Shake Shack plunged on Tuesday, hitting its lowest levels since November 2023, after the burger chain slashed second-quarter guidance only about a month after issuing it.
Baird analyst David Tarantino said the new outlook is viewed as "incrementally negative" for Shake Shack.
Tarantino noted that management had set an "unusually high bar" for 2Q comparable performance with its previous outlook, implying mid- to high-single-digit comps in May and June after -.6%.
He added that the updated guidance ranges may be attributed to new CFO Michelle Hook, who started May 11, and said "desire to set a more achievable bar going forward."
The burger chain, which has 445 stores in the U.S., now expects second-quarter revenue of $415 million to $420 million, down from its prior forecast of $424 million to $428 million.
Same-Shack sales growth is now expected to be 2.5% to 3%, down from the earlier 3% to 5% range. Shares sank 11% in the late-morning cash session, extending a nearly yearlong bear-market slide.
Here's a snapshot of the 2Q Forecast:
Sees total revenue $415 million to $420 million, saw $424 million to $428 million, estimate $421.9 million
Sees licensing revenue $13.5 million to $13.7 million
Sees same-Shack sales 2.5% to 3%, saw 3% to 5%
Sees restaurant level operating margin 22% to 23%, estimate 24.2%
Sees Company-operating openings about 16, estimate 18
"These results are particularly encouraging in the face of a challenging macro environment and inclement weather," Shake Shack wrote in a corporate presentation.
The downgrade adds to concerns that higher beef prices and other input prices are compressing margins. There are also concerns that cash-strapped consumers are dialing back purchases on higher-priced menu items.
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Last month, Shake Shack reported a small multi-million-dollar loss in the first quarter despite a 14% revenue increase, reflecting the costs of investments to boost foot traffic.
Shares are now roughly 60% off their peak, a drawdown that has historically coincided with the stock's bottom. That said, downside pressure could still extend toward the $40 to $50 range, which has served as support during previous selloffs.
Shake Shack's guidance cut suggests the premium growth story is over for at least now, and the fast-casual restaurant chain may need a clearer turnaround plan to reignite Wall Street optimism. Perhaps that's what CFO Hook is about to engineer in the quarters ahead.