Shake Shack Inc., the burger chain founded by restaurateur Danny Meyer, plunged as much as 8.5 percent in late trading after its inaugural earnings report failed to live up to investors’ lofty expectations.
The stock, which had more than doubled since its January initial public offering, dropped as low as $42.90 in after-market trading on Wednesday. While fourth-quarter revenue topped analysts’ estimates, the company predicted that same-store sales would grow in the low-single digits. That may not have been enough to satisfy shareholders after the stock’s surge, said Sharon Zackfia, analyst at William Blair & Co. in Chicago.
“It had a really strong run,” she said.
The company, which started as a hot-dog kiosk in New York’s Madison Square Park, is known for upscale fast food, including its signature burgers made with beef from Pat LaFrieda Meat Purveyors. Though Shake Shack currently has just 66 locations, it’s been plotting a global expansion and touting itself as a new type of cuisine: fine casual.
That’s fueled optimism that the company can build a relatively small chain into a burger empire. Shake Shack’s revenue rose about 52 percent to $34.8 million in the fourth quarter. Sales at company-owned locations open at least two years, which includes 13 restaurants, rose 7.2 percent.
That rate isn’t sustainable in the long run, which is reflected in the company’s forecast, Chief Executive Officer Randy Garutti said on a conference call.
“We’re going to continue to be conservative,” he said.
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