SHAK - Earnings call transcript Q1 2022

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Operator

Greetings, and welcome to the Shake Shack First Quarter 2022 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. I will now turn the conference over to your host, Annalee Leggett, Senior Manager of Investor Relations and FP&A. you. Thank

begin. may You

Annalee Leggett

good and evening, you, everyone. Thank

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

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

and quarter have Some no the a of results views change. represent our letter, over our today's section statements should quarterly XXXX. shareholder obligation actual uncertainties, our statements assume results as risks XX-K only forward-looking if of our views on differ may replacing including our to to XXth, today, By be an filed due be report now, or the presentation. forward-looking new which supplemental X-K will you our discussed I as access a and quarter. in-depth February exhibit more we XXXX at in in forward-looking, to annual Any materially statements letter and This turn of any those may the update can number Form prior format to shareholder found investor.shakeshack.com for now first is Randy. to call on

Randy Garutti

everyone. evening, Good Annalee. Thanks

spend with plan. numbers, new as a strategic new letter going dives tonight team our format, excellent notice We and a the hope time shorter a visuals, deeper prior are remarks its be shareholder in much the report. You'll bit than has some provided to you'll calls which

tour our newest improving strong Directors an significantly get Shake the February, to us waves the sales in business these licensing Shack ahead. by many through the hosted our trends driving culture, led working the the our of I team momentum recovery Shack's in every continued building improvement After We in April. This rebounded has performance who it's patterns. experienced as impacted Shack $XXX events, sales, by sales more through consumer travel, and both in as and million the as Shake we year-over-year urban over improve. revenue rebounded million total $XXX to offices, Total mobility average markets with revenue April creates extraordinary meaningful people and March. continue in XX% trends over in traffic that January in system-wide COVID thriving and our grew the day meeting in recovery are through has lead have Board generated quarter And seasonal our suburban being and tourism our traffic Area weekly we're and the in with and and highlights through continually the in into at to people to United Shack have partnerships more. a more reconnect Directors leaders now first Shack across Shake General it in been gave I so and who how recently Drive-thru those abroad. become are Orlando. highlight quarter, many I'm every than and States more at of the us XX,XXX before amazed many day. So, team of members market for Managers, with how members chance want our have graduated results and and many Shacks years experience leaders six development region to up We

year. growth XX.X% over Omicron sales after last posting in Our the urban XX% same-Shack waves quarter, even grew early our with sales the same-Shack significant

to expect into overall We these improve QX. further trends

impacts of generated headwinds. volatile licensed significant ongoing by in performed Shack-level and in We Our inflationary and offsetting the profit in op and sales COVID Shacks US well, driven global markets XX.X%, select levels ongoing Asia.

menu the to menu March, X% update increase price persist inflation closely persistent provide our price to pillars period currently the plan. we've in X% to inflation excluding over this year, premium about on to took on remain addition expect of We're delivery a patient and increase delivery running we third-party through the in orders. we experienced Given in brief as raising and impact last bumpy the a our of premiums, cost we'll four of watch strategic pricing and near-term,

count is growth few accelerated us development now goals. our together retreat In leaders. for created focus solid the for that strive just continuously our I to opportunity more attendees. member that our which upcoming with leaders, people. importantly, developing providing for across to team are Tree, long-term. coming licensing Shack why are learning a retreat our on be elevating X,XXX home benefits our most can on will hosted office, XXXX Shake This employers, better focusing challenging Globe. First, leadership Shake and can bring on to our opportunity partners make the first and remains choice a so and wages, provide together thrilled bench culture This growth investments hiring, you our just and nine we building the in for to people, and this than is we've this weeks, where Shack and critical where suppliers time our at career achieving retaining our ever a focused is I'm

we're curbside whether experience. digital we drive-thru. the add to kiosk, tools We're through drybulk, to delivery every ramping to Second, now convenience your transformation, building app, web, and want channel our remain you omnichannel in in investment greater Shack digital digital up even our and Shack Track Shack committed experience, the

we're first significantly rose through engagement, these Even average time. frequency the digital foundation can points to long-term click, higher the know set and channels. to takes growth. in better, with and continue this for building with that getting And All guests directly every as sales them check retention, in-Shack quarter, touch more drive our year-over-year we connecting

are supply We we and while a company here XXXX. licensed Shacks and and our beginning year, with open we intense we're in And we're to Shacks ahead total into expect to in Since our to opened We for with opening seven piece XXX Guangzhou, actually focused delays impacted our the April. opened China fiscal system see XX number at company-operated as fast our quarter, stand least planned pipeline, in and Shacks near-term and market availability our and COVID for XX our and this December, company-operated in yet Shacks, interruptions licensing plans And chain-related we've important as openings open in recovery our as the the Since Third, lockdowns in strong business, of COVID significantly remained China two revenue, to which and a year. continue across fourth and uncertainty in really we a Shacks transformational opening six between our globe open stadium first evolve more the including of In Nanjing, XX quarter our running drive-thrus, open initial an Shacks providing today. the excited business, have step drive-thrus convenience We bringing format the XX our to continue development of a in instances, another airport we market remain the the opening drive-thrus development to up construction, of evolution are market to are opened more time evolve license The our April that this future. quarter. this pushed in impacting year, exciting first for China, in license permitting, five a readiness before, and count including many landlord we two And we experience more about today, five market business intermittent And equipment back-weighted China licensed even creating April, in and to lines. and on ever US, expansion. end. in to much ahead. impacting feels greater this optimizing this growth around we're we great. than foreseeable learn know strategy learning. schedule expect experience major set Shacks

as massive growth business, space we look license see white opportunity. this a our towards As we in

next markets. brand Thailand with resonates world, of be taking expanding expand we'll the open around that and Our time week, announced up we're target key international in a decade. to we on Malaysia, And we've recently to This set also this to strong new our our and with the expansion partnerships we got announced over partners sights opportunities markets. and Shacks more XX license growth

Bacon and slate Makers partnered We sandwich. summer on create of don't miss burger to featuring Bourbon lemonades And LTOs. And guest we're just Chicken experience relentlessly week, our products. through LTOs, Finally, our we've wrapped our a Fry and Mark, our and focused chicken shakes. newest delicious our out on launched our Shacks jam up menu. We this and Buffalo summer our with

financial As to bar. to pass performance detail. in always, more over now the our food our Katie raises I'll discuss

Katie Fogertey

Thank replaces for and us begin say easy, our had looking to for good retreat speak coming incredible when a team but the of not forward shareholder short and taking I COVID has all years. team a is our new been dedication supplemental at Great. Shake weeks. has It our leadership By continued members through store Relations these pressures Randy, letter. here perseverance time in members their you, to few by our in I and everyone with now, amazing excited past to everyone. few Investor our want in I'm This available we to just section. past evening, years, moment Navigating thank I ongoing Shack quarterly for website spending opportunity for what's of our are in many our I view hope presentation. on the so

here our my and opportunity are I growth as a detail I the greater as well the Shack, our provide upcoming long-term today As potential. results into strategic that our to of trends wanted level Shake approach at initiatives their articulate on impact driving ongoing and anniversary to take one-year

to Omicron impacted and we trajectory. current are of early our Now financial and results, proud especially recovery on quarter first our our results.

of to Our grew first XX% to Licensing $X.X total COGS costs. well in million, light grew back XX% we operating year-over-year approximately to and XX% margin our March System-wide Shack-level a profitability million. year-over-year grew building and to XX% quarter remain $XXX.X X.X% we on in We delivery profit third-party XX% generated XX.X%. from sales as menu revenue focused as Shack XX.X% $XXX.X by labor million, $XXX.X raised by while price and sales as inflation of million. on delivery revenue grew to premium

office, throughout days shifts certain during of as weather drove XXX in to our urban environment and further, over return quarter channels hours generated warrants. in times. sales, Sales throttle increased great early by of and We inflationary necessary ability $XX,XXX and year-over-year. if higher in quarter avoided if $XX,XXX trends January, the fourth in as the gathering particularly were traffic operators of impacted from these impacted to and accelerating to with our price experience X% Omicron a some $XX,XXX most from than declined in XX,XXX closures, which consumers provide to in the further were during but XX reduce January. quarter increase. from have average to last more April travel, in weekly guest the down the prices up markets. quarter, recently, We raise and AWS Sales the benefit levels $XX,XXX needed and March

XX.X%. quarter First by traffic of year-over-year, grew sales supported same-Shack XX.X% growth

January markets. both As one-day an Shack in reduced our seeing, versus same-Shack calculation. sales Omicron in reminder, incremental increase heavily same-Shack we are or impacted are urban from our traffic particular that Shacks. by and and two sales was we with growth same pleased Urban and a headwind in operating our continued and however, are hours, sales The to XX% urban more in exclude XXXX were in Shack suburban XX%, the rose February. days closures pressures grew and same sales April we closures sales

same-Shack Despite XX% have the headwinds rose year-over-year. Manhattan However, recent in trends these early been still quarter, positive. sales

by D.C., New York COVID, our comp largest same-Shack other of Vegas the urban recovery hit The on XX% grew sales XXXX, positive suburban sales XX% urban in executed during a had to teams same-Shack and in first even lapping as larger negative volume similar the our and in year-over-year, the first a than more quarter. Omicron sales strong sales City where compared markets we same-Shack since we Washington, pressures urban. heavy realized quarter on seeing X% grew impact faced operational Suburban in patterns Las we're Our like Shacks.

and through evolved now While development In-Check our in and drive-thru. we suburban our We curbside skew portion drive, to than Shacks, coming opportunity batch by sales markets, greater a traffic delivery remain trends like formats were which year-over-year orders. encouraged single expand orders in are positive of suburban channels, our as more

coming Our Once digital the our transformation is sales website, meaning through came own as quarter, invest our digital channels. sales our XX% own XX% Shack to In of year-over-year. positive have channels, XX% move significantly digital even marketing guest in app up last first Shake these own than purchase digital $XXX.X a to rose seeing from and more Since we and continue are evident, spend channels, we new digital Shack and our excited digital with In-Check channels, technology our or this and grew our own Shake that into to sales end orders find own grow million they first-time more. guests about Licensing often, time our by additional in year, we made of driven more guests. they a investments, the Shack trends year-over-year. that we're

domestic pressured $XX.X Shack operating sales, other related realized profit impact breakage. XX.X% benefit of strong or our million in restrictions across a Kong we XX including basis Mainland markets. international COVID from Hong Total performance to was Shack a sales, China point card and gift and While positive level

of our beef, many our price XX.X% Our sales our dairy March, packaging. to in of food XX Shack but letter. remain this and high do we remains down markets. beef especially opportunities margin Page into target and urban or for in quarter, basis quarter continue uncertain, the expect improvement The on the we realized we as helped and inflation realized unique fiscal Overall, a In quarter, increase We Shack also pressures. profit first to throughout were XXXX. level the the shareholder low double-digit food moderating persist costs paper highly In points to some and low-teens second the that strong and not percent on wherever of first inflation, for million costs the offset key blend and specifically sales, to paper improved details elevated, contract. possible. our use quarter, environment we flow-through We inflationary more $XX.X inflationary quarter-over-quarter XX year-over-year single-digit outline quarter, we first year-over-year chicken, higher our operating March

the rose all-natural, and XX% is as more for realizing In Our year-over-year. it that and are bringing back paper beef is Angus year, than our could compares challenging costs. XX% mid-single first to inflationary beef lap food of important costs are also hopeful the dairy point, of of the beef basket, our XX% uncertain, market in XXX% dairy half of about moderate up At we higher low the to approximately the XXXX we parts quarter, Chicken than non-hormone chicken. this beef pressures, both digits. so outlook our are which but normal

the to this persist expect throughout We year.

fourth XX.X% were single-digit Labor expect Our paper high by from quarter, delivery in due increase delivery X.X% now the XXXX, or and of we was deleverage XXXX. percent million. rose from optimal teams XX.X% costs year-over-year year-over-year packaging mid-teens in expenses XX.X% million million levels, driven was Shack high total up fiscal to percent quarter year-over-year Shack February fiscal by this quarter by expect of up by leverage offset in of XXXX. in we total sales, higher work the increase volumes was raise or or in as XXXX. prior $XX.X percentage Shack in sales sales, and first commissions G&A single-digit primary our up to quarter, X.X% in starting of sales, for wages to $XX.X and fourth Operating by for continue total Occupancy mid and expense towards and the sales staffing XX.X% we'll January our to and from March. the high We sales XX.X% mix. increased our invest in we were Lower starting of wages our single-digit an percent the in quarter. the $XX.X partially pressure, to

to negative forma on of in new quarter negative largest Depreciation Excluding million or in Pre-opening and we a was adjusted On record loss share. sorry, marketing a digital opening million opened loss quarter Shake realized $X.XX support and Inc. XX.X%, per million, settlement, share share. $X.XX first $X.X projects. negative or staffing million basis, attributable $X.XX we we We -- $XX.X million fully year-over-year. pro as in $XX.X XX.X% Shacks. and as as technology a earnings in Shack, was legal expense the up seven $X earnings diluted up amortization executed an G&A net on to well as per year-over-year XX% was reported class net a the of exchanged key $X.X expense per the increased

the forma million. Excluding adjusted first tax of XX.X%, quarter pro pro tax benefit a in resulting compensation, income forma the our $X.X rate tax impact stock-based of was in

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

our to leverage formats, strong of company-wide addition including cash investing continue supporting new in support in will position other a We in of to openings Shack initiatives. our drive-thru in variety

onto and second quarter full year. guidance of XXXX Now for

or assumes additional unknown COVID-related no guidance Our disruptions inflationary pressures. new

total sales around which $XXX to second openings. are the in specifically COVID is Shack reflects Licensing uncertainty of new sales to mid-teens company-operated ongoing million, For a degree to a quarter, pressures, Shack low $XXX million Shack of China, million percent $X.X year-over-year we revenue billion guiding and key $X.X to same grow market. of guidance six

$XXX.X of We to XX% expect $XXX.X total million to growing XX% revenue million, year-over-year.

a Our in-Shack investments to pressures profit improvement and guidance sequential XX% in growth. to operating inflationary traffic our calls support margin to and our XX% ongoing Shack-level for reflects

our investments growth an our towards initiatives. are with We in long-term continuing year eye G&A this

basis, year to for the million in settlement expect between quarterly our guidance approximately company. the and legal not million We're $XXX including $XX going provide G&A. equity-based million for we full spend a to million total million now $X the of on compensation quarter, Excluding $XXX in $XX

expect purposes, your recognize an approximate million leadership to this biannual expense included and our we G&A in annual modeling $X support the second in conference, guidance. quarter to However, for the is

depreciation expect to the expense to year amortization million XX% impact pro million of between and full and rate, $XX forma and adjusted XX%. $XX $XX continue compensation excluding We $XX.X million to million, pre-opening be of of to tax stock-based

two also touch quarter, to add This some around. I we recognized want items more

accordance income gift done cumulative in including included catch-up, First, system-wide well as metrics, million breakage sales. was and a is card sales our in a adjustment GAAP. This Shack $X.X which total revenue as with GAAP catch-up

legal loss first million $X the statement in are in a of quarter. Second, G&A, consolidated settlement our in both reflected

results benefit breakage the gift this from include the GAAP card Our and legal from settlement. income expense

Shack of includes metrics level today calculation We shareholder called key card out Our by and in our however, letter. in impacted includes digital operating average gift breakage. weekly not sales, which our profit gift Same sales, Shack Shack and mix, are remarks sales card the breakage. adjustment and

We we to analyze adjustment have how an performance categorize regions made internally. align better how we to with

regional our You on read shareholder detail about can performance X page our more letter. of

So operating sales are while a challenging profits environment, improving. we continue to our and navigate steadily

are with part robust proud ahead more alongside great our we convenience I'm guest pipeline be before. so our formats than of delivering proudly more our as We team. supporting building Shacks team and global investing digital offering this also members, and many current that on to of investing a initiatives and are extremely amazing ever experience. just And transformation such Shack critical

So to for it thank And that, back I'll Randy. your time. turn with you

Randy Garutti

to and into and diversity, had team we're the opportunity Stand of much engaged in last for sharing impact, a as future of today the highlight Thursday. programs X journey. social to and the included hope our our work creating the to reporting, ESG. do our so vision, community. towards aligned together. went now installment is For our we focus, there with our analysis execute laid initiatives, Something first We've on ESG you've we tremendous update stage now, entire an us is with live the and business team previous By read and X our report all environmental, third where our this and our stakeholders on close provides of data, our work focus on evolving to do. want of I recognize to Scope sustainability report and inclusion that we for an Katie. with are Shack leadership report, Thanks, emissions heading Good our the This focus a suppliers much next collected we more. released good partnered we've governance and the ESG envision for foundation The that company audited a where overall work and I Building

Our to unique. our solidifies Stand initiatives For the Good make that report Something commitment us

exciting highest impact a yet read, And we share business. this Our quality our We're to formats the grow more. hope to take look, Shack innovation, as excited we a Shack family, with yourself and of is positive digital level new really the remind again have ingredients, world. you'll working have Shake

call As your ahead healthy. always, can and with hope open stay and families operator, questions. that, safe and that you go for the And you up

Operator

And you. with this from question-and-answer go at question comes Thank Tamas Instructions] first time, conducting Michael Our we'll session. our ahead. Oppenheimer. be [Operator Please

Michael Tamas

Hi, thanks.

provide is new shareholder level detail you letter a the First, of great. and

So that thanks together. for putting

beyond You great for margins second the the you're pressures potentially impacting And that. about on obviously, obvious the gave how quarter next cost XXXX rest color there even of the business. thinking question are think that and I expect is the the and you some

second any You're margins won't and out year-over-year? way half assuming you the half that versus taking of fair the that plays specific would it think there's be first cost year you Is environment potentially want if the you comments think. growing great, specific the numbers, to pricing. assuming the better Thanks about more And the and being for in to year us do but of make even

Randy Garutti

than That XQ, surprise lot for the you what continued expect there's lot the every increased has other across not let Yes. living half I'll a else few of play and clear wide on a think Katie in We're our comment continues we range to to we and Look, because Thank happening. uncertainty. about to look, And a shows that more a a There's happens and us margins. there, of a day see. be team goods you. We've there's things going that given little every given than bit. at say, company which back guidance in talk there. to there's environment detail have all cost everyone ever, inflated are Katie I

look, strong can we a who margins. generate company be to So expect continue to going we're

in I them this a where point our think we be for near-term pressure to we're many up, here so of are expect to year. continue and ingredients up

So, the go, by market how we our and where trends we're don't we'll recovery know quarter key best is going the urban see the But we experiencing. to if a will our given second hope expectations first are quarter inputs and encouraged went beef been that, and continued where guidance exactly that can see the going for where to on We've go. possibly we've go outgo. we we

Katie Fogertey

sounds we're are for basic as dynamic Randy composition can the this we kind working facing. and at to report pressures is time, through point a hit then quite as Yes. look here. we you I on year. this rest to I lot But great our inflationary already XX. there, to best is us on who give on, look best you've kind as thanks have a environment this together would also and as don't a our XQ thank more that, taken helps well as that we here, team and point you in and And It our dive add but manage the like outlook great very the of much, of to of Page the

Michael Tamas

that. makes Yes, sense. Appreciate

units differences and cost But units planning to process, Thanks. giving more drive-thrus what your drive us in that help to were know legacy rent model? specific the look you think between I yet doing model even like us drive-thrus might structure can higher the about when really labor different? describe Is Is the the you On just and those some units? anything Just specifically a suburban just not it out of financial you're the or qualitatively. up metrics anything. though,

Randy Garutti

open open. end And open said, We've should total We this should I early. year. about we of really five one it's Yes, the quarter. more Sure. get this got five as by

year, varied Castle So of in this XX We Rock have about opened in by just in the really end right? we'll environments, Colorado.

have not with we openings and cold open We and towards but targeting, and But sure obviously, seen week, end did happen team not, we Shacks our if Orlando we're the or that that year. we last some of a our in higher then We're that's we're what weather the not We're today, sharing goal. in will believe the AUV. numbers targeting? are potential

goal Shacks. At XX% the class normal. we've year should again living In up operating with conditions. cost those should times, number where on terms be whole than are margins to more up depend to will We're That this and return. moment, build this than market strong inflation in our of margin, normal The XX%, be going an environment will AUVs have bit. everything to expect strong that shared strong is a and a little our a our of you

know, of we at a are the a about for format last and ability as some think And built way that a us sites, the that is available we're sales capture after in for yet, can we share to goes of burgers time tell lot ultimately, that more We'll pretty increasing good. because about the don't will I'll this be hard are to on. this get give going I the feels drive-throughs think cool. out, it's the figure after market teams lot the why some learning, -- draw be to thing Shake that of you, to that can I've year if new really drive-thrus more it believe share go, we said, the given but as Shake one to the a as has things And our look us sheet It's over opportunity of we potential but capture when addressable built really there. Shack. Shack. really been opportunity sell is will really for And market a you've believe much optimize this working balance And to we those And as of working expensive. you

Michael Tamas

it Appreciate Thank you. that.

Operator

Please comes with question Nicole from next Our Sandler. Piper Miller go ahead.

Nicole Miller

Thank you. afternoon. Good

ones. two Just quick

When to commentary The that, they first digital the or and wondering in ecosystem? income? contrast ecosystem. first digital about And users customer? does a your is was like in customer and do you about your a however who what that, to encouraged look they lot around that customer Do a about specifically cohort average is these you tender certain your coming my that compare question leave own be

Katie Fogertey

Yes. Hi.

that to the with our a resonate and into they And maybe can -- building see across our into digital it's consistent guest, download with our really we're and understand that more then base. helping if getting delivering menu. guests. is So we're shared own overall, traditional very we've It's with guests they're is when our And board, digital digital we're What guest channels channels on It's more our to been through with that time. it's come XX% app. we the through the than where really ways, check that and of that kiosk and to often. than to intakes. see check. about excited they're really but more through premium. come -- starting guest audio exciting and XX% or vary guest our investing they that going we legging the it's more and channel we're And awesome connection channels back hospitality great spending them point, come What see see building, it when also, we've digital the seeing various experience we a personalized that our more that are really we're The we all they in in that what

Nicole Miller

maybe was But thinking it's that's of seekers something or just younger kind like guess is I or maybe like more value everybody too. then that. Okay. if I good, coming,

Randy Garutti

as continues a really, at younger right? between way even think, a guests is. they what younger Where into holding. is a And that pretty digital we're very are you getting -- have our to per guest, the so right? question, first hasn't but our and that's coming. really it's I got age many are over up Shack like-for-like we is often. as Nicole. recovery, Shack up, a to suburban percentage as time. of there's still really is our And to believe our so this data I where many up, But sales that your as consistent holding and has kind average higher think but know others, checks. answer Shack of into ages this guests know. think encouraging over up, have sweet It checks. in It Shack, more Shack, headed. the quarter the sales We all Our are We've more that's in is, generally still suburban of and we've Shacks, we're we sign there is it's digital Shacks up sales dynamic in And of time, over spot is new been not encouraging one and Young guests average I the changed, come our which and everybody the grow, business been of different. of than men And just that generally is for it's the different continued even Shack But not more points all XX% balanced in up It ways to higher often to one total digital expect Shake gone different know most women yet, probably have

Nicole Miller

you. Thank

More on development. last world quick a of unit Just on a one focus. rest

we I for to any there's about think to that the just of likely quite be going some think And complexities more moving understand even abroad time. situations are all complexities if certain of was lot change, the better I pieces. a starting

of share And So anything some on international in maybe like what's to regards economic chunk for China. tapering, pretty reality the perpetuity, into holds, but units maybe model, that the the is in number talk say unit the context, of percentage there Thank about you can but time good just not here? particular, growth you. of to unit within if pause, acceleration the level

Randy Garutti

Yes.

Deeply that self-delivery start where type our pickup have that Beijing, of Shacks, Most market now just now. let's doing are four mostly we right delivery China. only in themselves. with can closed. are So open right there. In Shanghai options impacted is Those of closed restaurants do

Long development in are significantly in lie So, we adding will China. how of how to. and on growth much just term, is And continue to to as the bullish quickly want we term. Part And your that, to grow don't happen potential do know new markets. or answer we increasing the we very can we near do that there what's going China. unit I to China accelerated think

frankly, we've have So opportunities travel pace. international continue added different, a the Thailand, at world our we've to And added rapid even ceased being not Malaysia. with

we're addition, business. about new really forget it's about two time, year. why markets us, we But for doing these because too licensing as in much doing So often talk global our we taking fast. That's too next the not

got New deal last new a We New Our event got for and in love to just we've more licensing we with opened Louis stadiums we've in domestic York quarter, Blues. do spaces, that We've the to and open our business that St. new going up. we're of This Apple and new throughway Jersey continues Turnpike business. grow. piece where Parkway opportunities, the Green,

increased out, early really need unlock about figure what but to So that. bullish today, for really this year. because we in we model and units too guidance we that we're And to expected our it on say license

XX%. at up XX to were We XX%. confident XX% least feel and we So at potentially to

really on that's it. the a -- market. keep it your like that us. growing this for unit be add to want is really we part So But going economic nice to and depends To question,

business, of much In our many in Middle business. our East AUVs more Asian it's extraordinary have We mature.

but lower have generally economic it continue see to openings, to well new AUVs, newer So model openings, really our less as as unit grow. dynamic tends partners you'll the

that. love cash asset-light asset-light in we flow. a We of opportunity in to We positive lots and So, our the sales it's the roughly have have of XX% environment smart license international a super business. think part

ahead. So. lots do, lots to

Nicole Miller

you. Thank

Operator

Bartlett Truist Securities. comes with Our ahead. go Please Jake from next question

Jake Bartlett

Great. Thanks for in taking March the question. Mine is on the average weekly saw sales that April. and you

so And typical to really could change wondering you the we weekly in can understand compare of that rest Shake reasonably does seasonal improvement seeing? of April there? you're Shack? the help a I'm low for trajectory underlying just see sales? what the that just also, the or seasonality, month April year? March how kind then the If Is high average about And just for us is

Katie Fogertey

Yes.

our driven are. mobility, by So at what it seeing down calendar April, let's Omicron urban people in really travel just When dayparts, returned just the look we at that our what of consumer recovery routines. here of driver call what we're business about less moving are point, people particular I'll to with of office. and It's signs that weekday kind all at this we the it, to trends break overall more macro of but and It's normal parts the and seeing lunch. is being with owned bigger currents tourism, we're strength March saw Those emerging in any much shifts. into from kind these from is their

Randy Garutti

talked the we we've about about letter one point through think to this Jake, regionally, you things the as And on X story page COVID. of to

the to first suburban encouraging seeing That's Manhattan in where specifically holding continues of most is number. it's XX% we're urban kind been, grow, of a some think big I up the quarter. while is things

what we still our our back Now about as back. remain XX,XXX. trend that in strong But country a to good when around Good -- play think a was, AUV to Manhattan -- it's feel And the for AWS. when they're is sales. it coming That's urban average out that's sure. for still see not the the weekly right? proxy restaurants and what deepest that for right you Manhattan, but And an pretty April direction we impacted, about

Jake Bartlett

Got it.

March, so really below up. trying understand going that's improvement we whether of I I And can to so the was guess, April understand kind just is typically

you could April is typically past? maybe if whether March years in below share So

Randy Garutti

Generally, it's have it's not don't up. the Generally, I number front below of. in March.

on broken to it Eastern and years but Also, that how -- been, and all haven't out the in in what when get it difference month. We in depends generally vacations past way. better that to Jake, as has holidays

numbers. I we at think So better look it at as to look quarter-over-quarter, AWS those

Katie Fogertey

looks at completely And one look of different. company our than kind just COVID to our it regions, pre-COVID, this is it's exposures, but footprint did different thing, if very prior obvious, you our

it true is get look So hard a seasonality what kind really normal read would like. on a to of

Jake Bartlett

a peers, it. been Shack's big why are weigh ordering Great. at bottleneck think you and a pre-COVID? driver. away unlock really question, digital a and hasn't been strong which really the some powerful with I seems pick be pay Shake investors the trying And as recovery Got as versus there's to to one up, then a And and have of kind of right, taking

of fast peers urban of types seeing or answer seeing sort kind the I of of on there the type big is have. the in you're of know same I suburban are see But just lit where So markets where we of you at you're … the and stores your urban that think markets any stores you're of and there casual some the type XXXX that also type versus

Randy Garutti

Yes, sure.

Katie Fogertey

Yes.

Jake Bartlett

…the benefit of that online?

Randy Garutti

a -- really Yes, this it whole story of we've absolutely. And told are your on the them depends There we’re them. it's not out, but similar -- breaking time. some as

environments of Midtown urban are kind office related. event tourism those impacted your most Your are that

ever this it and on still environments or be when but used we're peer every multiples are volume it where comparisons. some up are we rely urban at us to thousands trends our right about I've out we're a other at compare us there talking again, half But XXX than across sense. traffic to Shack to country balanced every you're not about today restaurants not we're New makes we that We've day, XXXX of environments. that We sense that needing being urban we And feel And story have. those way, when I for just we're going wider in over in look you going And Shacks, XXXX. not up if still, -- you're in language whereas areas with Shacks while some where that still York geographic may where going down, were ours more now kind restaurants highest this now in other part has much those than anymore. any on back to dispersion roughly just peers, to of I urban to about we're look where compare they on. XXXX, just with be the that's makes have of again, some talk of our still well a a to We're talking -- when here, moved XXXX of

but go, we direction. definitely trajectory the got So the to in some still recovery is right

Jake Bartlett

beef. state up my that on stakes, Great. look at hamburgers appreciate then you it. fast I whole-muscle is are the When I whole-muscle, see most one food not understanding use right? cuts, don't of all, use So the think them, trimmings currently. one you ground quick uses. your year-over-year And I really And down that if being I

is question price. you the how So

growth I -- understanding on my is I going commodity second never the year, the help I quarter. commodity specific beef get a just not guided a for the I you've in understand regular to as low costs, pricing you're So your down basis. at know ask they're you blend us the that of index for look should that. look know -- if markets, to But what but we most don't that would for single-digit against give But I -- understand

Just trying to reconcile that.

Randy Garutti

cuts can't I Well, are, tell you know. they you as which Jake,

answer be bit high Other the year the were really high. there year going it's and little our where kind was single been moments look, outlook last year There's this beef And officially to the that. depends. can't a shared So to lower. for digits. is at where of been answer moments than it we say, We've low

so doing market a are market is at that those what here, do do, but exactly price. telling best we we give that have moving the either, I and to going specific market with Of conditions. going variables our playing clearly, trend much cost around, corn, the as to cuts of we we're markets can beef we're might specific with what But there sure we're mean, ride very depend of that and international cost into we're not on generally feed, many and things course, guide as to everyone it's doing. of

we're not quality sacrifice in going and the -- of we to what our So food. put

great buy to continue to price and accordingly. meat going we're So

as going they price then in at system things look that We'll be, at feel are about looking may later look day. got headed that end we through at keep -- haven't the but well the now. every on at it at chosen and haven't year as we we decided sooner closely we'll higher we we've If that. So price even than rather or looking the right and may X% do, we of it normally yet, we're

Jake Bartlett

Great. Thank I very appreciate much. it. you

Operator

Deutsche Brian go comes Bank. question Please with next Our ahead. from Mullan

Brian Mullan

Hey, thanks.

evaluating or in you're Are actually Just products basically next there automated efforts anything thoughts the in be at that viable wondering if Shack? at Any you technology or being asking you're any on any years? could offer a or be least Shake on if are could automation any worked willing industry in at level? pilots that to could the theory the tools be functions kitchen considering few just

Katie Fogertey

Brian. for your Thanks Hi, question.

now That's our great lot payment in technology robotic been but of we a currently where where of technology has a jobs make of about never process talk be and help never, example we easier them saying team not the you kitchen. a kiosk And restaurant. lot. kind leverage to the on started automation right us We're to members' see and investments focused in we're more actually any efficient help equipment testing something So our have in our side. streamlining

Brian Mullan

And just then on a the Thanks. drive-thrus. follow-up Okay.

need more than when If would on I perspective? would in helpful? XX from or the be drive-thrus you do development opening Just be now, think pipeline a planning beyond were early less, XXXX that any decision for guess, year choose thoughts you be made this you'd to drive-thrus forced to

Randy Garutti

and longer We've drive-thru. I time a longer permitted we're a right? they number not than take yet. they built. build question. It's get mean, formats, And Yes. Drive-thrus fair bullish on generally announced entitled, other to definitely -- the had

that first not happens. We're how on more. to to So time to going it's on keep you commit quickly, will as line. see what we'll We're a posted waiting obviously longer go. be XX the and The we question

a believe across our want the will we're building drivers. in will and this next right potential we build that it focus that pipeline now which years, about I think And few more. is excited to absolutely goes some include formats, include

Brian Mullan

you. Thank

Operator

Thank you.

Silverman comes question Credit from Please ahead. go next Our with Lauren Suisse.

Lauren Silverman

Thanks for question. the

So Shake the environment? history you environment. on just a more We you in how consumer XXXX-XXXX. a have going challenging Can Shack lot in talk about don't positioning see a in

be helpful. thoughts high-level any would So

Randy Garutti

about Yes, we Lauren. it's lot, something talk a

consumer -- be knows answer to Shack If right? is be I the think where how in now, right exactly as to will to think pressured it going That's nobody it go. it that is be environment, seems expect environment we the does perform question. provide -- the I Shake spending

from -- we for money. ingredients premium much opened to may it We this in up not through money, you available that trade when XXXX-XXXX, that took trade exciting the we down spend been where in grow we've started costs and of a off. food company's also as have ourselves, never even an really really as recession. traditional to much our company though And event initial more fast to the want not more growth serve truly that's straddle about We always really thought fine line a

can But to both ends be to that straddle gives not say, going us us. hard benefit positioning an say, but that to we're good again, always consumer of But know any in hard that of hopeful that spending economy, it felt unknown So we've who on we're environment. a today to about claim that, make in spectrum. a positioning and will lot consumer going confidence to we

Lauren Silverman

going a are Thank restaurant on running some what Obviously, the the way understand for to margins. contextualize versus one in are sales are Just to can margins for trying try Great. weighing magnitude system. Is on those noise. any urban there you regained that. the markets? And outliers where of of I'm fully that you restaurants lot of

Katie Fogertey

Yes.

hit our March by was on restaurants, that the particularly XX%. into hardest had our April, So we what added north and that COVID, flow-through restaurants saw flow-through in a have urban been was of the tremendous and saw we we sales that strong. in in particular, it And

order of And think a magnitude potential little margin of you gives of so of bit for kind where side. I recovery on that there's that

Lauren Silverman

you Thank very much.

Katie Fogertey

Yes.

Operator

Our with Baird. go W. next from Please North ahead. Robert question Drew comes

Drew North

for taking the ask guidance. I unit the Thanks wanted question. opening about to Great. revised

it or units came side, the operated so. down company like looks the five range On

XXXX. more delays specific recognizing while Just be on due and to hear helpful won't out XXXX, you're you you still and think the high-level I slippage Thanks. color some might for I seeing guess, some of it into provide the you're And guidance to those there? provide pipeline context development thinking in could perspective what about challenges? how

Randy Garutti

Yes.

For sure. for noting thanks that. Yes,

of got think, And - time. challenging past we open. been that there -- be market so great a much -- all now. out in today, than didn't longer disappear. certainly really had control. I get now. been, again, open. had to permitting, numbers months that are that I've lines, And XX uncertainty of we're they've the taken availability as are going going likely this we're And of handful time just that. and I units still more got taking that through. in talked sharing taking -there's costs going are for taking we've restaurants. we've We to really They're that things a late this fourth labor ever we There's But strong few happening lines that's not might that leading Things have we're hoped been the They busy up end have about. that longer to still and company. just name going with those XXXX Shacks look, construction all in all is We're working time just longer. since to true. And construction out a of XXXX. the What's to okay our a takes extended They're is pipeline They're quarter.

don't over Sometimes the that supposed allows which our our us then us they're even construction to get building landlords take open. the in and to, time get right,

expect don't I year. this any hard. get Those certainly easier it's things, to So

to XXXX, into but to have see So for yet -- class a not that just we're we'll strong get expect today. we specifics of going

Drew North

for Understood. Thanks perspective. the

Operator

Charles Cowen. go question comes from Andrew with Our Please next ahead.

Andrew Charles

it ultimate you it We've Thanks, in concepts restaurant guys, XXX open the their lot around with leaves Great. I guys. a months recognize store potential. you raised And ended plus could high that outlined, last bit the seen of how a few go. you've

see format wondering obviously, range, I'm do you early the your out drive-thru, guys before that And for recognizing need there pretty have you days see to high share, especially exciting there. new this number with to you guys long-term you potentially of but a so volume. it's to obviously there's capture just a raise that opened What lot been a

Randy Garutti

of format, Yes. a perfect drive-thru couple -- -- we That think we it. example it's We I in shacks. the a we're a at of targeting have last Andrew. formats, were of about it plus there's Orlando of lot week, those when just kind was tourist other market really that was

one our got got in we for then have way right? drive restaurant of food a a that really the market court. We've we've and That's got six And You growth. So strong we're you've us, core mall got Shacks. a a of have a at shack, to Shacks. through. in neighborhood of type everything kind a looking couple That's traditional perfect

goals going margins and over a do years. science, can expect We're now we'll been both to lot bit data lower being keep want lot deliver. we've impacted we're we that you if over returns. those long of strong We've But And of art I obviously diving, that term. growth We a and really on everything what of these in number that -- of a but increase more a each years understanding of to continued little of kind into run new and those this lot be format and formats a market consistently goals ahead. we by need returns of of expect are at a get what So quite overdelivered deep more evolution, cost bit that the requires last the promised on moment, our just the to changes. learning, COVID, very our market, lot conversations strong past shared to total It's the formats. that the continue of two all regular there addressable a have we with formats craziness posted these build getting we'll for to market higher of sales doing rate see number has to see?

Andrew Charles

Kate, then And question helpful. for super a you. That's good. Very

margins to long-term back better-than-expected get as our And guys Just help Or of in of you well. should date? obviously, you with quarter. throughout that XX% mojo obviously, is kind return see recovery TV margins? country we're the and to XX%, still visibility scale that have the for your pleased guys the with your the kind expand Do

Katie Fogertey

and mean subtract guided as we've level operating we're profit guiding to for next I quarter, margins. to to Yes. XX% XX%

we've all how is where the good fully So There's But of about of that back out. a today. about that talked inflationary recovered. can you really we being where that kind there and gives unknowns and we a recovering feel pressures build still lot play sense out think will business to of even stand we not how we

Andrew Charles

guys. Thanks good. Very

Operator

Thank you.

Hludzinski question JPMorgan. comes with next from Our Jared

Jared Hludzinski

This John the Jared for for the pay digital you well Can customers… discuss Shack in-store cashier tipping being for on Ivankoe. as is on Shack to Thanks And for app, Hi. are question. for these... that's tested how transactions the the the transaction employees as

Randy Garutti

you Absolutely. Yes, bet.

Jared Hludzinski

mover needle cut Pay guys from the You --

Randy Garutti

our super definitely right? learning something to listening It's that to we've a test. testing and committed see. It's we'll Well, It's teams. early, and

since accepted has shared have we've to the and of the opportunity asked One Shack had Shake those opening beginning the certain guests is been who tips. that consistently things for never tip of

early our other yet money. And give again, that credit a pay more to little card. it's today in-person than that cashier data members any to at testing a with sharing happily you we're transaction only So available make days team not where your opportunity

we'll better they totally that. And so. we'll that voluntary. a you be and tip it's -- Over year, any we We in feel you in web for an or to can taking this care of way. it's hope is our whenever increased money, and will like I roll of we great, an and to through time, overall. And and we begin don't they money more do more hopefully, team test that in put to number later kiosks, out opportunity see. of But our retention, in for something first team if our our it's in digital and our want where more app testing We a choose create little it a people position the Shacks of But make think to have team goal, to, extra thank channels, we for bit and within obviously, of that pay are small our Android. channels now

Jared Hludzinski

you. Thank

Operator

for Thank further turn I'll management at the this questions to you. There floor no remarks. time. back closing are

Randy Garutti

appreciate We'll time the deep your Cheers. soon. and reports, you forward taking with look dig everybody. time Thanks, some we today, new to in all

Operator

evening. Thank you. concludes That today's conference. good disconnect. may a Have All parties

Shake Shack (SHAK) 6 May 222022 Q1 Earnings call transcript