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Shake Shack focuses on fundamentals

The chain doubles down on workforce, omnichannel experiences and chicken

Shake Shack has returned to positive traffic — up 1.6% — and saw same-store sales increase by 3.6% for the first quarter of 2019, the New York City-based company announced.

“Our performance was positively impacted by strength from new openings, a favorable holiday shift and warm weather conditions across a number of key markets early in the quarter, and the continued growth of our digital channels where we see significant ongoing opportunities,” Shake Shack CEO Randall Garutti said during the earnings call.

Net income for the company rose by 2.7% to $3.6 million and total revenue increased 33.8% to $132.6 million from $99.1 million a year earlier. Earnings per share were 8 cents for the quarter, compared to 13 cents for the first quarter of 2018.

“These strong results are a testament to the hard work of our entire team, and the execution of our strategic plan, with continued focus across the organization on those key initiatives that will support this business from 2019 and then in the future,” Garutti said.

“So, here's where we're focused: Committing to excellence in our people, delivering a consistently great guest experience, cultivating a loyal and connected community and innovating our business for long-term growth.”

In terms of commitment to its people, Garutti pointed to Shake Shack’s recently  launched “All-In,” a company-wide diversity and inclusion initiative. He said the company also had a new women’s mentorship program and that almost 60% of promotions in 2018 were earned by women. Shake Shack was awarded a 100% score by the LGBT advocacy group Human Rights Campaign 2019 Corporate Equality Index.

Regarding employee benefits, the company is testing flex working and a 4-day work week.

On the guest experience side, Shake Shack is looking to update legacy restaurants to make them more compatible with digital sales and delivery.

“We're bullish about everything digital means for Shake Shack, although as we mentioned before, the introduction of additional channels in already busy Shacks can at times create operational complexity, which we are still working hard to address,” Garutti said. “In addition, you'll hear this from Tara [Comonte, chief financial officer], any of these channels come with new costs to our business. And you're seeing some of those in our financials in the quarter.”

Another significant cost during the quarter was chicken.

The company’s Chick'n Shack was launched three years ago and the company launched Chick'n Bites as an LTO during this quarter.

“We made a decision to test this item with reduced promotional pricing focusing primarily on guest uptake and feedback,” Comonte said. “We've been pleased with the reaction and as a result saw the opportunity to increase pricing at the end of March. Chicken is a high-cost item in our basket, particularly the high quality, fresh, hormone and antibiotic-free supply that we insist upon.”

High quality is just who Shake Shack is, Garutti said toward the end of the call.

“We were born from a fine-dining company,” he said. “We're always going to lead with quality. We're going to lead with things that the guests really are asking for and will come back for. And we want to be the next generation's burger joint.”

Contact Gloria Dawson at [email protected]

Follow her on Twitter: @GloriaDawson

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