The Bloom is Off the Burger

There's no waiting at 11AM at the Hillsdale Shake Shack.

A little over a year ago we sampled the wares at Stanford's Shake Shack:

Impressions: the burgers were flavorful and made of quality beef, but I certainly wouldn't wait an hour for them. There are any number of good burger places on the Peninsula that are competitive with Shake Shack's pricing, $8-$12 for a full meal.

Shake Shack has expanded the number of outlets in the Bay Area. While there's often a line at its new San Mateo store, the traffic has subsided noticeably. Perhaps the bloom is off the burger.

SHAK is 29% below its September high but has still
beaten the indices by at least 30% over the past year

Update: SunTrust analyst Jake Bartlett downgrades SHAK.

Shake Shack plans to open 90% of its company-owned stores in existing markets in 2020 and the research firm's checks suggest 22 out of 24 store openings are located within 20 miles of a non-comp base store.

The math behind this trend implies a 220 basis point same-store sales headwind in 2020 due to sales cannibalization.

Update 2: despite Shake Shack's possible over-expansion (and the fact that I don't love their burgers), I bought a few shares today for my retirement plan. SHAK's previous highs, and the company's low valuation (under $3 billion) promises that it has room to run. The head still rules over the heart...and stomach.