What happened

Shares of Shake Shack (NYSE:SHAK) were getting tossed away today after the fast-casual burger chain posted underwhelming results in its third-quarter report. Comparable sales missed expectations, and guidance for the fourth quarter was disappointing. The market also seemed skeptical of a plan to temporarily close down restaurants next year for renovations and upgrades.

The stock was down 19.4% as of 1 p.m. EST.

A Shake Shack burger and hot dog next to each other

Image source: Shake Shack.

So what

Shake Shack's comparable sales rose 2%, below expectations for 2.9%, and lifted overall revenue 31.9% to $157.8 million, matching expectations. The company opened 17 locations in the quarter, 11 of which were domestic company-operated ones.

Restaurant-level operating profit rose 17.4% to $35.1 million, though restaurant-level operating margin fell from 25.8% to 23.1% due to rising food and labor costs as well as other factors.

Overall operating income fell 12.2% to $8.6 million due to costs associated with Shake Shack's systems upgrade, "Project Concrete." Adjusted earnings per share ticked up from $0.21 to $0.26, ahead of estimates for $0.20.

CEO Randy Garutti said: "This has been the biggest development year in Shack history as we've grown our presence around the country and internationally in the new markets of Mainland China, Singapore, the Philippines and Mexico. In 2020, we will continue to expand even further within key domestic and international markets."

Now what

The burger chain adjusted its full-year guidance, raising its revenue forecast from a range of $585 million to $590 million to one of $592 million to $597 million, but lowered its comparable-sales guidance from 2% to 1.5%. It also cut restaurant-level operating margin expectations from 23% to between 22% and 22.5%.

Those guidance changes seemed to outweigh the earnings beat in the minds of investors, especially as Shake Shack already trades at a premium for restaurant stocks. Furthermore, investors seem to be spooked about the company's decision to switch to using Grubhub as its only delivery provider, especially at a time when that company is rapidly losing market share and experiencing its own problems.

Shake Shack shares are now down more than a third from their peak in September, but are still up 50% for the year. That's a sign that the market is still figuring out what to make of the high-priced, fast-growing restaurant chain. Expect the volatility to continue.