Shake Shack CEO Rob Lynch reviewed his company’s most recent quarter in a Monday interview with CNBC’s Jim Cramer, and he described how the burger chain manages to mitigate the inflated cost of ingredients like beef without steep price hikes.
“We’ve built so much productivity over the last year, our operating margins have gone from right around 20 up to 24%, almost 24% last quarter,” he said. “We’re right now working within our supply chain to find a lot more productivity, so we’re able to mitigate that inflation with all the productivity.”
Even as Shake Shack beat revenue and earnings estimates when it reported last week, shares declined as investors worried about a lower-than-expected same-store sales figure. The stock is currently down a little over 11% year-to-date.
According to Lynch, Shake Shack no longer depends on pricing to drive growth and now sees traffic as a significant driver of “healthy, sustainable growth.”
He said Shake Shack is “never going to be the lowest price point product out there,” as its products cost more to make. Lynch said the company is looking at other ways to provide customers with value, such as a $1 drink promotion on its app. He also mentioned newer offerings, like alcoholic beverages — “boozy shakes, classic cocktails, full bar” — at certain locations.
Lynch maintained that Shake Shack has pricing power if inflation skyrockets.
“I mean, we still have pricing power, if we choose, if we need to, if there’s enough inflation,” he said. “So pricing will always be a part of the model, but it’s, we’re not dependent upon it like we used to be.”
