Investors are less than satisfied with Shake Shack’s first earnings report

Wall St.’s favorite burger
Wall St.’s favorite burger
Image: Reuters/Brendan McDermid
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Reporting quarterly earnings for the first time since its January 2015 IPO, Wall Street’s favorite burger joint dished up some undercooked numbers on Wednesday, after the bell. Although revenue ($34.8 million) and increase in same-shack sales (7.2% for shacks that have been open at least two years) were both higher than analysts expected, there was a net income loss of $1.4 million ($0.05 a share) for the fourth quarter of 2014. And $1.1 million of that loss was attributed to expenses from the IPO.

Shake Shack stock was at a record closing high of $46.90 on Wednesday afternoon before the earnings release; shares were down by more than 6% in after-hours trading.

Same-store sales, said CFO Jeff Uttz on the earnings call with investors, were buoyed by three things: the closing of the flagship shack in Madison Square, from which other Manhattan shacks benefited; the return of crinkle-cut fries, which customers apparently loved; and general increases in menu prices, as a result of rising commodity costs. These factors are still in play for the first quarter of 2015, he said.

A large gap between sales and profits is nothing new to anyone who looked at Shake Shack’s paperwork before the IPO. The road ahead for the company may be bumpy, as it aims to open at least 10 new domestic company-operated locations each year. Few of the new shacks are expected to be as high-traffic as the ones in Manhattan, where Shake Shack has a loyal fan base. Total average weekly sales at company-operated locations are expected to decline as more stores open.

In 2014, there were 10 new company-operated shacks in the US, and 12 international licensed locations. The first Shake Shack in Japan will open in 2016.

Also, all Shake Shacks will soon serve hamburger and hot dog buns made with certified non-GMO ingredients.