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Shake Shack Foresees Roadblocks to Rebound Hopes

By Demitri Kalogeropoulos – Jun 24, 2020 at 3:51PM

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Its fast-casual focus is a liability while social distancing efforts continue.

Shake Shack (SHAK -3.52%) is opening new stores again, but the COVID-19 pandemic might continue pressuring its results even after its peers return to growth.

Executives from the fast-casual burger specialist spoke at an investor conference on Wednesday and delivered mixed news for shareholders. The company has resumed its development schedule, CEO Randy Garutti said, although at a slower pace than the initial 40-unit launch rate that management issued for 2020. That's good news because most of Shake Shack's growth potential relies on its ability to greatly expand on its current level of just under 300 locations.

A woman bites into a burger.

Image source: Getty Images.

Garutti said it faces some unique challenges in returning to comparable-store sales growth following COVID-19 shutdowns. Many of its stores are in high foot traffic areas that are built to encourage large gatherings. Those places, including in spots like Midtown Manhattan in New York, are being avoided during the pandemic. As a result, "our [recovery] tail will be longer," he explained.

Shake Shack is adding drive-through and walk-up ordering access to more of its stores to adjust to the new social distancing realities of the time. But its average location might not return to pre-COVID-19 volumes for some time.

Demitrios Kalogeropoulos 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.

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