Shake Shack Inc. (SHAK) Earnings

Management highlights

- Core Sales & Traffic Performance * Extended streak of positive comparable sales growth to 22 consecutive quarters, with four consecutive quarters of positive traffic growth * 3.5% same-shack sales growth in Q2 2026 includes ~90 basis points of estimated positive impact from the World Cup * Digital sales mix reached nearly 41% of total sales, with comparable app channel sales growing nearly 30% year-over-year; app guests have higher frequency and annual spend than other channels - Marketing & Promotional Strategy * Disciplined, targeted promotional strategy not reliant on broad-based discounting; most promotional investment is focused on the app and digital ecosystem to drive incremental demand and long-term guest value * Continued refinement of paid media strategy to expand brand awareness while maintaining disciplined returns on marketing spend; total 2026 marketing spend is expected to remain in the 2% to 3% range of total revenue * Expansion of lifecycle marketing in H2 2026, including behavior-based communications, targeted offers and automated guest journeys to increase frequency, accelerate second visits and improve retention - Menu & Culinary Innovation * The Q2 2026 barbecue platform (led by the Baby Back Rib Sandwich) met performance expectations, driving guest excitement, traffic and check growth * The Big Shack was added to the core menu after strong guest demand, repriced to align with double burgers to eliminate prior margin dilution from cannibalization * A new West Coast-inspired menu platform launched in July 2026, and the Dubai Chocolate Pistachio Shake was brought back as a successful premium limited-time offering; new chicken and smoked brisket offerings are currently in testing - Unit Development * Development momentum remains strong, with Q2 2026 marking the highest second quarter of company-operated unit growth on record * New shacks are all opened in existing markets, which still has significant untapped white space; build costs remain in line with expectations, and new shack productivity tracks to target cash-on-cash returns * Licensed business continues to perform well despite global headwinds, with particularly strong results in Canada, the UK and parts of China - Technology & Strategic Capabilities * Project Catalyst, the company's core strategic technology initiative, continues progressing on schedule, including POS system rollout, loyalty platform development and integration of AI-enabled capabilities * A unified data and analytics platform is being developed to combine operational performance and guest behavior data, enabling faster decision-making, more personalized experiences and scalable AI expansion ahead of the 2026 loyalty platform launch

Guidance

- The company is moving away from providing quarterly guidance going forward and will only maintain annual guidance, aligning with long-term business management and industry best practices - Full year 2026 guidance ranges remain unchanged from the June 2026 revision. Adjusted EBITDA and net income are expected to come in at the low end of their stated ranges due to continued cost headwinds - Company-operated shack openings are still projected to hit 60 to 65 for full year 2026, and licensed new shack openings are projected to hit 40 to 45 for 2026 - G&A for full year 2026 is still expected to fall in the 12% to 13% range of total revenue - Beef inflation is expected to remain elevated above 2025 levels in the second half of 2026, continuing to pressure restaurant-level margins, though the year-over-year increase will be less pronounced than in the first half of 2026 - Long-term 2025-2027 targets remain under review as part of the 2027 planning process; no updates are provided in this call, and any changes will be shared when the review is complete. Long-term unit growth targets remain unchanged at this time, with the review focused primarily on restaurant margin expansion goals

Segment performance

1. Company-operated Shacks: Total shack sales of $403.4 million, up 17.5% year-over-year. This contributed 96.6% of total Q2 revenue. Same-shack sales grew 3.5% year-over-year, composed of 2.0% positive traffic and 1.5% price mix. Average weekly sales per shack were ~$78,000. Restaurant-level profit was $92.7 million, equal to 23% of shack sales, a 90 basis point year-over-year decline. 16 new company-operated shacks were opened in Q2 2026, bringing year-to-date openings to 33. 2. Licensed Shacks: Total licensing sales grew 7.6% year-over-year to $222.4 million, with licensing revenue (contributing 3.4% of total Q2 revenue) growing 7.1% to $14.2 million. 8 net new licensed shacks were opened in the quarter, led by growth in US airports and Canada. Performance was partially offset by ongoing conflict in the Middle East pressuring the UAE market.

Risks & headwinds

- Elevated and persistent commodity cost inflation, particularly for beef, which has peaked in June 2026 but remains far above prior year expectations, creating ongoing pressure on restaurant-level margins - Higher fuel, distribution, energy and utility costs add additional cost pressures beyond commodity inflation - Intense competitive pressure in the burger fast casual space, with peers pursuing aggressive broad-based discounting strategies like $5 meal deals - Uncertain macroeconomic environment and weak consumer sentiment create headwinds for discretionary dining - Ongoing geopolitical conflict in the Middle East continues to weigh on licensed performance in the UAE, the company's historically highest volume market in the region, which relies heavily on tourism - Tougher year-over-year same-store sales comparisons in the second half of 2026 create challenges for sustaining prior growth rates - Any future pricing increases to offset cost pressure could risk negatively impacting traffic growth, requiring a careful surgical approach

Analyst Q&A

• Q: How does management expect the marketing strategy to evolve for the second half of 2026, and what is the outlook for sustaining long-term positive traffic growth? Is there an update on the timing of the loyalty platform launch? /

  A: Management's core strategy remains unchanged: focus on delivering premium quality products and strong hospitality, while maintaining targeted channel-specific value promotions. The company has delivered four consecutive quarters of positive traffic growth despite industry headwinds, and will continue improving returns on marketing and technology investments. The loyalty platform is still on track to launch in 2026, but it is not expected to contribute meaningfully to 2026 revenue, as the company will test and optimize the platform to ensure it aligns with its hospitality-focused brand positioning rather than being just a discount program.

• Q: With tougher comparisons in the second half and peer burger chains becoming more aggressive on value, how confident is management in its current strategy, and are there updates to the 2025-2027 long-term targets? /

  A: Management notes that peers have been aggressively discounting for 18 months, and Shake Shack's premium positioning and targeted promotions have allowed the business to remain resilient. The company is already lapping its first large scaled promotion from 2025 and is encouraged by early third quarter results. Long-term targets from 2025-2027 are still under review as part of the 2027 planning process; no updates are available at this time, and any changes will be shared after review completes. The review is focused on restaurant margin expansion targets, not unit growth goals.

• Q: As management reviews long-term targets, is there a plan to reduce unit growth given market conditions, given the strong returns on new shacks? /

  A: Management has no plans to reduce unit growth, and intends to maintain the current growth rate, with unit growth volumes expected to increase annually off the larger existing base. New shacks are generating over 30% cash-on-cash returns, which meets investment return targets, and the company remains on track to deliver 60 to 65 company-operated openings in 2026 with growth expected to continue increasing in 2027. The licensed business is also performing well in most markets and is expected to become an increasing contributor to EBITDA growth long-term.

• Q: There is market concern that business slowed exiting Q2 into July 2026; can management address this trend and the cadence of sales through the quarter? /

  A: Management states that concerns over a late-quarter slowdown are completely inaccurate. Comp sales accelerated throughout Q2 2026: April came in at -0.6% comp growth, while June was the strongest period of the quarter even after removing the 90 basis point World Cup benefit. The company does not provide in-quarter updates going forward, but notes it continues to execute on the initiatives that drove strong Q2 results as it enters the third quarter.