Shares of Shake Shack (NYSE:SHAK) were sliding today after the fast-casual burger chain posted weaker-than-expected results in its first-quarter earnings report.
As a result, the stock was down 14.4% as of 2:51 p.m. EDT.
Shake Shack is still struggling with headwinds from the pandemic, and the company said same-store sales were up 5.7%, though that lapped the period when it was first impacted by the pandemic. Overall revenue was up 8.5% to $155.3 million, which was short of the analyst consensus at $161.9 million, though the business built momentum heading into the second quarter.
The restaurant chain scaled back on new store openings during the pandemic as it focused its attention on driving digital growth, but pandemic-related challenges pushed restaurant-level operating margin down from 19.1% to 15%.
With the help of a substantial tax benefit, the company posted adjusted earnings per share of $0.04, up from $0.02, which was well ahead of a per-share loss of $0.09. However, it would have reported a per-share loss close to that number after factoring out an $11 million in tax benefit.
CEO Randy Garutti said the company was making progress in recovery, noting, "In the first quarter and so far through fiscal April, the positive momentum of our financial recovery continued." He added, "We know that the return of business traffic, events and tourism to cities like NYC, Chicago and LA will be key to our full recovery."
For the second quarter, management expects revenue of $174 million to $183 million, below estimates at $183.3 million. That represents 15% growth from the first quarter and laps the nadir in its performance last year. It also expects restaurant-level operating margin to improve modestly to 15%-17% from 15% in the first quarter.
Through April the company saw strong retention in its digital channel while rebuilding in-store sales, which should continue to come back as Americans return to their prepandemic habits.
Shake Shack stock had already recovered all its pandemic-era losses coming into the report, so it's not surprising to see the restaurant stock falling on subpar results today. Still, the business's performance should eventually recover to prepandemic levels.