Fast-food chain Shake Shack (NYSE:SHAK) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 10.5% year on year to $320.9 million. Its non-GAAP profit of $0.14 per share was 15.1% below analysts’ consensus estimates.
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Shake Shack (SHAK) Q1 CY2025 Highlights:
- Revenue: $320.9 million vs analyst estimates of $327.4 million (10.5% year-on-year growth, 2% miss)
- Adjusted EPS: $0.14 vs analyst expectations of $0.16 (15.1% miss)
- Adjusted EBITDA: $40.75 million vs analyst estimates of $41.94 million (12.7% margin, 2.8% miss)
- Operating Margin: 0.9%, in line with the same quarter last year
- Free Cash Flow was $1.87 million, up from -$2.39 million in the same quarter last year
- Locations: 585 at quarter end, up from 525 in the same quarter last year
- Same-Store Sales were flat year on year (1.6% in the same quarter last year)
- Market Capitalization: $3.53 billion
Company Overview
Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE:SHAK) is a fast-food restaurant known for its burgers and milkshakes.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years.
With $1.28 billion in revenue over the past 12 months, Shake Shack is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.
As you can see below, Shake Shack’s 17.3% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was excellent as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Shake Shack’s revenue grew by 10.5% year on year to $320.9 million but fell short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 17.2% over the next 12 months, similar to its six-year rate. This projection is commendable and suggests the market sees success for its menu offerings.
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Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations often determines how much revenue it can generate.
Shake Shack sported 585 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 16.1% annual growth, among the fastest in the restaurant sector. This gives it a chance to become a large, scaled business over time.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.
Shake Shack’s demand has been healthy for a restaurant chain over the last two years. On average, the company has grown its same-store sales by a robust 2.8% per year. This performance gives it the confidence to meaningfully expand its restaurant base.
In the latest quarter, Shake Shack’s year on year same-store sales were flat. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Shake Shack can reaccelerate growth.
Key Takeaways from Shake Shack’s Q1 Results
We struggled to find many positives in these results. Its same-store sales missed and its revenue fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 2.7% to $85.40 immediately following the results.
The latest quarter from Shake Shack’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.