Please ensure Javascript is enabled for purposes of website accessibility

Shake Shack Provides a Business Update as Sales Plunge 70%

By Asit Sharma – Apr 2, 2020 at 5:52PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The burger-and-shake chain regroups as coronavirus significantly buffets its operations.

Roadside burger chain Shake Shack (SHAK -3.52%) updated investors on the effect of the COVID-19 pandemic on its business on Thursday, while also providing details on its immediate financial condition.

The company noted that nine of its company-operated units are completely closed (out of 280 stores), while the rest are "relying solely on to-go and delivery orders." Excluding the temporarily shuttered units, domestic restaurants are seeing sales declines of 50% to 90% and are averaging a 70% drop in business against the same period last year. Shake Shack reported that its international licensed stores are also experiencing dramatic sales erosion. 

An artisan hamburger and steak fries on a wooden table.

Image source: Getty Images.

For now, liquidity doesn't appear to be an issue. Management drew down the company's $50 million revolving credit facility last week. As of April 1, Shake Shack had $104 million in available cash and marketable securities, which it believes will "[provide] adequate liquidity for the foreseeable future."

The company noted that it has furloughed or laid off 20% of its corporate employees while reducing corporate salaries and instituting a companywide hiring freeze. It's even deferred cash-compensation payments to its board of directors.

The organization has also undertaken "significant reductions" in store staffing and store-level operating expenses. Shake Shack is currently evaluating store hours and identifying locations where sales levels don't justify continued operation.

Finally, the fast-casual chain has halted all construction, shelved plans to open any new locations at present, and placed a hold on non-critical capital expenditures. In sum, the "Shack" has gone into a fully defensive posture in an attempt to outlast the COVID-19 pandemic.

Shares gained more than 1% in Thursday's trading session.

Asit Sharma has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Shake Shack Inc. Stock Quote
Shake Shack Inc.
SHAK
$44.98 (-3.52%) $-1.64

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
104%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.