Shake Shack earnings: Inflation, labor costs, and new locations in focus

Shake Shack(SHAK) is expected to report fourth quarter results before market open on Thursday, as investors hone in on the company's margins, growth plans, and menu prices.

The burger chain, which announced preliminary fourth-quarter results and its 2023 outlook at the ICR conference in early January, also unveiled major plans for more locations, discussed the success of its drive-thru concept, and weighed in on the impact of inflation.

Here's what Wall Street expects from Shake Shack, according to estimates from Bloomberg:

• Revenue: $238.2 million, up 17.2% year-over-year

• Adjusted earnings per share: -$0.11, down 11.1% year-over-year

• Same-Store sales: up 5.16%

These expectations are mostly in-line with the preliminary, unaudited fourth-quarter 2022 results the company reported in January.

After falling more than 40% in 2022, Shake Shack shares have gained about 40% so far this year.

Shake Shack also provided guidance for the first quarter of 2023, saying it expects total revenue to come in between $234.5-$243 million and same-store sales to be in the mid to high single digits with operating profit margins around 16%-18%.

Same-store sales guidance could get a boost for the first quarter of 2023 according to Nick Setyan, an analyst at Wedbush, who has a price target of $55 and Neutral rating on the stock. Setyan said "favorable weather and the year-over-year Omicron comparison" could provide more upside to same-store sales.

For the full year 2023, Shake Shack expects to open nearly 40 U.S. locations and 25-30 licensed locations.

Shake Shack CEO Randy Garutti said last month the company plans to open "probably 10 to 15 more drive-thrus" in 2023. Currently, the company operates 11 drive-thru locations, 9 of which opened last year.

Each location should generate more than $4 million in annual sales, the company said. That's compared to $3.8 million at traditional company-owned stores. Operating profit margins should be on par or better than the company average.