Shake Shack earnings: 8 cents per share, vs expected EPS of 7 cents

Shake Shack reported quarterly earnings and revenue that beat analysts' expectations on Monday, but shares fell sharply on a sales growth outlook that was a bit below expectations.

The company posted fourth-quarter earnings per share of 8 cents and revenue for the quarter came in at $51 million. This is the first time that Shake Shack has reported fourth-quarter earnings since its IPO last January.

Analysts had expected Shake Shack to report earnings of 7 cents per share on about $50 million in revenue, according to a consensus estimate from Thomson Reuters. The restaurant's stock, which was priced initially at $21 per share, is currently trading at nearly double its IPO price.

Shake Shack cheeseburger and drink.
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Shake Shack cheeseburger and drink.

Same-store sales for the restaurant increased 11 percent in the fourth quarter, according to the company, with domestic chains averaging $89,000 in sales per week. Wall Street had on average expected same store sales to grow 7.3 percent, according to FactSet.

Despite beating analyst's expectations, Shake Shack stock fell more than 7 percent in after hours, as the company forecast same stores sales growth that was as much as 60 basis points below consensus: The company said it expected "same-shack" sales growth between 2.5 and 3 percent — analysts had on average expected 3.1 percent growth, according to FactSet.

During a conference call on Monday, Shake Shack execs touted the importanct of long term value creation, community and innovations in the restaurants core menu.

A recent addition to the Shake Shack menu is the Chicken Shack, which launched in January and is the chain's first chicken sandwich. Some analysts have said the menu addition could help drive future sales and offset increased beef prices.

"It is likely the most important menu addition we've made since Shake Shack began," CEO Randy Garutti said, during the call. "While it's still too early to know exactly what chicken will mean for us systemwide, we are hopeful it will prove lucrative to sales, traffic, average check and food costs."

In addition to the Chicken Shack, the restaurant increased its starting wage for employees in January of this year, offering regular staff between $10.50 and $12 per hour and team leaders between $12 to $15 per hour.

"Paying the team well will drive sales," Garutti said on Monday, explaining the importance behind the rise in labor costs. However, the CEO also noted that this increase in expenditures will be reflected in 2016's earnings.

Shake Shack continues to open in new markets — one-third of all new shacks are in new markets — and is slated to open at least 13 new domestic company-operated Shacks in 2016. Each location is expected to have average annual sales of $3.3 million and operating profit margins of at least 22 percent.

Shake Shack, which went public in January of last year, has grown from 63 to 85 stores domestically and internationally, but has said it hopes of growing its footprint to 450 locations.

"We are very proud of what we have been able to accomplish in our first year as a public company," Garutti said.

CORRECTION: Randy Garutti is CEO of Shake Shack. His name was misspelled in an earlier version of this article.