Shake Shack shares pop as Goldman Sachs sees menu innovation driving same-store sales
Shake Shack Inc. SHAK, +8.56% shares jumped 8% in Wednesday trading after a bullish note from Goldman Sachs forecasts a menu-driven same-store sales rise. Goldman analysts say softness in the burger chain’s third-quarter results was due to a weak menu. Same-store sales rose 2% in the third-quarter, falling short of the 2.5% growth FactSet forecast. During the fourth quarter, Shake Shack added a group of holiday-themed milkshakes that customers responded well to, analysts said. Recently, Shake Shack brought back the popular Shackmeister item to U.S. menus, and Hot Chick’n will be coming later in the year along with the introduction of Hot Chick’n Bites, a spicy version of the Chick’n Bites item. "We note a key investor concern has been that Shake Shack would take these items off the menu all together due to operational complexity and costs," Goldman wrote, with reference to the chicken offerings. Speaking at the ICR Conference, Shake Shack Chief Executive Randall Garutti also said the company is working on a new version of the veggie burger. Moreover, the disruption that had been anticipated from the Grubhub Inc. GRUB, +1.83% integration seem to be "manageable." About 40% of Shake Shacks are now exclusively on Grubhub. "Estimates are already factoring in a high level of disruption as they migrate to Grubhub," Goldman wrote. Goldman Sachs rates Shake Shack shares buy with a 12-month target of $115. Analysts see an 80% upside to that price target. Shake Shack stock has rallied 43% over the past year while the S&P 500 index SPX, +0.34% has gained 26.1% for the period.
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