Habit Burger blames same-store sales slip on lackluster burger promo

The fast-casual chain posted a 1.4% drop for Q1.

It was a rough start to the year for fast casual The Habit Burger Grill.

The chain saw same-store sales drop 1.4% for the quarter that ended March 27. March was particularly brutal for the burger brand, with same-store sales plummeting more than 4% over March of the previous year.

Habit stock dropped 18.5% on Thursday after the dismal earnings were revealed. Meanwhile, the chain is making plans to slow growth and retool its promotion plans as it ramps up its search for a chief marketing officer.

“This was below our expectations,” Habit CEO Russ Bendel said during a Q1 earnings call for the brand’s parent, Habit Restaurants Inc.

The fast casual blamed its slip on a poorly performing burger promo. For the third year in a row, the chain offered a free Charburger to new and existing members of its CharClub loyalty program. Though its loyalty program now boasts a million members—almost twice last year’s number—the free burger promotion “may not have been as effective as in the past years of driving incremental traffic,” Bendel said.

In addition, Habit Burger will likely put the brakes on growth in 2019, Bendel said.

The chain opened 11 new company-operated restaurants and two franchised restaurants during the first quarter of this year, bringing its unit count to 222. The chain still plans to open a total of 30 company-owned stores and six to eight franchised units in 2018.

“We definitely have pulled back on growth,” Bendel said. “It was harder to pull back this year, because quite honestly, our real estate team has done a really nice job of building a solid pipeline. Obviously, we have not been rewarded for being a growth company of late.”

Matt Hood, Habit Burger’s chief marketing officer, stepped down in March to take over the CEO post at On the Border Mexican Grill & Cantina. Habit is in the midst of a national search for Hood’s replacement.

“We are really looking for someone that has demonstrated historical success of driving traffic through some of the more new-age channels of marketing, focused more on digital, social, those kind of arenas,” Bendel said.

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