By Dhirendra Tripathi
Investing.com – Shake Shack stock (NYSE:SHAK) plunged 8% Friday after the burger chain’s first-quarter forecast left traders unimpressed.
While the company is forecasting a 26% to 30% year-on-year jump in first-quarter revenue to $196 million to $201.4 million, a big erosion in Shack-level operating profit margin is a possibility. According to the forecast, the OPM could fall to 11% from 15% a year ago. On the most optimistic side, the margin is seen at 14%, still down a percentage point.
The margin erosion would have been worse, but the company is promising a price hike. Shake Shack will jack up prices in March and increase its third-party delivery menu prices, Reuters quoted CEO Randy Garutti as saying during an earnings call.
Successive waves of Covid-19 have disturbed operations at its restaurants, keeping diners confused about their repeated opening and closing though full-year same-Shack sales exceeded 2019 levels.
Same-Shack sales define sales at domestic company-operated Shacks open for at least 24 full financial year months.
“While a return to pre-Covid movement patterns remains uncertain, we are pleased to see improvement through fiscal February, with same-Shack sales up approximately 13% month to date," Garutti said in a statement, holding out hope for the current quarter.
Total revenue in the fourth quarter rose 29% to exceed $203 million. The net loss almost halved and was just over $10 million.
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 the suburbs during the pandemic. That helped comparable sales at suburban restaurants gain 9%.