Shake Shack’s shares dropped by 30% on Thursday. The company pointed to unfavorable weather, rising beef costs, and a fall in tourism as reasons for their underwhelming performance.
The New York City-based burger chain didn’t meet Wall Street’s revenue and profit expectations for the quarter ending April 1. They reported a loss of $290,000, contrasting with a profit of $4.25 million the previous year. Although sales grew by 14.3% to reach $367 million, it still fell short of the anticipated $371 million.
According to Shake Shack, harsh weather conditions in January and March deterred customers.
“We entered the quarter with a much higher sales rate than what we ended up with, largely because of the bad weather,” lamented CEO Rob Lynch during a call with analysts.
The company added that rising beef prices—up in the “low teens”—and fewer tourists in New York were also negatively affecting their financial results.
“Tourism in our major urban markets, particularly New York City, continues to decline,” Lynch stated. “Inbound tourism has slowed down significantly, which is putting more pressure on sales, particularly in busy areas.”
Other restaurant chains, like McDonald’s, are also worried about shifts in consumer spending due to inflation. McDonald’s CEO Chris Kempczinski mentioned in Thursday’s earnings call that consumer spending might “deteriorate a little bit” because of rising fuel prices impacting individuals’ budgets.
On a different note, Shake Shack announced the appointment of Michelle Hook as its new chief financial officer. Hook, a veteran from Domino’s Pizza, is recognized for her “track record of scaling growing companies and building high-performing teams,” according to the company’s statement.
She will replace Katherine Fogarty, a former Goldman Sachs Vice President, who had been overseeing Shake Shack’s finances since 2020 but resigned in March.
