Home Equities Score Is Shake Shack, Inc. (SHAK) Stock Set to Rise Following Promising Q1...

Is Shake Shack, Inc. (SHAK) Stock Set to Rise Following Promising Q1 2021 Financial Reports?

Shake Shack, Inc. (SHAK) stock prices were down by a marginal 0.66% as of the market closing on May 6th, 2021, bringing the price per share down to USD$105.62 at the end of the trading day.

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Improvements in Revenues

Total revenue for the first quarter of 2021 was reported to be USD$155.3 million, up 8.5% as compared to the same quarter of the previous year. Aside from licensing revenue, Shack sales comprised USD$150.7 million of the total revenues for Q1 2021. The 9.1% increase in Shack sales as compared to Q1 2020 is largely attributable to the opening of a total of 25 new domestic Company-operated Shacks between March 25th, 2020 and March 31st 2021.

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Relaxed Restrictions Result in Growth

A high level of digital sales retention in conjunction with increases in dining indoors resulted in same-Shack sales increasing by 5.7% in Q1 2021. The improvement across all regions was a significant upswing from the reports of Q4 2020 indicating a 17.4% decrease. Same-Shack sales were up 86% in April 2021 as compared to April 2020, primarily because of the easing of Covid-19 regulations. A vast majority of Shacks have been operating with open dining rooms, despite there being varying levels of capacity restrictions.

Economies of Scale as SHAK Grows

Q1 2021 reported an operating loss of USD$10 million, as compared to the USD$0.8 million reported in the prior year quarter. These numbers reflect a 6.5% negative operating margin for Q1 2021, as compared to 0.5% in Q1 2020. General and administrative expenses were up to USD$19.6 million in Q1 2021, up from USD$16.2 million in Q1 2020. The difference is partially made up of USD$1.9 million equity-based compensation and other non-cash items.

Solid Liquidity Position

SHAK conducted a private placement in March 2021, which saw the company issue 0% Convertible Senior Notes due 2028 in the aggregate principal amount of USD$225 million. The offering granted buyers an option to purchase up to an additional USD$25 million in the case of over-allotments. As a result of the exercising of this option, SHAK issued a total of USD$250 million aggregate principal amount of Convertible Notes.

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Future Outlook for SHAK

With the world hurtling towards universal immunizations and the gradual lifting of government-mandated restrictions, SHAK is poised to return to its pre-pandemic capacity. Despite the challenges presented by the global pandemic, the company has managed to stay afloat and even thrive in uncertain times by adapting effectively. With strong financial reports, current and potential investors are hopeful for continued growth and significant and sustained increases in shareholder value.

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