Pressure on Transactions, New Unit Volumes and from Labor Impact the Near & Long-Term Outlook
This report is a summary of our thoughts on the investment case for Shake Shack (SHAK) post 4Q17 results. We discuss the the stock's current and future valuation. We examine the implication of the changing profile of its new unit return on invested capital, which we consider the company's return on incremental invested capital (ROIC). We discuss transactions trends at same-Shacks. Lastly we evaluate 2018 and 2020 guidance provided by the company.
Shake Shack is a roadside burger stand serving an American menu of burgers, hot dogs, crispy chicken, frozen custard, crinkle cut fries, shakes, beer, wine and others. The company operates and licenses Shake Shack restaurants. The company's menu include: Burgers & Chicken, which includes the SmokeShack?, 'Shroom Burger? (Co.'s vegetarian burger), Shack Stack? and Hamburger, as well as Chick'n Shack?; Crinkle Cut Fries, which are made from Yukon potatoes; Hot Dogs, which includes beef hot dogs and chicken dogs; Frozen Custard, which is made from vanilla and chocolate recipes and milk; Beer, Wine and Beverages, which provides local craft beers; and Dogs Are Welcome Too, which provides dog biscuits.
Quo Vadis Capital, Inc. is a Registered Investment Advisor, independent equity research boutique and financial and strategic consultancy. Our focus is on the U.S. consumer market with a specialization in the retail and restaurant sectors. Quo Vadis provides an investment edge for professional investors using a proprietary forecasting tool that identifies and quantifies near- and long-term upside or downside potential to consensus estimates. Quo Vadis is based in Paris, France.
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