Shake Shack Shares Crash Most On Record; McDonald’s CEO Warns Of Faltering Consumer

Shake Shack shares crashed the most on record after the burger chain reported weaker-than-expected first-quarter revenue and adjusted EBITDA, with management blaming the miss on “significant weather impacts.”

But the weather excuse may be masking a much larger problem: a weakening consumer increasingly pushing back against premium fast-casual pricing, with the average Shake Shack meal costing around $23.

SHAK reported first-quarter results that missed Bloomberg Consensus estimates, with revenue and adjusted EBITDA coming in light as the burger chain faced margin pressure despite positive comparable sales.

Here’s a snapshot of first-quarter results, courtesy of Bloomberg:

Revenue: $366.7 million, estimate $372.5 million (Bloomberg Consensus)

Shack sales: $354.0 million, estimate $358.7 million

Licensing revenue: $12.7 million

Adjusted EBITDA: $37.0 million, estimate $45.5 million

Comparable sales: +4.6%, estimate +4.65%

Traffic growth: 1.4%

Restaurant-level operating margin: 21.2%, estimate 21.9%

CEO Rob Lynch noted that soaring beef costs rose by a low-teens percentage, while unfavorable weather eroded profit. Underlying sales and traffic momentum remained solid in the quarter.

Wall Street analysts were not thrilled with the earnings report. Shares crashed by the most on record, plunging 29% in the early U.S. cash session.

For the year, shares are down 17% and now trading at early-2024 levels.

Separately, Shake Shack announced in a separate release that Michelle Hook will be appointed as the new CFO next Monday.

Earlier, McDonald’s CEO warned that current consumer environment is getting pressured: “Clearly, when you have elevated gas prices, which is the core issue that I think we’re all seeing about in the press right now, gas prices, inflation on that, that is going to disproportionately impact low-income consumers. And so we expect the pressures there are going to continue.”