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Shake Shack Fails To Shake Off Omicron Impact, Forecasts Dour Sales

By Dave Simpson

Shake Shack Inc SHAK.N has forecast first-quarter revenue below estimates as the fast-spreading Omicron variant of COVID-19 kept diners away and led to temporary restaurant closures.

Benefits from easing COVID-19 Delta infections were short-lived for Shake Shack as the Omicron wave that soon followed dissuaded customers from venturing out, infected staff and set back the recovery of urban-centric restaurants.

Statement By CEO

"Drivers of our business such as office returns, events, travelers and the general gathering of people that contribute to Shake Shack's best results (turned) downward," CEO Randy Garutti said during an earnings call.

First-Quarter Revenue Forecast

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Shake Shack forecast first-quarter revenue of $196 million to $201.4 million, compared with analysts' average estimate of $210.9 million, according to Refinitiv IBES.

Statement By M Science Analyst

"We saw a more acute impact on SHAK sales from Omicron than its more geographically diversified peers ... expectations were just too optimistic and underestimated the Omicron impact," M Science analyst Matthew Goodman said.

Rising Costs

Rising paper and food expenses as well as labour costs have also put a squeeze on Shake Shack's margins. Credit Suisse analysts noted that the company's margin forecast was also below consensus estimates.

Additional Statement By CEO And Raised Prices

To protect its margins, Shake Shack will jack up prices in March and increase its third-party delivery menu prices, Garutti said. The company in October raised prices by 3% to 3.5%.

Nearly every US restaurant, including Chipotle Mexican Grill CMG.N and McDonald's MCD.N, has also raised prices.

Sales

In the fourth quarter ended 29 December, same-store sales in Shake Shack's urban restaurants, which account for over half of its topline, declined 4% as many city dwellers moved to suburbs during the pandemic.

However, that helped comparable sales at suburban restaurants gain 9%.

Shake Shack also pointed to a sales improvement in recent days, with monthly comparable sales through 15 February 15 jumping 13%, versus a 2% rise in January.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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