Shake Shack Inc . (NYSE:SHAK) announced today that it will close nine of its company-owned restaurants in California, Ohio, and Texas. This decision comes as part of the company's ongoing efforts to optimize its portfolio and improve profitability.
The closures are a result of an evaluation process that identified underperforming locations, which have been affected by changes in the trade area and sales cannibalization from nearby Shake Shack outlets. The company does not foresee any further closures based on the current evaluation.
The affected employees were informed of the plan on Monday, and the closures are expected to be completed by September 25, 2024. Management staff will be offered positions at other locations, while hourly employees will be eligible for rehire at different Shake Shacks. Those not transferring will receive up to 60 days of pay.
Financially, Shake Shack anticipates recording pretax charges of approximately $28.0 to $30.0 million in the third quarter ending September 25, 2024, due to these closures. Cash costs are projected to be between $14.0 to $15.2 million, with the majority relating to lease termination and future lease obligations. Non-cash costs, primarily consisting of asset impairment and write-offs, are expected to be in the range of $14.0 to $14.8 million.
Despite the closures, Shake Shack reaffirms its growth and strategic priorities, including the number of new restaurant openings for fiscal year 2024, as previously disclosed. The company's third quarter and full-year 2024 guidance remain unchanged.
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