Closing Bell - Closing Bell Overtime: Shake Shack, Abercrombie & Fitch & Dutch Bros CEO 1/13/25

Episode Date: January 14, 2025

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

That bell marks the end of regulation. Riskified ringing the closing bell at the New York Stock Exchange. Deloitte Bay Area Fast 500 winners doing the honors at the NASDAQ. And a mixed session today as rising bond yields and NVIDIA worries put pressure on Big Tech while the Dow gets a boost from UnitedHealth. Attention now turns to KB Home Earnings out in just moments. That's the scorecard on Wall Street, but winners stay late. Welcome to Closer Belt Overtime.

I'm John Ford at CNBC headquarters. And I'm Morgan Brennan, coming to you today from the ICR conference here in Orlando, where I'll be joined exclusively by three CEOs with a pulse on the consumer. Abercrombie CEO Fran Horowitz, says that stock tanks on updated sales guidance, along with the CEOs of Shake Shack and Dutch Bros. So we have a packed show, John. Looking forward to that. But now let's break down today's market action with Hightower Advisors Chief Investment Strategist

and CNBC contributor Stephanie Link and Innovator ETF's Chief Investment Strategist Tim Urbanowicz. Guys, good to see you. Stephanie, some volatile assets had trouble today. AI names like Palantir and NVIDIA, Dell, Fintechs too. The Dow was higher though. Meanwhile, S&P hanging out around 5,800 still. So how are you investing here? Yeah, it's a lot to digest. I think you just have to put it into context that the last four out of the last six years, John, the markets, the S&P 500, up north of 20%. That is huge. Long-term total return average for the S&P 500 is 7.7%. So we're well extended over the last several years. We all feel pretty good about that. Fast forward to

this year is it's going to be a little bit more mixed. I think we're not going to see a 3% GDP growth like we saw the last two years, maybe 2, 2.5%, which is not terrible, still above trend. But the point being is you just don't have that fiscal stimulus this year that you have had over the last several years. And as a result, a little less growth, maybe a little less in terms of earnings growth. I'm thinking mid single digits, upper single digits. So I'm taking kind of this two prong approach this year. Number one, I'm looking for strong sectors that actually corrected in December six, eight percent. That's financials. That's discretionary. And then I'm actually looking at some laggards to mean revert. And that's what we're seeing so far this year, John,

mean reversion into energy materials, if you will, those kinds of sectors. And so that's what we're seeing so far this year, John, mean reversion into energy, materials, if you will, those kinds of sectors. And so that's kind of where I am adding to. I mean, like energy last year was up 3 percent the entire year. So I think with higher oil prices, that should be pretty positive for that sector as well. So a mix. It's not all foregone for for technology. But I think maybe we're going to see a little bit more of a broadening out. Okay. Okay. Well, Tim, what role do you see interest rates playing in equities here, especially after that hot jobs report on Friday? How do they affect names like KB Home, which reports in just a few moments? Well, John, you know, overall, we think that equities can

digest interest rates very well at the index level. I think it's pockets of the market, like KB Home, those builders that are really going to struggle with higher interest rates. We just don't think you're going to see a broad recovery in housing at this level. Seven plus percent mortgage rates are much different than six. And I look at a name like KB Home, you look at the pocket of the market that they're catering to, that first time home buyer, they're going to be much more sensitive to that payment. So we think it's high risk, lower reward. So we want to look at pockets outside of that.

We think the AI infrastructure trade is going to be alive and well. There's a backlog of orders, high margins, strong pricing power. Those are really the pockets that we want to be focused on right now. Okay. Stephanie, I want to ask you about the consumer. And you mentioned mean reversion, your long gap and target. We're about to get some great insight from Morgan's interviews this hour at ICR. Abercrombie had a terrible day. So did Macy's. What makes a good consumer play here? Well, first and foremost, I think the consumer is in pretty good shape, and that ties to jobs. And we had a very good job number on Friday with decent wage growth, a little less than we thought, but it's still pretty high. And I think with a little bit lower inflation, yes, I know it's sticky, John, but it has come down dramatically from that 9 percent to 3 percent. Adding it all up, I think the consumer is in good shape.

We know about the services story. The ISM services continue to hum. It's encouraging. But I also think maybe also, again, a little bit of mean reversion within consumer back to goods. And Gap has lagged, and Target certainly has lagged. Both are show-me stories. But I just think that there are places where in consumer, the risk reward is very attractive. I mean, you have Richard Dixon

at Gap who fixed Barbie at Mattel when he was at Mattel. And he's been there a year and a half. And oh, by the way, everyone's talking about Lulu today and the strong numbers. Well, guess what? Athletic grew five percentage points sequentially last quarter, and they've got all kinds of new leadership at that company. And then Target, show me story, but I think they've gotten through their inventory issues. They still have to be more consistent, but I think they can get back to a 5% to 6% operating margin. So I want to be very selective within discretion, but I want to look for opportunities and stories where the fundamentals can absolutely improve. Stephanie, I also want to give you credit.

I think I might have given you a hard time for not being in NVIDIA at one point, but you are in Broadcom. And boy, what a run it's been having as NVIDIA has kind of flattened out. So just wanted to shout that out. Tim, to close out, you like small caps. They have not been performing well in a higher rate environment. So why do you feel like at the index level, these rates aren't going to hold things down? Well, John, to be clear, we do think there's

going to be a tug of war playing out all year long for small caps. It's going to be this back and forth between higher interest rates and strong economic growth. But John, when we go back and we look at the data, economic growth is a much stronger driver of small caps longer term than interest rates are. That interest rate picture we think is actually pretty blurry. So when we take a step back and look at the incoming administration, the reduced regulations, we think small caps are going to be a big beneficiary of that. And really what excites us a little bit is this relative valuation story versus large caps that have been bid up so much, those lower valuations is not necessarily a timing tool. But if we start to see good news, we start to see economic

activity pick up, that really is going to act as a springboard, John, to give us more upside. So it ain't going to come with a lot of volatility. It's going to come with a lot of volatility. So we've got to be cautious there. But we do think small caps can do very well. Okay. Tim, Stephanie, thank you. Good to see you. Thanks, John. Well, we got a news alert on IAC. Julia Boorstin has it.

Julia. John, IAC is announcing that its board has officially approved the spinoff of Angie, the home improvement marketplace, expecting it to close in the second quarter of this year, giving IAC shareholders direct ownership of Angie. Now, as part of the change, the company's announcing that IAC CEO Joey Levin will leave his role to become an advisor to the company while also taking on a new role of Angie's executive chairman, its most senior executive alongside Angie's CEO, Jeff Kipp. With Levin leaving the CEO role, IAC will operate without someone in that CEO spot, and its C-suite and DotDash Meredith will report directly to Chairman Barry Diller.

That's similar to the structure the company adopted back in 2013 when it spun off Match Group. Both IEC and Angie will post fourth quarter earnings on February 11th. You see IAC shares up 2.5%. Back over to you. All right. Interesting move, I guess, about eight years after Angie's List was purchased. Julia, thanks. Let's turn now to healthcare and biotech and a number of big stock moves in the space,

including a big pullback for Moderna, which hit 52-week lows after slashing its sales forecast at the J.P. Morgan Healthcare Conference in San Francisco. You can see it down there, almost 17%. Our Angelica Peebles joins us from that conference, where she's been talking to key players in the industry all day. Angelica. Hey, John, that's right. Now, this year and every year, we're always looking for deals at the conference,

and today we got a few of them, the biggest being J&J's $14.6 billion acquisition of a neuroname intracellular therapies. We also saw Lilly drop $2.5 billion to acquire a cancer company called Scorpion Therapeutics and GSK acquiring another oncology player, IDRX, for about $1 billion. And I also want to flag a few movers in the space. You mentioned Moderna. Those shares are under significant pressure today after the company slashed its full year sales forecast by a billion dollars, again, because of weakness on its COVID shot and also RSV. Now, on the other end is BridgeBio. That stock is up today after the company shared some early results from the launch of its new heart drug called Atruby. And we'll

have BridgeBio CEO Neil Kumar tomorrow from the conference. And of course, Washington is dominating the conversation. Everyone wants to know what to expect from the new conference. And of course, Washington is dominating the conversation. Everyone wants to know what to expect from the new administration. But so far, people have a lot of questions and not so many answers, John. I was wondering about that, Angelica, and the balance of optimism, curiosity, questions, fears between M&A, which certainly has been heating up, and RFK Jr.? Right. On the M&A front, it definitely does help to see a few of those deals today, that J&J deal being the biggest one we've seen in a few years, but a lot of uncertainty around

Washington. And it depends who you ask. I think publicly, people are trying to keep a little bit more of a brave face. But privately, when I talk to people, a lot of uncertainty and unknowns about just what direction the administration will take and also just about the biotech market generally. Stocks have not been great, and every year people have been saying, you know, it's okay, it's okay. But talking to people all weekend, you know, it's kind of settling in that there's been a bear market for a few years and people are not feeling as great as they were in years past, John. Well, I know you're getting some good intelligence there. Looking forward to more, our Angelica Peebles. Well, up next, we will be joined here at the ICR conference by the CEO of Dutch

Bros. This is one of the big winners of 2024, which is coming under some pressure today. And speaking of pressure, we will also talk to the CEO of Abercrombie & Fitch, which shed 15% in today's session after sharing new holiday season guidance. We've got a big show straight ahead. Overtime, back in two. Welcome back to Overtime. KB Home earnings are just crossing. We're going through those numbers right now.

We'll get them to you in just a moment. Meantime, Dutch Bros, major winner last year, but it is coming under some pressure today. The company did not pre-announce results here at ICR conference, as some were perhaps expecting, but did announce the opening of its 1,000th store in February. So joining us now is Dutch Bros CEO, Christine Barone. Christine, it's great to speak with you again. Thanks for being here. Thanks so much, Morgan. It's great to be here with you. I do want to start with the fact that there was some expectation from analysts that you might pre-announce guidance. What did you see to the extent you can share it about in the holiday season? Yeah, so what we've shared so far is what we've seen in Q3. We had an awesome Q3,

a really great 2024 building up to that. We had some really good innovation. We had rolled out mobile order. So excited by what we were seeing in the year. We just talked about this 1,000th store. I mean, you have been expanding at a, shall we say, caffeinated pace across the country. How much does that pace continue at this level? How do you think about that versus balancing saturation? I mean, I think about Starbucks a couple of years ago becoming oversaturated. So how do you make sure that doesn't happen with Dutch Bros?

So we are absolutely just at the beginning of our journey and just getting started rolling out shops across the U.S. We shared that we'd open at least 160 shops in 2025. So excited to continue at a very rapid pace of growth. How do you decide where to expand? Because you're not in the New York area, which is why I say that. Absolutely. So the way that we decide how we expand is all based on our people and when are our people ready to open that next shop.

So we have 400 operators in our pipeline ready to build a new community and open a new shop for us. It seems like the takeaway so far here at ICR is that at least for Q4 and the holiday season, consumer was perhaps stronger, more resilient than some were expecting, and we're poised for perhaps a solid 2025. Maybe election outcomes helped inject some certainty into the marketplace as well. Is that how do you see it? What are you seeing from the consumer, especially across different income levels? So as we look at the customer right now,

we believe they really are looking for value, and that's in a lot of different ways. It's through price, but it's also through what you're providing. Are you providing an awesome connection with them? Great products. We have merch drops that we do. We make things fun.

So when you come in for a beverage, you get points through the rewards program. And I think that's really what customers are looking for in 2025. In a week where inflation data is in focus, we've seen coffee futures surge over the past year. How are you navigating that? What does that mean in terms of menu pricing? Yeah, so as we look at coffee pricing, coffee is about 10% of our commodity basket, so maybe less than you might think. So as we look ahead, we are bought ahead to a certain extent. And what we shared did not impact us in 2024, even though coffee prices were elevated for the year. I want to get your thoughts on the competitive landscape.

Starbucks has got a new CEO in place with a new strategy to turn the coffee chain around. Just today, we're getting a report out of the Wall Street Journal that they're looking to roll out a new code of conduct, require cafe users to be paying customers, which reverses a years-long policy. I want to get your reaction to that and how you think about such policies within your stores at Dutch Bros. So we're a drive-through system, so we actually don't have a lobby. Our customers are coming through the drive-through or coming to the walk- window to pick up their orders and as far as how we look at our customers you know we we really know who we are and believe that we have a super unique

point of view on the market we provide customized energy drinks and we think that we have really perfected the art of service with speed menu innovation you're experimenting with some food options as well right now. How to think about that and what is gaining traction? Yeah, so as we look at food, we're in very early days of food right now. We expect to be testing it throughout 2025 with plans to roll it out sometime in 2026. And finally, you have quite a few stores in California. Have you been affected? Have your

employees been affected by these wildfires? Yeah, we have had some employee impacts and so we are looking at how do we best support our employees who might be looking for a place to stay. We're looking at how can we support the community and it's one of these things where you want to be really thoughtful about being there but not getting in the way of the support that the communities really need. So it's a hard time for everyone, and I thank you for asking. Christine Barone, the CEO of Dutch Bros. It's great to be sitting here with you at ICR. We appreciate the time and the insights.

Thanks so much, Morgan. John, I'll send it back to you, and I will tell you, I have been living on the coffee drinks here with the truck. Well, hopefully you've got food, too, a little sooner than Dutch Bros. We look forward to seeing what they come up with. Meantime, KB Home earnings are out. Diana Olick has those numbers. Diana. Well, John, a nice beat on the top and bottom lines for KB Home.

EPS came out at $2.52 a share versus estimates of $2.45. Revenue of $2 billion. That's up 19% year over year versus estimates of 1.98 billion. Home deliveries up 17%. No guidance yet. We're going to get that on the call. But KB's CEO, Jeff Metzger, said in the release, net orders rose roughly 40% year over year as buyers continued to demonstrate a desire for home ownership and housing market conditions improved relative to last year, despite ongoing mortgage interest rate headwinds. And that's important because they started the quarter with the 30 year fixed at six point one one percent. That's a cyclical low and ended their quarter with rates well above 7%. They did increase home prices 3% to $501,000, but apparently, as some are saying, perhaps buyers are getting used to this new normal of higher

mortgage rates, John. Well, interesting stuff and quite a pop, first real pop for this stock so far this year. Diana, thanks. Look forward to that guidance. Well, California Governor Gavin Newsom saying this weekend that the L.A. area wildfires could end up being the costliest natural disaster in U.S. history. We'll get a live report from the devastated Pacific Palisades neighborhood when Overtime comes right back. Welcome back to Overtime. We got some news on NVIDIA, the European Union commenting on the Biden administration's further restriction of AI chip exports, news that hit NVIDIA shares in the regular session and that NVIDIA itself blasted earlier today. The EU saying in a joint statement, in part, we are concerned about the U.S. measures,

adding, we believe it is also in the U.S. economic and security interest that the EU buys advanced AI chips from the U.S. without limitations. The statement interests that the EU buys advanced AI chips from the US without limitations. The statement adds that the EU has shared its concerns with the Biden administration and looks forward to engaging constructively with the incoming Trump administration. Well, the deadly Southern California wildfires are now estimated to have caused as much as $150 billion in damage, and they're still raging across the Los Angeles area. Our Contessa Brewer joins us now from Pacific Palisades with the latest. Contessa? Yeah, and I have an update for you here, John. A massive jump in the estimate on economic losses

from AccuWeather. It jumped from $150 billion on the high end of the range to $275 billion, in part because the Santa Ana winds are expected to kick up again. And look at this. You're seeing right now how the L.A. recovery is listing out these houses and the damage, every house on every street, and it just seems apocalyptic. This is, again, the website recovery.lacounty.gov which gives some homeowners confirmation whether their home is gone or by miracle may still be standing but it's far from updated I can tell you. Many of the homeowners bought coverage through California's last resort insurer on the fair plan. It sent out a notice today saying, look, it's way too soon to put a dollar figure on its expected claims. Too soon to say whether fair plan will have to tap into

other sources of funding. That means, you know, make all the other insurers pay. But it warned it operates on a cash in cash out basis when paying claims. So basically, if it doesn't have the money, you're not getting paid. I've previously reported the fair plan does not have a lot of cash on hand. Red flag warnings continue in Santa Ana. Winds are picking up already. We can feel it. And those warnings through Wednesday. We're keeping our eye on a developing situation here, John. A tragic story still unfolding. So many lives and livelihoods affected. Contessa Brewer. Thank you.

Well, shares of U.S. steel sharply higher today. Sources telling CNBC's David Faber that Cleveland, Cliffs and Nucor are teaming up to potentially make a bid for the steelmaker where somewhere in the high three thirties per share. And that's much less than the fifty five dollars a share deal from Japan's Nippon Steel that was recently blocked by the Biden White House, sparking a lawsuit by U.S. Steel. Now, according to David Faber, Cleveland Cliffs would buy the company and then sell its Big River Steel unit to Nucor. Morgan. Well, coming up next, the CEO of Abercrombie & Fitch joins me right here at the ICR conference as her company's stock makes a major hit on updated holiday sales guidance. She's going to break down the new numbers. She's going to give her read on the U.S. consumer.

And later, I will be joined by the CEO of Shake Shack as well, also under pressure today after sharing a business update and long-term targets. Over time, we'll be right back. Time for a CNBC News update with Bertha Coombs. Bertha. Hi, John. The Senate Energy Committee has postponed the confirmation hearing for President-elect Trump's pick for Secretary of the Interior. The panel said the confirmation hearing for North Dakota Governor Doug Burgum has been rescheduled from tomorrow to Thursday due to a delay in requested required paperwork. The panel's top Democrat, Senator Martin Heinrich,

has accused the Republican chair of scheduling the hearing despite not having received the required ethics report. At least 100 illegal min miners in South Africa have died after being trapped deep underground for two months, according to a group representing those miners. Police launched a raid in November to force the miners out and arrest them for illegally entering the abandoned gold mine. More than 400 miners are said to still be in that mine

waiting to be rescued. And McDonald's has been sued over its Latino scholarship program. The lawsuit filed by a group that opposes affirmative action alleges that decades old program discriminates against non-Latino students. As part of its announcement last week to roll back diversity initiatives, McDonald's said that it was reviewing all of its DEI programs. Morgan, over to you. All right, Bertha Coombs, thank you. Well, retails are some of the biggest losers today after posting early holiday results that were better than expected, but apparently not good enough to impress investors. Abercrombie & Fitch raised its outlook for the full year and the fourth quarter, but it just posted its worst day since May of 2022.

Joining me now is Abercrombie & Fitch CEO Fran Horowitz here at ICR. Fran, it's so great to have you here. And you did. You raised your guidance today. You put out stronger guidance. You sounded very upbeat, very bullish in the update you did give. I guess just give some context, especially as investors didn't take as kindly to it as one might perhaps expect. Sure. Well, thank you for having me. You and I sat here together just a year ago, and we had just come off of what we called our defining year of 2023.

And the promise that we made to the investment community and to ourselves was to come back and do it again. And not only did we do it again, we actually did it better. 2024 was a phenomenal year, record-breaking on all levels. The fact that we grew the business 15% on the top line, 15% operating margin, and to your point, increased the fourth quarter as well. I couldn't be more proud of what we've been able to accomplish this year. Investors, I think, expected to see more given the fact that you've had, call it, two years of very strong comps. You tend to be stronger than expected in terms of the numbers you do put out. How to think about what is sustainable over the long term in terms of growth for the company and its brands? Yeah, so we came into 2024 with momentum and we're going into 2025 with momentum.

And we have spent several years really rebuilding the company, building a very strong global foundation that's going to help us continue this momentum into 2025. We have a very clean store base. We have two incredible iconic global brands that are resonating and are very, very healthy. We've invested in our digital business. In fact, our business is 50% stores, 50% digital,

both of which are very profitable. So again, lots of good things happening. The good news is that because of where we are and having a strong balance sheet, we can continue to invest in the business and keep us continuing to be ahead. A year ago, you and I were having this conversation. Abercrombie & Fitch was posting strong numbers. You were talking about the fact that Hollister was on the cusp of realizing its turnaround. Where are we coming into 2025?

So a great year for Hollister. Hollister is a proof point that our playbook continues to work, right? We talk a lot about product voice and experience aligning in our playbook. They took that Abercrombie playbook. We've applied it to Hollister and have had a really terrific year. The team has gotten much closer to the customer, really truly understanding what's important to them. We launched this year as a great example our collegiate collection, which was really showing you that this teen, whether they're going to go to school or not, you know, college is very aspirational for them.

They love to wear different universities. They told us that. We listened. We launched this collection. It's been very successful. So staying close to that customer and making sure that we have the product, voice, and experience aligned. What are you seeing in terms of the health of the consumer as we do come into this new year? And there is this focus on a holiday season that was perhaps better than expected. Yeah, what we're seeing from the consumer is that whether the economy is good or not, the consumer always has an opportunity on where they choose to shop,

and they're choosing us. To end 24 with both brands being double-digit growth, you know, comparable sales growth, we're seeing a consumer that's willing to spend when they see what they want. Kids, women, young adults, men, where do you see the biggest growth levers moving forward? You know, we actually have growth opportunity in both of our brands. One of our biggest levers going forward is actually international. We've talked a lot recently about global growth for us. The majority of our growth over the past few years has really been North America.

We are excited. We have teams in London to run our EMEA business and teams in Shanghai to run our APAC business. They are now exporting the playbook and really coming up to speed. So we saw growth across regions this year as well. So I would say that both brands, as well as international, are big opportunities going forward. We have a lot of conversations about how strong the U.S. economy is versus the rest of the world.

What are you seeing from your unique lens where consumers are concerned? Yeah, what we're seeing is, again, the consumer has a choice to shop, and they're choosing us. So we saw growth across regions all year. Inventory levels, you feel comfortable with where they are? I do. We came into the fourth quarter with unit inventory relative to our outlook right in line. We were very excited to get the product in early. We did make some choices with all the unknowns about the supply chain this year so we didn't disappoint our customer and our expectations to head out of the quarter with clean inventory as well.

Given the fact that you did put out this announcement, you pre-announced results today, stock fell double digits. What is the takeaway for investors? What is the context or the nuance that is perhaps being missed in this reaction in the market today? Yeah, I mean, I guess it takes us back to the conversation, which is that we had a phenomenal year. We have a very strong global foundation that we've built in this company, very different company than we certainly were years ago. Very proud of what that is. A strong culture, a talented team. You know, I could go through again, just like the store base, which is clean, the digital business. So lots to be excited for and looking forward to 2025. All right. Fanny Horowitz, the CEO of Abercrombie & Fish.

Thank you so much for joining me here at ICR. It's great to see you. John. All right. Clean inventory after that holiday season. Perhaps the biggest news. Morgan, thanks. Well, we've got a news alert on Robinhood. Kate Rooney has details. Kate. Hi there, John. The SEC announcing a $45 million settlement with Robinhood. This is on the brokerage side of Robinhood's business. It had to do with violations dating back to 2018. The SEC just saying that Robinhood failed to investigate suspicious transactions to implement policies to protect consumers from risks of identity theft in a timely manner includes electronic blue sheets. So basically the information on certain trades that broker dealers need to disclose and then some issues around data categories that were reported, fractional share marking as well, policies and procedures around a data breach, and then record-keeping and AML, so anti-money laundering. These were

delays in filing some of those reports, not actual money laundering. And then Robinhood's general counsel, Lucas Moskowitz, saying in a statement, we're pleased to resolve these matters, adding that most of these are historical matters that our broker-dealers have previously addressed, and we, quote, look forward to working with the SEC under a new administration. Also says they have significantly strengthened compliance processes as well. This is a lower number and a lower settlement than previous ones that Robinhood has had with FINRA and the SEC. The SEC, meanwhile, separately has been investigating the crypto side of the business. But there has been no lawsuit yet.

This is, of course, Gary Gensler's last week in office, guys. All right. Yeah, a lot of tech folks seeming to look forward to work with the new administration. Kate, thanks. Well, Shake Shack reporting stronger than expected fourth quarter sales, but the stock took a big hit today. Up next, CEO Rob Lynch on how rising beef prices are impacting his business and whether he sees any sign of a slowdown in consumer spending.

We'll be right back. Welcome back to Overtime. Shares of Shake Shack plunging today, despite giving preliminary fourth quarter results that beat estimates and full year 2025 guidance that also largely topped expectations. Now, Shake Shack also saying it plans to expand its company footprint to at least 1,500 stores over time. Joining me exclusively is Shake Shack CEO Rob Lynch. Rob, it's great to speak with you today. Morgan, thank you for having me today. A lot just right there in the introduction to Unpack. So let's start with your pre-announced quarterly results, which were better than expected. Better revenue, better same-store sales, better margins as well.

Tell me about what you saw this past quarter and how it sets you up for 2025. Yeah, we had a great Q4. Our guests were very excited about Shake Shack. We launched a truffle burger, which is our new innovation. Essentially a $25 cheeseburger for $10 at Shake Shack, and they responded. We also implemented a lot of new operations initiatives, and everything's kind of clicking. So we are really excited to come in here today and talk about a great Q4, but even more excited to lay out our framework for thinking for the next three years,

where we guided to some really aggressive targets, and we have the right people and the right plan in place to achieve those targets. How are you going to do it, given the fact that those are aggressive targets? How do you do that? You know, it really is just about getting better every day. We've got a great team that is focused on delivering for our guests and deliver and taking care of our team members and you know if you if you let me I just want to recognize our team members right now who are out in the Southern California area taking care of their communities. Our folks have stepped up and are delivering food drops to all of our first responders for that terrible situation and it's that kind of commitment and that that kind of

dedication that makes Shake Shack so special and gives me all the confidence that we're going to continue to outperform expectations and do great. Yeah and our heart goes out to all the folks in the LA area right now facing this tragedy. So you're not quite a year in the role but you are putting your strategy out in a big way. We just talked about these longer-term targets but we also this ambitious plan to more than quadruple your company owned U.S. store count. So we're talking about more than 1,500 company operated

U.S. locations in the future. That's up, just to give it some context, from a goal of 450 when the company went public a decade ago, you currently own 330 U.S. locations. So what is it going to take to realize more than 1,500? How quickly can you do it? What are we talking about in terms of investment? What are we also talking about in terms of what those stores are going to look like? Yeah. So we are celebrating Shake Shack's 20th anniversary. And as you mentioned, the 10-year anniversary of our IPO. And back

10 years ago, 450 Shacks seemed like a very aggressive, ambitious goal. And today, we're really excited about our ability to do a lot more than that. But it's going to take an evolution. It's going to take us really embracing all the things that make Shake Shack so special, the great culinary development that we do, the great food that we serve, the way our team members deliver enlightened hospitality. But we have to scale that. We have to take that and make it replicable across a lot more communities and a lot more

shacks in North America. And so that's what we're focused on. And we're seeing really great green shoots. We've developed new formats. We recently opened some drive-thrus, so that expands our aperture for our real estate into the suburban America. We're also building a smaller format shack that still delivers on the financial objectives that we have, but allows us to go in and take advantage of real estate that in the past we may not have been able to go in and build a shack in a profitable way. So the format development

has definitely allowed us to enter into new markets. And then our four-wall margins, our restaurants are operating at a very high level right now. We delivered 22.7% restaurant margin in Q4. That's 300 basis points above where we were a year ago. So some of the highest margins, that profitability is going to afford us the ability to go into these markets and open up a lot more shacks. So I'm going to ask you a similar question to what I just asked to Christine Barone at Dutch Bros. In a week where inflation data is in focus right now, how are you thinking about costs and managing costs,

especially given the fact that beef prices have been soaring? And what does that mean in terms of menu pricing? Yeah, it just means that we have to continue to get more productive. We have to get better at running our shacks. We have to get better at optimizing our labor and our deployment of labor. We also have to improve the top line, which helps us with margin as well, because we don't want to take a lot of pricing. We want to be able to deliver a great value to our customers every day, but still continue to grow our margins the way we have over the last three years. And so in order to do that, we have to find productivity,

which we've been really good about over the last six months as we brought on a new COO. We've got new processes in place. Our teams are really embracing the new model, and we're going to continue to improve moving forward. Quickly, have beef prices been a pressure point? You know, we plan for them to be a challenge this year. So far, we've actually seen a relatively stable market for beef for us.

The wages are something we always keep our eyes on, especially after the last few years of unprecedented wage inflation. But we've been able to mitigate that through productivity and some pricing. All right. Rob Lynch, the CEO of Shake Shack. It's great to sit here with you at ICR. Thank you, Morgan. Great to be here.

John? Strong showing for drive-thru out there with Shake Shack and Dutch Bros. Makes me wonder if it's the end of Starbucks' third place. Well, KB Home shares popping after beating earnings estimates. Up next, a top analyst on what he wants to hear from management when the call starts in just a few minutes. We'll be right back. Welcome back to Overtime. Shares of KB Home are up right now, close to 8% after posting fourth quarter results that beat expectations. Home deliveries increased 17%. Average selling prices were up 3%. Joining us now is Kenneth

Ziener. He is Seaport Senior Home Building Analyst. Ken, I want to give you credit. You put a sell rating on KB when it was at around 80 bucks a share back in the beginning of August. Your price target was 65 bucks. It went down there, you know, close today around 64. Now it's popping after hours, though. Now that it hit your price target and you see some of these results, are you shifting at all? Do you think it's going to go back down where you said it would? Well, afternoon. First, the conference call, which has not happened, has quite a bit of information. They beat on revenues, were a little light on gross margins, beat on EPS. The guidance of $7.5 billion revenue is now $7 to $7.5. So key questions are regional margins and the spread between their backlog margins and what they're actually closing intra-corridor. So I want to listen to the conference call like other people do.

But is there enough possibility in what you see, at least initially, that there's some nuance here? Perhaps KB is able to out-execute this higher rate environment? We do take a macro view. So our view on KB is not in isolation. I'd point out macro. Basically, 61% of Fed cuts the last 18 actually led to higher 10-year interest rates. So I'm not sure that the street was well positioned for that. Second, new home inventory is 30 percent above the long term average. So KB's comments will be interesting there. That's obviously creating margin pressure. And then if margins, you know, they did talk about West and Florida, Texas margin mix. If that's a headwind and margins pull back further than perhaps their guidance, that can undermine the re-rating thesis that some want to put forth for the group.

So I have to listen to the call. The group can discount for only so long, and I know that there have been hopes that rates would come down probably more quickly than they're likely to after the jobs report we got on Friday. How does that impact things? Historically, negatively, in the sense that Fed cuts back to the mid 60s, actually they're inflationary because the cost of capital is going down. Now, if the Fed's cutting and rates are falling because it's a recession, that's obviously not good for the stock. So I think they have a lot

of hard work here with inventory, new home inventory, census data, 30 percent above long term averages. We've got a tragic situation unfolding right now in California, people losing their homes. And it's unclear where people even who aren't losing their homes are going to be able to get insurance. Any impact here that you see for the homebuilders? Obviously, there's a big humanitarian angle on this but numerically if they're talking about 12 000 structures palisades the north la area is not really where the builders are orange county riverside so it's i think a lift in terms of demand clearly price um in terms of insurance it's going to exacerbate issues i I think traditionally we think about with Florida, which amid a steady to high rate environment, property taxes don't move as fast

in California as other places. But it really is an affordability issue on historic proportions. If you look over the last 60 years with rates staying flat or higher, this is only a further headwind. And so does this change the way investors need to think about this market? And I say that as this tragedy is still unfolding. But as people really do need places to live, that is is lifting prices, both rental and home prices, with people behaving as I think you and I would. So it's a very micro consideration for the homebuilder sector is my general opinion. Real challenges out there, especially for folks who bought a long time ago, had a lot of equity and now aren't sure how they might rebuild. Kenneth Ziener, thank you.

Thank you. Well, coming up, Blue Origin scrubbed. The Bezos rocket company calling off a potentially historic flight this morning. Up next, we'll hear from the company's CEO about space prospects under Trump and how Elon Musk's government ties could impact business. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We will be right back. Welcome back to Overtime. About 50 miles from here in Cape Canaveral, Jeff Bezos' space company Blue Origin was poised to realize a long-awaited milestone early this morning when it planned to launch its New Glenn orbital rocket to space for the first time ever.

And in an ambitious move, even attempt to recover the first stage booster. Now, the early morning attempt was ultimately scrubbed over a, quote, vehicle subsystem issue. A new launch date has yet to be announced. But as we previewed last week, the powerful New Glenn is crucial to Bezos' broader strategy of, quote, building a road to space. So yesterday, before the scheduled launch, I had the opportunity to speak with Blue Origin CEO Dave Lemp in his first TV appearance since taking the helm just over a year ago from the company's rocket factory on the Space Coast. And I asked him how Blue Origin will compete in a launch market dominated by Elon Musk's SpaceX and what he thinks the incoming Trump administration will mean for space.

I'm optimistic. You know, if you go back to the first Trump administration, they did a lot of good for space. They created the Space Force. They were very, very proactive with the Space Council. They gave the first lunar commercial contract for space through NASA. And so those are things that are still continuing today that have been really boons to the U.S. And I think they'll continue that momentum. What's different this time around, though, is that, you know, one of your rivals, one of Blue Origin's rivals, SpaceX's founder and CEO, Elon Musk, has the ear of the incoming president.

He's got a role in this administration through Doge. How do you navigate that? What does that mean? Well, you know, I think Elon has been very forthright saying that, you know, he is doing it for the public good, whether it be Doge or his other work. And he's not trying to, you know, put his thumb on the scale of his own private companies. And I take him at his word, and I think it's going to be great. So we'll see how it goes, but I'm optimistic. Blue Origin is solely owned by Jeff Bezos, and I also asked Glimp if the company would

be interested in taking on outside investments, if that would ever be a scenario. We have a very good shareholder, one shareholder in Jeff, and he's super involved day to day. I mean, this is his full time job. Now, you can find the full conversation right now on CNBC.com, as well as my podcast, Manifest Space. And John, I know you have spent time with Dave Lemp when he was at Amazon running devices and services. And one of the other things he told me in that interview was that he has brought some of that ethos and some of that leadership mentality over to the sister company, Blue Origin, especially when it comes to things like keeping the customer front and center, which in this case is satellites, satellite providers,

and customers like the Pentagon and NASA. Interesting to see him in that role. He looks happy, but I guess that was before they had to scrub the launch. Really fascinating stuff from you out of ICR today, especially Abercrombie. The stock didn't do well, but they seem happy with the store footprint. The transformation is scaling 50-50 e-commerce and in-store, and the inventory position sounds like it's good. I would say the takeaway so far from here is cautious optimism coming into 2025 across companies, across industries, and a resilient consumer. We're going to have interviews tomorrow with Planet Fitness CEO and the co-CEOs of On as well. So more insights on this show tomorrow, John.

Yeah, a lot depending on that. Looking forward to having you back here as well. We'll see how the consumer fares as 2025 goes on. Well, that's going to do it for overtime. Fast Money starts now.