Investments in operational improvements, new menu news and advertising are expected to pay off for Shake Shack in the second half of the year.
Except, well, not as much in the fast-casual chain’s hometown of New York City, which has suffered a sharp slowdown in international tourism this year, impacting Shake Shack’s sales there, said Chief Financial Officer Katie Fogertey, speaking at the Goldman Sachs 32nd Annual Global Retailing Conference on Wednesday.
In Washington, D.C., broader macroeconomic pressures have been weighing on demand at Shake Shack units there, said Fogertey.
Across the greater Washington area, thousands of federal workers have lost jobs in a purported effort to improve government efficiency, for example. And President Trump’s federal takeover of the police force has reportedly dampened both tourism and local business across the Nation’s Capital in recent weeks.
The good news for Shake Shack, however, is that the majority of the chain’s 346 company-operated domestic units—and the chain’s planned growth—are outside those markets. Including international and licensed locations, Shake Shack has more than 610 units, and is pushing to reach 1,500.
In fact, in the second quarter, Shake Shack units in cities like Miami, Orlando, San Francisco, Houston and Denver were showing same-store sales growth in the high single digits, Fogertey noted.
“We just see such great momentum happening and success from all of the strategies that we have to drive the business,” she said. “Cycles turn. Markets turn. And we believe that we’re also well positioned to win when the macro turns in our favor in those two markets.”
Overall, Shake Shack’s second quarter results showed improved trends, despite headwinds impacting the industry more broadly.
Same-store sales were up 1.8%, largely driven by price. Traffic was down 1%, but that was a big improvement from the traffic decline of 4.6% in the prior first quarter. And traffic improved each month through the second quarter, and was up 3.2% in July.
And Fogertey said those trends will continue to gain traction in the second half, as Shake Shack brings new menu news. A new limited-time offer is scheduled to debut next week, for example, and Fogertey hinted that Shack Shack’s recent social media post about Taylor Swift and Travis Kelce’s engagement offered a hint about a side innovation coming (onion rings?).
The chain is also investing more in marketing to support the culinary innovation to come. That marketing push began this summer with the rollout of the internet-famous Dubai Chocolate Shake, and a promotion around $1 drinks through the brand’s app.
“We’re really excited by what we’re seeing on that front,” she said.
Both of the promotions have brought in a younger demographic that is more inclined to use the app, and app users tend to have the highest, long-term value as customers, she said.
Shake Shack doesn’t really have a full-fledged “capital L” loyalty program (yet), she noted, but the chain is using the app to engage more directly with guests, like with a recent app promotion designed to build frequency by challenging guests to come back three times in a month to win a tailored bonus, like a free burger or whatever might appeal to that guest.
Fogertey didn’t give any hints about third-quarter trends beyond July, but reiterated earlier guidance of a low single-digit comparable sales increase for the year. That will likely include about 2% in menu pricing, with the remainder as traffic and mix.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.