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Shake Shack makes cautious return to unit growth

The burger chain added four units in Q2, but same-store sales remain down nearly 50%, according to a business update.
Photograph: Shutterstock

Despite continuing to experience significant same-store sales declines, Shake Shack is returning to growth mode, adding four new stores during Q2, the company announced in a business update Tuesday.

Same-store sales fell 49% for the quarter ended June 24, driven by a 60% drop in traffic and an 11.1% increase in price mix. Because of the pandemic, the fast-casual chain had seen same-store sales fall as much as 64% in April.

Six of the chain’s units remain fully closed, down from 17 shuttered stores at the end of Q1. About 60% of units are operating with dining rooms open at limited capacity.

“However, in recent days, some of these interior and patio dining rooms have once again closed for safety reasons,” the New York City-based chain said in a statement.

Protests against the killing of George Floyd while under police custody in Minneapolis cost the chain about $3.2 million in June, due to reduced operating hours because of government-mandated curfews as well as temporary store closures, the chain said.

New company-operated units opened during Q2 in Sacramento; Los Angeles; Charlotte, N.C.; and St. Louis, Mo.

“Amid our gradual sales recovery, we’ve started to open new Shacks again and are looking to the significant growth opportunity that we believe lies ahead for Shake Shack,” CEO Randy Garutti said in a statement.

Shake Shack said it has a pipeline of leases in negotiation for further growth in 2021 and beyond.

Total revenue for Q2 was $91.8 million.

The chain, which has 167 company-operated restaurants, has acknowledged that its real estate portfolio has posed challenges amid the coronavirus crisis. Most of its stores are in dense urban locations, lacking drive-thrus—two pitfalls as consumers seek out limited-contact QSR transactions.

Shake Shack said in May that it would begin adding interior and exterior pickup windows. It is also considering order-ahead drive-thru pick-up lanes, much like Chipotle’s successful Chipotlanes, which the chain is dubbing “Shack Tracks.”

Shake Shack currently has $184 million in cash and marketable securities on hand, it said, and it is burning through about $200,000 per week. On June 22, the company repaid the $50 million it had previously drawn from its revolving credit facility.

 

 

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