The company looks to close the year out strong, and early reads on 2025 are encouraging.
Shares of restaurant chain Shake Shack (SHAK 7.79%) were rising on Wednesday after it reported its financial results for the third quarter of 2024. Investors celebrated after digesting the numbers: As of noon ET, Shake Shack stock was up almost 14%, within 1% of the all-time high that it reached back in early 2021.
Business is good for Shake Shack
In Q3, Shake Shack’s revenue was up nearly 15% year over year to $317 million. Opening 17 new locations during the quarter helped boost the top line. But revenue was further boosted by same-store-sales growth of over 4% — the ninth straight quarter same-store sales have gone up.
Shake Shack has been making progress on profitability in recent quarters, particularly with its restaurant-level operating margin. In Q3, the company’s restaurant-level operating margin of 21% exceeded management’s guidance, which was an encouraging sign.
Same-store-sales growth and operating margin improvements were encouraging enough. But these improvements are also an excellent sign when looking ahead, which is why Shake Shack stock rose so much today.
Is the long-term outlook looking up?
Shake Shack’s management raised the lower end of its financial guidance for 2024, which is good news for shareholders — it means business is good. But investors really like how 2025 is shaping up. Management expects to open up to 85 new locations next year, compared with just 75 this year. That’s really fast growth for a company with 552 locations as of Q3.
Moreover, Shake Shack’s management is looking for ways to save money on pre-opening expenses, as well as improve unit economics for stores once they’re open. In other words, growth is picking up, and management seems to be taking profits more seriously than it has in the past.
With moves like this, I understand why Shake Shack investors were quite upbeat after reading the Q3 report.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
