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Shake Shack shares flipped lower in extended trading after the burger chain said a key sales metric cooled for the fifth straight quarter and issued a downbeat revenue outlook for 2017.
Shares in the New York-based company fell as much as 10 per cent in extended trading, before trimming those losses to trade 5 per cent lower. The moves came after Shake Shack reported like-for-like sales, a key industry metric, rose 1.6 per cent in the fourth quarter, slower than the 2.9 per cent rise recorded in the third quarter. It was the fifth consecutive quarter of cooling sales growth.
Moreover, the company said that average weekly sales for domestic company-operated ‘Shacks’ slid to $90,000 from $103,000 in the third quarter, although they were up 1.1 per cent from a year ago, driven in part by higher menu prices.
Looking ahead, the company said it expects sales in the range of $349m to $353m in 2017, up from its previous estimates of $348m to $352m. However, that fell short of analysts’ estimates of $354.5m. It also re-affirmed its outlook for same-store sales growth in the range of 2 to 3 per cent.
Profits rose to $3.9m or 15 cents a share, up from $1.25m or 7 cents a share in the year-ago quarter. That eclipsed analysts’ forecasts of 9 cents.
Revenues rose 43.5 per cent in the fourth quarter from a year ago to $73.3m, topping analysts’ estimates of $70.7m.
Shake Shack began as hot-dog cart in Manhattan’s Madison Square park in 2001 to support the park conservancy’s first art installation. Following its success, it set up its first kiosk in 2004. While the company made its public debut to much fanfare in 2015, it has recently struggled to maintain sales momentum, and shares declined nearly 10 per cent last year.
Burger chains have in the past noted that lower food prices heightened the gap between cost of eating at home and dining out. That, along with a consumer preference for healthy food, has hamstrung growth. Moreover, traditional burger chains have faced increasing competition, with McDonald’s noting earlier on Wednesday that it has lost 500m transactions in the US since 2012.
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