crispy pickles XXXX ran engagement with with Buffalo dusted Buffalo with crinkle Truffle served being spice are sauce. with toasted bears bun. in cuts, we're

maker of Our communities gather whip seasonal expectations burgers, another quarter with Red partnered the more topped shake, supporting this neighborhoods exciting moving check communities. Shake The out yet to and first vanilla maple LTOs of with for Coffee, connection commitment the driving as frozen about goal the flavors California, Bay of chicken, it candies. by shakes that, I'll lineup with of And and in share & example a our hand an orange with quarter with zest, and businesses. lemonades, delicious brand our our hand year, and forward. of a off local span coffee syrup the our love. incorporated Oakland, on We've coffee custard details Katie is with planned to orange and Wake enrich frequency, a cream black-owned done to focusing all We've shakes to and

Katie Fogertey

continue the want Great. everyone. work afternoon, do you, office our together they Randy, landscape. thank in good this tireless Shacks Thank at as and challenging work we teams amazing to navigate our our home that and for and I to

terms recovery bright deep shining dedication, the the our more urban ended lingering a through Our for optimistic COVID. We on an tourism and innovation pressures with note is perseverance about restaurant from and footprint year encouragement heavy still can green what to Shacks international dining were tourism, saw and look to consumers of not in even recover across restaurants. well start as in fully return to behavior We back shoots as like. as domestic notable patterns office

our COVID We XX volumes that were the revenue quarter XX.X%, company. operating as recovered. to largest had the million to fourth far even happened was rose of for of long-awaited this year-over-year many and Shack-level the And sales grew to Same-Shack milestone $XXX.X basis up prior still XXXX profit gap sales over generated closing our year-on-year. than XX.X% XX% Our Same-Shack This as sales. a Shacks margin from points more

we of XX% year-over-year. for more System-wide business had levels. Our XX% relative $XX.X the full $XXX.X million XXXX generated were and million, XX% EBITDA license in a over up up record quarter and sales adjusted by more quarter, the and than year-over-year billion than year, to $X.X

and outperformed in quarter, in the menu $XX,XXX We total of sales. We urban there historical quarter formats Manhattan relative as and from our month strength enter sequential New prior Shacks new operating digital our and on generated business. largest of had we a improvement and we reported well up urban fourth X% seasonality, Shake now material suburban from quarter, a we the Shacks higher by are weekly down as City our company-owned price presence XXXX outside the the Shacks. markets function of same-Shack were below in quarter. as continued a to average Shack recovery countries, insights in sales, in countries, the last as a XX,XXX sales were urban driven levels, each XX% In markets building our Most XXX in have XX more are up York improvement Same impact XXXX, and learning strong across

well. XXXX suburban business above even our a as performed levels, sales were quarter-over-quarter Our urban also same-Shack acceleration X% material

out Towards from more our shopping benefited end the our for of guests mall-based Shacks the holidays. quarter, of the

the saw regions Our each also shopping trends. swift XX% and strong center and levels. were showed across or performance reversal rising in Georgia, We Connecticut XXXX continued more the sales the a of Texas, Same-Shack freestanding we outdoor of traditional throughout strong quarter. strength. Then up all in case fourth quarter sales end and Same-Shack saw to January, counts December fourth relative COVID with

sales fell a year-over-year. Our reduction up drove high flat operating hours. in to January, slowed Shack and addition to days to our of closures weather XX $XX,XXX single-digit to weekly last year, same-Shack full counts momentum average sales case and in Rising X% in

cases. experienced are We of rather some pressures, digital have in new, what in also prior consistent course, channels but wave. These throttled we not with COVID

While from our and are the January timing momentum in strong showing our Tuesday to when improvement approximately XX% patterns sales of same-Shack week. gas is up now or uncertain, sales pre-COVID are will return February this as movement of level, year-over-year our

ability trends, and is pertains our development recent XQ We sales, guide other cost, impacting as sales staffing, are with and on cautiously to full XXXX but to it this optimistic understandably uncertainty year precision metrics.

first to sales levels. $XXX sales assumption by million, impact remain January We Shack an COVID, impacted lessen but million are quarter to that of our by guiding the that supported $XXX continue from will

the assumes disruptions this major However, no unanticipated new quarter. throughout

expect to same-Shack We year-over-year. grow our high single digits to double low digits sales

case service our are quarter. over ongoing Shack our profit support first inflationary return margins operating Shack-level sales for to impact pressures to with a increase we of extent are October points. higher additional year to all delivery along later in may build deleverage that our brand to price remains January, terms negatively mix, and we price encouraged and The inflation expenses the and still great tiered the of and P&L. a likely as our With in realize food guests saw in quality a uncertain, guest ensuring as believe superior This, results pricing year and approach help of back by wide We significant well and COVID rising across focusing price range power. the take focused impact this a while our value across counts on has pricing offerings this sales of restaurant added margins,

to be profit Shack-level guiding XX% are margins XX%. and operating We between to

We taking price are the in late quarter. first

to So sales new XX% our system the restrictions million, little quarter, We through quarter's This international this performance increased a year-over-year. in and XX% driven nearly was we'll openings, our margin. Shack of markets. with operating travel profit sales relaxation by air $XXX.X generated of have reaching COVID-related partners up in license select benefit level holiday license domestically

more XXXX. to partners worldwide, in openings XX we to restaurants XX see licensed and now Shack than new licensed are expect operating Our XXX

And year. COVID case restrictions. increase Our license from to wide impacts continue the partners the impact are a throughout of seeing and expect range counts this in recent we

license revenue in $X quarter $X.X of are first to such, particularly guiding our risks for note business As rising uncertainties Asia. million and restrictions, we in million the around and

our reinforced While simply fourth sales momentum strategic faced in we was the the encouraging, our pressure quarter Swiss importance of January in the plan.

are by the key of quarter, well digital base guest of and full web terms to as our formats more our XXXX, channels. through launching and preferred XX% nearly experience committed continue our we invest app people, digital our web personalized than offers customer platform, into must app and we the leaned our XX% prior our in our first-time to time the In for experience app grew and as digital our limited transformation hospitality. the by commitment quarter quality evolving our in believe as own transformation, and of channels. to fourth rules marketing sure for true versus the more year In meaning guests company are and we building making digital elevating a terms that the our and that We omnichannel

we nearly sales doubled. XXXX, In in we retained XX% had in-Shack nearly the business digital strong. remains as of January our December, retention digital Our even generated that

quarter top our kiosks improved and channels lay The our digital overall of and growth G&A our sustainable guidance XX% Our groundwork of We mind and sales the our business guests. the these nearly digital mix in is was are to combined. lifetime investment and and digital considering frequency XXXX digital plan. important when initiatives believe of long-term XX% in value for

of Shacks. Now cost side the on to our

[technical offset backdrop. has and supply commendable were inflationary job In costs a and this as $XX.X the helped but cost increase low difficulty] fourth may across food to done We inflationary the chain team year-over-year quarter-over-quarter our single-digit paper suppliers we more price environment price our particularly implemented and navigating challenges low take million The working are committed food warrants. realized flat. in year and quarter, the macro-driven inflation. double-digit with We many and inputs, protein. paper best-in-class the pressures quarter We

the expect to The single-digit our higher high across to of and across staffing However, non-protein our invest ahead. our packaging. XXXX, biggest sales, we Operating is are were continued continue XX.X% the inflation of double-digit XXXX the and fourth inflation the inputs driven of primarily paper total of sales. million we to or currently the moving Shack by the in from from growth quarter $XX.X total anticipate with XXX% prior quarter most million quarter our of to subject up Labor XX.X% inflation challenging, for Shack our of beef, third and Angus environment sales, and mid- leverage are teams in prices. basket XXXX. in XX.X% and fourth in part and The expenses to of XX.X% all-natural going build XX.X% remains quarter down or $XX.X was monthly XX.X% and where we weekly

in marketing. rooms relates and Shacks came Our including the dining our our in expenses in-Shack additional as year-over-year doubled it local to quarter, and maintaining from with business that

of in line of quarter of restaurant of near mix of to combination higher of is in times P&L Sales XX.X% from a to a we margin with in in. coming the from the in delivery community was Occupancy place was the total our gathering compared January delivering operating XXXX, $XX.X sales up or and the in Shack committed neighborhoods Shack plus X.X% down leverage great inflationary being in term. XX.X% pre-COVID items pressures are level the the third quarter a pressuring X.X% Shack We a or of from the fourth and XX% sales. experience, million sales, Total and realized up $XX.X recovery across stronger pressures XXXX. quarter Shack guest of from operate million sales quarter enriching restaurant fourth profit sales, variety

the We health to business. profitability to back important with long-term our build steps the are Shacks of taking an the of some eye

we believe power. with we pricing First, are a brand strong

the We can if Also, pressures inflationary help today the increases we offset fourth needed. in of as quarter, price we cost face. price menu may take and through are as third-party on and the this saw some environment leverage year delivery taking warrants sales additional

We deeper investment are to as accelerating sustainable we time. more recovery a forward and look marketing in going sales-driven over and digital

G&A Our stock quarter for spend up bringing and the in G&A XX.X% and full million, technology increase $X.X came of was million, expense XXXX largest marketing investments. inclusive year. $XX.X $XX million G&A to year the fourth quarter-over-quarter equity-based full from additional $X.X million compensation The for year-over-year in our the

eye and of up necessary open are in opened $XX.X making our is $XXX investments of investment million, Shacks million be most in preopening The million expense an XX% $X.X is $XXX and million in this between this quarter expense for year function and million. potential and expense. the year-over-year. compensation digital on expense the long-term strategies. key with $XX.X of we expect we Depreciation as level and This XXXX million between in new expect Shacks, out $XX to million, was including the our build We teams, was XX a and $XX equity-based managers. to marketing us Preopening to G&A growth and the on amortization stock company compensation investing our year equity-based in general inclusive spend approximately stock rise record

a of $XX We and net amortization $X.X be we earnings exchanged realized or a loss fully quarter and million and GAAP loss On per share. negative forma We of reported million an share. expect actual $X.XX million. in between a pro to $XX million per adjusted expense $X.X $X.XX basis, XXXX the fourth a net diluted or negative depreciation

compensation, found quarter impact and between be stock-based share our can of reconciliation rates per tax section GAAP income our our Excluding can rate pro XX.X%. of earnings forma tax a A financial the reconciliation in adjusted net the forma full the was supplemental earnings and found of tax fourth and in release our details materials. be our pro in

year. the for forma tax impact full compensation XX% expect the We adjusted XX% to our excluding between stock-based be pro rate, to of

of However, we on business could extent other recovery jurisdictions tax and see variability the range our depending in from factors. higher this

Our we $XXX.X in sheet with a securities. ended quarter remains strong marketable position, in the and million cash balance and

variety as will investments balance strong business. using Thank our well new And healthy our back turn your formats, continue in I'll it including for a openings growth drive-thru with our of you Randy. to as make be across We that, Shack across cash support to time. to

Randy Garutti

our us. thankful along for Shacks our a every forging Shack. to Thanks, the each the COVID-induced doubt Katie. we're but that ahead. this ride in is already been I way the want what's around products, you're around team whipsaw continues, We're today sharing and experience guests driving the team excitement and ahead. with no feels first our can impact quarter Shake There's our just of ahead, optimism We've has end felt got big in year

and hope the healthy. stay please you go As safe questions. and call always, family I With open that, that operator, ahead and your for

Operator

Instructions]. [Operator

from Tamas comes with the question first of Our Oppenheimer & Company. line Michael

Michael Tamas

to from shift your comment protect the to protect of a margins. the you're like more few calls. March in sounds said margin to think I a And take price bit You last planning little

what's how do interpreting should comment. want look right the that And the you to so Or us protecting we on that that 'XX? to that way meaning be all margins about should similar comment Is protecting margins? think specifically XXXX

Randy Garutti

going and investments inflation, have of And in There's continued of a the I to through and X% uncertainty head our think got interpret running -- in in as there's we're entering price to cost you a X% lot total that system of puts and lot think the things. the -- the I business all you our takes. into goods our of as it we Well, people QX.

that. just some that. the going -- not do hit back. sales appropriate And price always are sales it the margin. sales. The is to we're expected #X that's take we'll margins on focus fully thing run #X going long-term And with getting to will this our return of So those business to run We're we'll to protect be

I our into remain closely we've it that clear it's gets year. business shared hit is its this and see on if we will to worse may think remains inflation today watch persistent, and what persistent,

we'll So as an And plan eye for keep an we'll whether on at eye couple as price we more right times, have moment, the keep change we'll business that's need plan said, come. that, that, you keep that posted Michael, we but on of But on this next no a but a do to Katie implants year. now. the

Michael Tamas

then and early And really drive 'XX. the process end of up I you're in you by the obviously, planned, think, have still of sense. XX Makes drive-thrus

business. about so your XX And I 'XX, just just think if such mean, you growth to why beyond for of you not unit XX% units, point those to a us a grow transformation And Is know say, here if giving your see where numbers, this these that not? might XX% you wouldn't you're case, is but were XX XX XX be units? there be I the as to

Randy Garutti

the got where We've drive-thru. optimized as than for have not got a months how no So can excited that. learn, continue lot in we're of And gotten are see on here we've those And going numbers I'm less right? we we've drive-thru, about to think to it experience I today. any get open. to we're I do. got you of a X lot Well, learning to X And to words comments to users, my

of various be to to And where shape be believe, out how will figure We're a up designs, got places to we've got scenarios part build drive we've learning. Shack's future, but We have we're that. that going drive-thrus, prove we there's kitchen that. various practicing. to And critical

quite on So a and optimism way are few that. lot Shacks coming a our soon. ahead, of that lot a

to near you. So look a forward drive-thru

Operator

Garber comes of Jared question next with from the Our line Goldman Sachs.

Jared Garber

back commentary studies circle out what to to out wondering kind elasticity. want show encouraging I increase you your set pricing. on on to would profile. hear margin help the pricing Obviously, of on the guys price But and there

a is things that hear of we of Shack Shake burger. I the the think a one about talk investors lot price

suggest what that more pricing kind you that you you've about, research view to have Randy. just curious possibly to Katie of X% to sort price you take? that X% And how So of power done than talked or maybe

Katie Fogertey

to willingness eye guests but and go to still of saw on October, price price very kind The price are at that we of. when in look pay -- confidence good pricing. kind We very do more to it our a and gives and all what raised very to our pricing, do our approach we of our think about risk what and account what mindful a today. feel And that is gap probably we where we're see And good and that us that are, we're in reception markets. of increase, that tiered into take into kind various take pretty competitors We we here, I'll results we is. we careful we that's something keep relative of so that's we a

Randy Garutti

following kind And inflationary a Jared, I in think, this seen look, have none a has seen Certainly, X us pandemic. alive of it environment ever of generation. no

of for or going drink, typical burger might you learn. against that gives just Shack us we But really kind a other options we watch have, sit and a does. your to there's and we lunch sit, at like you like be from. to said, sure Shack we think platform comfortably look think we grow about feel good And you a lot feel as kind of where meal, strong it fries dinner, have So that when I and does that to

Jared Garber

X That's quick of pricing. then follow-up And delivery great. just sort the on

drive the on those are direct Does higher third-party terms your margins channel of than in incrementally channels. channels? agnostic lower that scenario sort that Or margins? still taking You're of a

Katie Fogertey

our with say an step profitability channels. this improve is delivery would in I our important to that,

Operator

of question Zackfia with line comes William the Sharon Blair. next from Our

Sharon Zackfia

were Katie, pandemic the have on want the any but noticeable you've price? resistance a U.S., I point. Is given you I volatility? the quarter then range just that analysis doing can, price were York pricing, and And where than sorry. at before sitting Randy, guess you a bit remember, together normal. we you and question consumer into for the is the uncertainty bit a And you the sales reflecting can taken the with elasticity in the years, in past don't pricing overly really I over seen where to take started pandemic secondarily, wider recognize that New margin week you get the more

Randy Garutti

Okay.

got that in and October, since new, towards then. So took the on of pricing, we've right, consumer we've wild X.X we October, end is just the environment a look, all had

really So hard to say.

We just and continue years believe, like our have to and smarter price, also for we we than some price got market-by-market you're how exchange fair to believe, delivery strong how Sharon, got really X continue what a referring to, as things pricing. pure gotten we've that channels -- about pricing value That's more and power. ago, we we what

that has us if of look that us of living And eye for really think reasonable. I smarter of and the we'll price which is more strong expensive good is against probably -- range think food. And time as is So a enter this position pretty about we at us, we're conservative phase the we're probably think indicative a pricing it X take we around every company on that a that end to at-home keeping we feel why history would keep I this X% you cost getting for still roughly about future. within things an the on And of a we're against price in yet in. things year the of at be tell industry, next us getting you

Katie Fogertey

best the the the our talked kind here impact really There your something the true in that landscape cost growing nail margins, from question remarks. we on so reflect in done we've down it's our wide on and Sharon, then, range is ability here to about I Omicron, prepared to and of mean, guidance our that today. about And of uncertainty

Randy Garutti

you clear really Shack in celebrate also happen, have was we the that that been last And And tough. can drivers that. very and better consistently make like business results catch want yet Shake that we're to our we week. Like those started in February January looked drive know I every sure see to what really for QX X weeks in

of given kind proposition. So estate talked see generally of as look our you impacted unique Shack is we've for and waves real of X in that in hopeful, We're patterns. traffic we're quarter but our and sales normal be this profit for more Shake return going we And cautious these a op about to more wave can by to in years, guidance beyond. forward that our

Operator

Nick next of Wedbush question Our line the from Setyan comes with Securities.

Nick Setyan

sales decline your pretty tended forward as best average step we a what to in of above new weekly favorable Can weekly about QX, And the take the average what even us weekly the Omicron average go QX weekly just QX times, there? volumes. versus and maybe and to back average and cover QX the of unit normalize because year-over-year, sell were 'XX sales explain should sales. 'XX sales do expect post we was so 'XX you

Randy Garutti

of I about see that towards urban to know and to and bit that recovery the Shack couple things what was of that like. looks a we we on of You We little the all had we're where look talking -- And but booked most Nick, what that. start love QX. end seasonal like will here, a trend saw Yes. you think of right? that's see in optimism that to the some start price, the

it's as January. ahead nobody and was expected our kind optimistic this slower Shake it been, XXXX, gives of And we know not AUVs gives specifically that as and Shacks that about, and has to get things AWS off, than But some and we're weekly and is through we of towards some building of quote that -- we being average digital the strategies headed. for that that that continued our But some the about openings where us back confidence. confident we're but we're weekly to see average an all and and for sales why our sales kicked what can I And people, is strong pretty noted, we for number Shack is always thing we why had class above-average we just going that excited growing. to look that's talked

Katie Fogertey

tail to just on And there.

our many the significant City, driver of total City sales. were York XXXX levels. our in that of York still recovery the while very Shacks improvement the saw in fourth New New that same-Shack quarter. a quarter, was below

what so tourism. started started not trends to levels very see more to we pre-COVID returned to international nowhere but get And we -- see we're near you really fully encouraged movement were by started as to

the once just us such look to could like see started more for return recovery move are those things and great past Omicron. benefits to You office. what us, All for we left encouraged

Nick Setyan

pre-Omicron the think pre-Omicron increase could levels margin I sort in the sales, like what to QX? incremental levels of QX Katie, recovers again, look And assuming, of Okay. of what price sales,

Katie Fogertey

There's into into uncertainties Yes. go point. We're a as too go at throughout that XQ this of not so. going to we the quarter lot

Operator

with Next question of Lauren Credit comes from the Suisse. Silberman line

Lauren Silberman

margin, wanted a last So high-volume about outside noise, P&L of question. the margins restaurant your term, ask Shacks I across transitory just to pressuring little degree. longer-term to similar volatility the outlook creating headwinds, in bit on near a But lot

return the XX%? margin Is for do As means be no to that towards guess as right normalized What AUVs a base you further in it acceleration still should see for if I how environment, the Is we about move costs. and it? system? thinking which more pre-COVID the across we

Randy Garutti

know work to the finishing long-term have given out we yet. rebuild to Lauren, start do We we that rebuild official -- that of QX you haven't Yes, see and year. guidance in to kind

begin got our to and every still sales. and work believe say that the that long-term that and and all a a I how work getting job many part And that this restaurants things do. given COVID done for me of start the next ahead. that. we've of be you a But and we fully that's is our A how what year been, we've of team driving the always and going upon. to that volatile And prior impact have and landing end of strength we end ups has watching to of inflationary up look, based cost this years. great environment, X/X had. So much got for strategic profitability of the will with get road of the the some to And And our margins that's some basically back. work That's brand. X given proved that We've think of do lot work COVID to back, in that last an lot where the the digital every to of channels things pillar is how delivery that increase, other and is heard downs, continue impact it's

Lauren Silberman

it. Got

guess, average versus question. you I Are XXXX, trending to February look time January, are Okay. as in and February which what was willing and can transition same-store just normalized versus relative sales to we or I'll at Then one? sales the at -- to try to for a were near-term month-to-date weekly it through give where I XX,XXX try January guess the I

Katie Fogertey

we are Yes, doing to we're to specific point. reason. at comparing going this And always X-year a for this no, be our stack very

We are fast. so growing

is base different so XXXX versus is today XXXX. comp or it Our than

we so pattern reporting normalized reverting And are of here. to of kind a more

Operator

with Charles Our next question comes the Cowen. line of Andrew from

Andrew Charles

Yes.

number you a confidence now, guidance margins it for going of as challenging going make kind that number. from of I have are very the longer industry last is guys facing the still we you the The one. of is that's or some the And to if question, to it's XX% long-term first XX%. so, a lot with mean in term? do my maybe I before follow-up things But foreseeable just view margins a about of industry where challenges that for to Just so of for of are formal just a bit future. that on look, want make course, thinking sure that is more there's The And today? right to stretch

Randy Garutti

question, not I'm said. just to Andrew, I Well, say than could anything that different than I sure

opportunities long-term think long-term QX. I in -- work last the guidance for about XX% our given are that plus beyond that Shack. to changing we do not got rebuild Shake So We've to we've the

believe is of do. of and strength strong We the got work in to the AUV op certainly profit forward. this brand being the So moving

you we're rebuild. to and we'll So keep posted going

Andrew Charles

the have my I there are a Thrones, some about of Clay marketing buzz looking to beyond that would box, Game create with to things innovation, collaborations, marketing in year. the that Got be brand on terms is outside of I then little with some brand other new done ideas? this just historically like the it. thinking question know love in plans been menu has for And fun for bit should we Thompson, XXXX mean,

Randy Garutti

this Black super been can in various Well, And to we're fun see now, year. and up work fun. that time some our you channels and We'll a things Chicken, have Truffle. brand things with localized ton advertising digital we even and creating that our And running will for have on Buffalo channels. some also TV have ended Hulu from attachment Chicken testing recently, right to Buffalo specific having and you of we've just some -- marketing new YouTube wider you'll great some time. we've Definitely. and that out-of-home it, with pop labs some the you'll brand digital chef with see some to see collab We've us may different our a like great more we'll and got see team QX is doing --

of as guide spend to year. this marketing So more and a part G&A for starting dabble our definitely greater more into

Operator

Our from Brian comes the Deutsche of line with next question Mullan Bank.

Brian Mullan

Just around specifically a question on consumer delivery, demand.

I because some you've channel system. your imagine curious months, seen is ago compares that the that across are period. And transactions a Just has asking from few what last over growing tough year the year-over-year I'm there

now be consumer any helpful. right for looks would color what delivery So on like demand

Katie Fogertey

Yes, lot the did of business in so XXXX. delivery delivery, a clearly

versus was cases, see in we the now, you Omicron about market mix. delivery did the increase in rise an think If our there where

comparing severe time year are a before. against the we pretty However,

Randy Garutti

I going think interesting watch. it's just to to be

-- it's -- just it think look, it's unknown. I

great continued relationships like to a in channels, partners. our delivery That's third-party that have the and delivery. We strong punchline. demand for We own do have we our with

So we'll see that.

really and quarter, seasonal, people the this even saw right? more generally out about, it's think COVID, fourth be more and tend rose. really do in-Shack when sales delivery proven you our it's I to When cold, little are to we when in a

So sales. lean our more to to normalized patterns more me, expect that just we to starts to in-Shack that traffic show return you too happens, when, towards how

Brian Mullan

the any course crisis thoughts what year? the late, an gets high environment, important, then what And that talk of really Maybe no on And challenge. a the where always a objectively question easier longer over always labeled is on or but has about gotten such at just is Can point but you important, this or is labor happen level. challenging. better this a industry be what then being least when of to will as acute Okay. remains labor could still

Randy Garutti

to lot reality I would pay at Look, knew. think hardest, knows there's wish is hit made across I on every cases, limited maybe and was that question many I possible. knew. X harder believer lot work a try questions. of get a Omicron have work so challenged January member don't to of I industry that to because that keep return when it a team in choice. in challenges and had really even I'm time. at career to a environment, great limit a people will Shake to to I I just of And Shack That's we do. can level. as anyone COVID a want we're going people labor great restaurant. top time you to each say, December that operator, And a continue every the really I going wish just to And restaurants I'm just to work as to person note, here a we in building to ask X back as what from aims to that and

Operator

question Barclays. Bernstein And comes of with Jeffrey next the line from our

Jeffrey Bernstein

question. X just Randy,

XX company-operated a which equates to outsized an in got You've U.S. growth. units, unit XX to pipeline that XX% XXXX, low

is sites when noted but of the people. Obviously, I building quantity are the it's of XX% size just wondering believe appropriate, just changing multiples you was I'm difficult think I not is you double is long-term either today, the your plus right base for find or guide it whether the think that obviously, if necessarily many that, or your to a digits. right still up increasingly quality that not IPO. it at want the XX% you costs

think larger you that how base algorithm? at get temper point to presumably and as of having that do some about unit kind to So you larger growth a

Randy Garutti

Yes. Jeff, thanks.

haven't -- obviously We well we've performed those history of percentages above company. the for the

like long-term guided really haven't We XX%. anything

We to great So only be XX. is XX this number. we that's clear, have to just think the guy a year’s

what lot it good dismayed to than a growth all And ever sheet. opportunity, grow stronger, would We the can But strong at than coming we have like We're of ever. we're not is -- that to years. build on I restaurants by one. find are higher right we more to at ever, We're not our going us, more the gotten formats are places restaurants. in more Jeff. keep story, you going why to now, We'll for environment. a a exciting but do think team in We've pace. of posted keep next cost build better us going feel of We're and have we've and our to got XX Shacks most add than the front strong to for started. to I go see appropriate million for working we'll that a cost growth remains on That is $XXX roughly going we it Shake XXX like balance in use that year, parts year, Shack say, looks X that barely opportunity for to and of the still this XX

Operator

comes John Glass question with Morgan from line next Our of the Stanley.

John Glass

you this Costs margins just right, you've in or I'm returns measure how are got good are new store but uncertainty. Randy, wondering Katie, because environment, do up. sales, going

it make of does building do of you it now. increased right you you stores Is not do have how the margin start a some discounted new to related how so you inflation? do So plug cheaper, there? Shacks offset mechanics how you So flow about to about costs, and that? thinking work? the in And assumption to some ways of are that to think part that can is Or building cash

Randy Garutti

those. down, easy. the sheet. profits a to drive-thrus learning, ways. given in for keep going capital We to longer. while it a great we lots Obviously, a question, really us here payback cost keep good at restaurants build specifically for cost pretty it's And John, cost confidence. different of have look to are building our building with to we're math balance When build more we a is we're will is little of and optimize But situation also takes and up our that going with as with Yes.

learning. So out anything spend open we're addressable trying money not market. to of trying to learn the that to cut to up We're

do and to materials, core Shacks, designs design time here Shack to that continue compared opportunity where the this at our do more constantly of so construction we're we're the But we've grow expect smarter we on while with As ways that. margins be to and what back to building. teams got way this We've as And meantime, that to and long in to work they've depressed. look get this and lot efficiently. building because said to going build believe better, our teams the to taking third-party to we're yes, we've things And that But a got some call be environment returns of been not doing do Shake internal small we to there's going may a that historically our go. in we is with period different we our opportunity, keep are do today.

Operator

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

Alec Estrada

be initiatives Estrada Chris. Alec kiosks actually on the slated part were for year. is to digital I this a big This of know

those lower a place then hoping is of of benefit today? labor the that. obviously here? kiosk more a much have on being you was requirements, How model with labor kiosk of to XX% color those many for do restaurants sales I get which have line So And of little that how digital, from in

Katie Fogertey

And half more, but and kiosk. Yes. instances, Shacks taken out kiosks. some really just time point today we cash of instances, really cost initiative. about other savings Yes, we've in at about really this in being we're on kiosk, taken kiosks our a we've excited out don't register In view as have

really digital the that understand about ecosystem. investing the back guests We lot kiosk items a lift There's through menu have that be increase have in see drive we full bring we that, that more opportunity and the attach we engage number with of And with into very the we're and it it's kind see way. can us, a drive-thru. exciting checks higher menu in to as rates channel. We For boards digital technology this really of we're this opportunity our and very learning strategy and of digital to investing exciting It's sales us that a really LTOs do see really our deeper that year the exciting really today. of point-of-sale as going kiosk. to type on

Operator

Our of Baird. next Tarantino question comes line David from the with

David Tarantino

the clarification a on how better a sales wanted have business. Omicron question I I out to just sense that much get has of you're today. running the of And taken

how of guess, that off could you give us February sense QX as sales what I are would you terms? look in some the at do percentage trend, you of seasonality So from And your your typical to far to QX? then

Katie Fogertey

Yes.

where check when seasonality X trending sales January. past hard and with is years. And very business has from challenging. incredibly fourth really over same it's trends typically our sales fast, about least we to quarter relative in to from our typical December doubled have prior our comp to are are or appreciate, we the AWS see it years into probably you pleased February decline tend But typical as growing So to at makes But compares seasonality. do talk base basically

David Tarantino

Understood. rate But QX, you guess, still if under differently, adjust internally? said were guess guess, adjust maybe February it I you the I you in it however run I is

Randy Garutti

number of of impacted January, traffic. we from that as the impacted Omicron but week the still, is improving said, in February kind rely every Shack by by traditional think on I our still base Shacks still

there's be to down. I I impact That's going of all of February yes, going time take some that to our So we've some as rebuild through and today. remaining year, part think it's guide the to QX mean said for

Operator

BTIG. comes the line with Our of Peter next from Saleh question

Peter Saleh

for prices planning of us that your pricing, give how Can for and much that into both the a on taking consideration, think and inflation based you sense will the forecast Just labor of for of do you in just year? March. much October again, commodities how raised you guys in offset you current

Randy Garutti

dynamic basket, expectations how that well. the over give there's to expect we for given going in to to going for other not our the parts certain environment. We're We've are potential Yes. of though full we a and parts to year. as be protein is beef our very of basket out you our This play year. that But volatility subject

Operator

of Levy Our next from MKM line question the comes Partners. Brett with

Brett Levy

getting with what mold labor, to respect in looking experience, applications, the you hire really talking you're of flow at but but they're applications fit necessarily people to people with are And Shake not for of We've not seeing in ability Just up, are experience? weren't just some what you Shack? -- their terms are your of terms heard same about they that seeing through? level just what that for others

Randy Garutti

lows some that back we've the off certainly in Yes. given January, tick pretty seen We're environment Amoco low up. but coming

this little think I have hard where that not looking human to day. hire, shake. spin continuing, just year. know -- more question it's all to is you existed we're a COVID. improvement we're goes hard through And the what about for They're by us, to And to we're it's role. the that fully hire. teams conversation. things COVID. optimistic we a how I of is staffing cities going slight beings. say be There's of where and to trend think way And rate long of exacerbated we to encouraging before those great really cities a answer every to to a but have milk from it's part would staffed worried not see if And in and going going strong any those this be about It's so We're of environment, parts normalized for still So region-by-region

and of there. Our your job drive is opportunity to development teach you leadership from that

an training that, of cost keep people. good we about of feel we'll that. our a training, we real lot So a to do investing a There's there. new There's now. but and lot impact There's right to

Brett Levy

last terms costs? what seeing training that you Could in of of you're Just guidepost overtime any in give on point. and terms

Randy Garutti

is that certainly There haven't in speed QX that getting out, gone we've period cost tough current -- of in results, to even inherent guide. up challenging to this We in it's in and newness to the year's of people first to through the that broken everything all but a last and It's more results couple QX. the environment right? the initial labor that inherent impact

Operator

line the of from comes question Next Sanderson Research. Northcoast James with

James Sanderson

of the with the bolster I'm employees to team store that you satisfied you're start management improve the Just labor actual the on rethinking stores business or or assuming supervisory made employees on you to the in if in sure make covered maybe does couple of number management have average? up can rethink your following need Or that disruptions layer the handle and you next currently have the number experience to per if supervisory quarters? throughput, your of increasing of and issue. of wondering

Randy Garutti

having really a good it's managers, really especially our general success. are Jim, question. and about teams Yes. significant well, which management strong paying We've felt them to always our critical

restaurants. So on have and like that. great it. felt trying trying never you efficient to run be And tight hit We're on been to we always we've

more and think about seasonality I return. it's

business. this begin a as average little seen weekly begin bit And grow to staffing in hopefully now as those generally right? we QX bulk seasonality to is the time uptime, quite We go of our through So a QX. up to You've teams sales the return. sales to is a bit

work it. And want better the at our us that have don't businesses. we incredibly we know that's stay build. better feel good women, caught with to I don't great in hiring those to that We of that. but got want term. the XXXX, came any our promotions to of and a to my at of us, We've people's XX% We of want with than more That's do think color point, half just the are I people other continuing but want better to from that and you be running comments within just change to of you we be be tells be starting we for opportunity. develop at long that -- earlier, culture kind about if So those

Operator

Ivankoe with the comes from Next line of question JPMorgan. John

John Ivankoe

that kind One you your what of whether self-help different we shorter-term actually the term or your How more things about question. to are whether changes business, it's medium thinking changes tactical kind about on of margin think even stores to efficient side, already the can store do to more business the difficult in of of in the model maybe simply existence, the high or to stores run allow that will are you future commodity this environment? in XX labor a environment

Randy Garutti

thinking way driving the there, first a lot we're in sales. about is John. There's Yes. And

sales. First, let's drive

allow Let's to build drive-thru about. That's let's what formats. formats other us what future. drive is strong then That's get that back, these and for new AUVs all the additional

kiosks, right? The in tech communications automate you when don't We're our screens the experience is Shake you process. where stuff second when happening more and then we think part and is that again, We're and guests testing more that today, how But can And of is pickup And more, -- and can our digital, that work tell here, to that our app more ready. soon in more your pickup expect we're in anytime we more guest what pickup engaged. real-time our and with direct making Shack ordering about digital. -- having getting processes. have robotics the really, our and ways then

But about on So why returning held even the menu. thinking while. all our menu we've substitutes, That's off got off kept of that's for a keep the we've we yes, that's stuff. that the we've why of classic some lot a items

LTOs longer may of our of some are time. you periods And notice running now for

X. trying to to And is admin, the over work instead of reduce operation, and on we've of depends we years, the our it's ease company goals the kind it, may go day. teams and that lot a of steps through many a to the every our lot do. month, a So have and do in LTO of the operational but got to time reduce X of that the goals that's just line that top one Again,

So as the on continued focus to sales first, our always we're recovery, side. going to and work that committed we're But part plan. margin of

Operator

Raymond for question, we And James. with line Vaccaro had our the final of Brian

Brian Vaccaro

in one or that of And earlier the And could. on you labor, those see I are of the could what to What quick level investment in 'XX? there alluded if and in to a inflation did the is wage a fourth of level ballpark you some expecting way take Just quarter? form investments forms you call?

Randy Garutti

around just The our continued starting the doesn't clear X the higher hourly ship of just that managers, our include are roughly the XX% and our number here. exempt wage from we support is general other we've until wages. managers, in inflation managers is That starting our wage functions on end XXXX we gave raises now, given

need a So the year now, idea that be -- you the that to keep there'll find of running There'll we're competitive a little in system where do Shacks will doing right that investments to wages, various keep sure. there, learning and through I'm be continued on gives right? some we this what's and journey and increasing. be things regions We'll

Operator

question-and-answer the CEO, call for reached turn Garutti end have the to we the back session. I'll remarks. over And Randy now of closing

Randy Garutti

tonight. soon. Thanks, to everybody, Chicken us being with forward Buffalo Sandwich with look a Take care. We for you grabbing

Operator

your conference, this today's for concludes This disconnect and may you participation. you lines your at time. Thank

Shake Shack (SHAK) 18 Feb 222021 Q4 Earnings call transcript