Shake Shack shares fall more than 13% as same-store sales growth disappoints

Shake Shack shares fell more than 14% in extended trading Monday after the company reported third-quarter earnings that beat analysts’ expectations, but turned in disappointing same-store sales growth.

Revenue was in-line with expectations, but same-store sales rose 2.0%, shy of the 2.5% growth analysts predicted.

Here’s what the company reported compared to what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: 26 cents, adjusted, vs. 20 cents expected
• Revenue: $157.8 million, vs. $157.8 million expected

Shake Shack said its net income rose to $11.4 million, or 31 cents a share, from $6.9 million, or 17 cents a share, a year ago.

Excluding items, Shake Shack earned 26 cents a share, topping estimates of 20 cents per share.

Revenue climbed 32% to $157.8 million from the year-earlier period, in-line with analysts’ predictions.

Shake Shack revised its financial outlook for the 2019 fiscal year. The company said total revenue, which includes licensing revenue, is now expected to come in between $592 million to $597 million, compared to the previous outlook of $585 million to $590 million.

Same-store sales growth for 2019 was revised downwards to about 1.5% from the previous outlook of about 2.0%.

Shake Shack said it still expects to have 38 to 40 company-operated restaurant openings by the end of 2019. In 2020, it expects to open 40 to 42 domestic company-operated restaurants, including a few urban restaurants with a smaller footprint that increasingly integrate digital ordering, CEO Randy Garutti said during the earnings call.

At the end of its second quarter, Shake Shack announced a deal with GrubHub. Garutti said Monday that the company will start actively marketing the partnership nationally.

Shake Shack started transitioning from four delivery partners, DoorDash, Postmates, Caviar and GrubHub, to just GrubHub in the third quarter. Garutti said that the company expects an impact on its delivery revenue, especially in areas where GrubHub is not a market leader.

Chief Financial Officer Tara Comonte noted on the earnings call that the company’s results to-date coupled with “expected volatility from the delivery transition” were reflected in the downward revised year-end same-store sales guidance of 1.5%. The burger chain also sees more “inherent risk” in its fourth-quarter performance because of this transition.

Ahead of earnings, Shake Shack shares had gained more than 85% since the start of the year, and had a market value of $3.1 billion.