In quick succession, two burger restaurants had their respective IPOs and both saw immediate investor interest. But how are they stacking up now?
In November, Habit Restaurants Inc (NASDAQ:HABT) saw its stock surge from an $18 open to nearly $40 on the first day. HABT stock now trades for just above $30. It recently announced a follow-on offering that will include another 5 million shares.
And in February, Shake Shack Inc (NYSE:SHAK) priced its IPO at $21 per share and raced out to nearly $46. It’s now trading just above $50.
Based on their respective first days of trading, investors were excited to jump on board for the next hot burger place. However, which one of the two looks more promising moving forward?
How The Habit and Shake Shack Stack Up
After a closer look at both HABT and Shake Shack, the differences between the two become clear.
The comparison of quarterly results already shows that HABT stock has a clear advantage. The Habit reported a preliminary quarterly revenue of $54.3-$54.8 million, while SHAK had quarterly revenues of $34.8 million. For same store growth, HABT had 12.4%-12.6% growth, while Shake Shack had 7.2% growth.
HABT continues to look better than SHAK even in annual results. On the year-end balance sheet, HABT had $49.5 million in cash and equivalents, up from $122,00 the year prior, and had reduced debt from $14 million in 2013 to $2.5 million at the end of last year.
Shake Shack, meanwhile, had $2.7 million in cash at the end of 2014, compared to $13.1 million the previous year. SHAK’s liabilities also increased signficantly, from $17.8 million at the end of 2013 to $70.4 million at the end of 2014.
Beyond just the numbers, HABT has a more stores and a tighter focus on where it places its stores. The Habit has 113 stores in the western U.S., while Shake Shack has 63 stores — 27 of them which are internationally licensed. With a concentrated base of stores and focused on domestic operations at this early stage, I give the edge to HABT even though SHAK’s most concentrated store area is in New York.
HABT also has bigger plans than Shake Shack. In terms of future store growth, HABT projects to eventually have more than 2,000 store locations while SHAK’s management envisions 450. I give the big advantage here to HABT.
The Future for The Habit and Shake Shack
Even the 2015 projections continue show a marked difference between the two. HABT forecast its annual revenue to be between $216-$219 million. SHAK anticipated revenue is $159-$163 million. HABT is more promising.
In 2015, HABT plans to open 26-28 company-owned stores and three to five franchised restaurants. SHAK expects open at least 10 domestic company-owned stores and five franchised international locations. The Habit looks better again.
Same store growth for the year may be projected to be a tie. HABT is expecting the same store growth to be 2.5% to 3%, while SHAK forecasts growth to be a in the low single digits.
Even if I concede that the projected 2015 same store growth is a tie, HABT has the more promising results over Shake Shack in terms of larger revenues and more stores opening.
The Verdict
It’s still early for both HABT and SHAK. Things may change as companies, markets and target customers change. However, in just about every measure and foreseeable projection, The Habit has the advantage over SHAK.
If I had to pick between the two, I’ll go with the good HABT.
At the time of this publication, Johnny Chen does not hold any of the aforementioned securities.
