We want you to feel the value. We want you to understand the quality of what you’re doing. So when we do things like our chicken Sundays, that hits our channels. It hits our interior. You can come in and use those. So it’s not just digital. It’s omni-channel, truly. In Shack, in our kiosks in Shack, app, web, and delivery. And I think the strategies that team is just beginning to employ have been so, our learning is just so fast, furious, and fun. I mean, we’re really enjoying the process of opening up these budgets a little bit, trying some more things, to see what hits in our guests, see what hits regionally. Sometimes something hits very different in New York than it does in California or Texas. And we’re learning all that. And I think as you build an engine that’s based in the data that we now have as we’re growing over these years, we can take greater insights into our strategies.
And that’s really the foundation that the team has been working on to build. So we’re super excited. We have a lot more arrows in our quiver as we move forward, regardless against whatever the economic opportunities are going to be. And you’ve seen that. You’ve seen that in the trend of continuing sales growth every month, getting better so far this year.
Operator: Our next question is from David Tarantino with Baird. Please proceed.
David Tarantino: Hi, good morning, Randy. Congrats from me as well on a fantastic career at Shake Shack. So I wanted to kind of follow up on your commentary, Randy, since you’ve been sort of the inventor of this very premium brand and successful brand. And I wanted to ask, a lot of the advertising has been focused on promotional activity, and that’s certainly understandable in this environment. But I wanted to get your perspective on how you’re balancing the offers that you’re making with the need to protect the premium nature of the brand positioning, and specifically, how you’re monitoring whether some of the things you’re doing are having an influence on consumer perceptions and that related to the brand?
Randy Garutti: Yes, those are great questions. It’s something we think a lot about. I think the strength of the Shack brand and its ability that we just have always punched so far above our weight, that’s been a strength for us. But as I’ve said in previous calls, what’s also fascinating as we’ve grown pretty far, pretty fast, globally and around this country is, there’s still a lot of people who don’t really know Shake Shack. So, we start everything with the education of who we are. Our brand pillars are really about helping people understand the quality of our ingredients that, we’re cooking to order, that we’re spinning our Shake’s fresh by hand. These things are paramount. Then what we do is we think about whether it’s a promo or an afternoon Shake opportunity or sometimes we’ll do free Fridays, whatever these things are, they’re all based in added value.
They’re all based in ensuring that we continue to keep that brand positioning. I don’t expect you’re going to see us do a dollar menu type of promo. That’s just never been Shake Shack’s thing. We certainly understand there’s a great place for traditional fast food. And we may not get those consumers as often as traditional fast food does at that price point. But we feel like our value is strong. And everything you’re going to see and have seen from us is about continuing to help people understand. Hi, you know, when you choose to eat a burger, chicken sandwich or have a shake, you should choose Shake Shack and here’s why. And that’s what that’s what we’ve done. That’s what I expect we’ll continue to do.
Operator: Our next question is from Andy Barish with Jefferies. Please proceed.
Andy Barish: Yes. Hi, Randy. So it’s nice to see a Jersey boy do well. So congrats. On just Katie, quick clarification and sorry if I missed it. Just on the 2Q, same store sales guide of low single-digits and you’re starting out mid-single-digits. Can you give us kind of a little color about sort of why – it doesn’t continue in that range?
Katie Fogertey: Sure. So in May, we’re going to be rolling off about 2% price. We’re expecting you are trying to kind of – be then you be solid, but rolling off price and just normal seasonality, that’s what gets us to our guidance for a low single-digit comp in the second quarter.
Operator: Our next question is from Jeff Farmer with Gordon Haskett. Please proceed.
Jeff Farmer: Great. Thanks. And congratulations to Randy. Definitely looking forward to seeing what you pursue next. What I did want to touch on was the consumer backdrop. So my question for you guys is, do you see the consumer demand headwinds stabilizing or sort of further building, further intensifying in coming quarters? So that’s the first part of it. And how has that demand backdrop impacted Shake Shack?
Randy Garutti: Yes, look, it’s hard to say where it’s going to go from here. I think what we’ve said has been consistent, with what we’ve said for probably about a year. We – you definitely see some of that consumer pressure we’ve – said and shared and we see this today. Some of our lower income consumer, probably trading down from time-to-time. We may lose a little bit about of that. We may lose some of the middle distance consumer in some of our urban centers. We’ve talked about that a little bit, but generally those trends have remained similar, for about a year right now. And we kind of expect those, to be where they’re at for now. So how that impacts us is, as we’ve driven traffic through other strategies and through building great restaurants and great places, and continuing to build our brand. And that’s what you’ve heard us consistently say, and that’s what we’ve done against that backdrop. And it’s been successful for us.
Operator: Our next question is from Jeffrey Bernstein with Barclays. Please proceed.
Unidentified Analyst: Hi, good morning. This is [indiscernible] on for Jeff. And I’d ask for the same congrats, Randy, on all you’ve achieved. It’s been great partnering with you and I wish you the best of luck. My question is on store level margins. This year you’re going to get back to the low 20%. And that’s relative to your long-term framework of 18% to 20%. Just do you see an opportunity to expand margins materially higher from here on out, especially with all the great work you’re doing with operational efficiency, and taking costs out of the model? Or is that really kind of offset by more muted AUV growth going forward, and just a higher cost environment that makes return to former peak harder? Thank you.
Katie Fogertey: Great. Thanks for the question. We’re not providing any outlooks here beyond our guidance for 2024. But what I will say, is that the team has continuously delivered profitable growth here. We have been steadily improving our margin every quarter, and certainly our guidance for this year calls for another year of restaurant margin expansion. Look, we have a number of pressures that are not too unique to us. We have wage inflationary pressures, supply chain remains broadly inflationary if you take out kind of the benefits that we’re seeing here, from the work that our team is doing on strategic cost savings. So that’s kind of how I would view the opportunities here. And we’re really proud and excited, by the work that our team has been doing, to address opportunities in total cost of serve.
As we get denser in markets, as we kind of grow our footprint, we’re able to leverage more suppliers, we’re able to optimize freight. We’re able to do things that the guest really doesn’t see the impact of, but it does help us be more efficient in running our restaurants. On the labor side too, it’s been a combination of several things, both things that we’ve done internally to help improve turnover trends, and keep our team members for longer. It just helps them be more efficient, as well as all of the work that the finance team and operations have done to partner together, and really be much tighter on how we’re operating our restaurants. And then, if I look forward to kind of the next level here, with having even just a more bespoke and optimized scheduling tool for our operators.
I think that that continues to provide great opportunity for us, to navigate inflationary pressures in a way that allows us to also kind of maintain the value for our guests. So, no long-term guidance, but that’s the overall framework that we think about here at Shake Shack.
Operator: Our next question is from Jim Sanderson with Northcoast Research. Please proceed.
Jim Sanderson: Hi, thanks for the question. And Randy, congratulations on all your accomplishments over the years at Shake Shack. I wanted to talk a little bit about unit growth and unit development. On the international front, I’m wondering how confident you are that the brand can sustain the 40 units that, you’ve achieved this year given the macroeconomic headwinds, and the geopolitical issues we’re seeing overseas. And then in the U.S., if you’re leaning into any specific regions, or states that you believe really are a much better fit for the Shake Shack brand than maybe in the past years? Thank you.
Randy Garutti: Jim, thanks. Two great questions there. Internationally, we feel very strong about the 40 Shack Guide. And look, it’s a big world out there. Let’s remember too, we’ve had amazing success. So many places that we’ve gone. So yes, we acknowledge and a lot of companies say this, there’s pressures in certain parts of China right now. Generally, our Asia business has done quite well. But we’re also focused on our domestic licensed business here in the U.S. Our airports, we’re growing a lot of our roadsides, which have been a really good new model for us. Stadiums and other opportunities that we feel non-traditional opportunities. We’ve done some museums, things like that, where we think there’s really exciting opportunity.
We haven’t even hit Western Europe at all, other than the U.K. We haven’t even really hit anything. We have not hit anything South of Mexico. The opportunities for us are really strong. And that is such a critical, important part of our business. And I think undervalued, underappreciated. So it’s something I definitely keep an eye on as we go. We really appreciate that part of the business. And then in terms of the domestic opportunities, we really want to balance it out. We want to go deeper in our current markets. You’re going to continue to see us do things in the major markets that we’re in, the Northeast, Texas, California, the Midwest. We’re going to do a few new markets this year, but they’re not too far afield. Pittsburgh is going to be our next big market opening.
And by the way, just to jump back to international, we’re opening in Canada later this year for our first one. That’s a tremendous opportunity for us. So I think at 300 roughly domestic company operated, and just over a couple hundred internationally in license, like there’s a big opportunity for this company in our growth.
Operator: Our next question is from [Rahul Kro] with JPMorgan. Please proceed.
Unidentified Analyst: Good morning guys and thanks for the update. Randy, wish you the best going forward and I’ll keep up with your social media updates here. Broader industry question. Can you talk about the state and pace of competition growth out there and how do you think the landscape is changing? There are a lot of new upcoming concepts with national aspiration and also competing locally as well. Appreciate your thoughts here. However, you’d like to describe on a regional basis, or on an urban versus suburban basis?
Randy Garutti: Thanks. Listen, I think there’s always going to be great competition. We didn’t invent the cheeseburger, and we won’t be the last people to create a great one. We’ve always fit ourselves into a very special place though that sits well above traditional fast food and our quality and our experience and below casual dining. And I think that’s been a good home for us. I expect that’s where we’ll continue to go. But that does require us to continue to reinvent. We got to get better. We got to have better products, have exciting LTOs, have exciting menu evolution over the years. And I think we’ve done that. So, when you really think about our ability to compete, we’re watching and we’re learning. There’s lots of great restaurants out there that we certainly compete with. And we think at our best when Shake Shack does what Shake Shack was built to do, we can be a winner in a lot of places. That’s what we’ve shown for 20 years now.
Operator: Thank you. We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.
Randy Garutti: I’ll just close it out and if anyone’s still listening. Just a lot of people said some very nice things to me, but I hope everybody goes into a Shake Shack, and says those nice things to the employee, who’s working hard day-after-day to be a team member of this restaurant and make it what it is. Because it’s certainly been them that has made this all happen. So thanks everybody. And we look forward to seeing you for a Shack burger soon.
Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.
