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Shake Shack sales drop 29%

April 2, 2020

Although Shake Shack could be considered one of the most successful fast casual brands around, it isn't immune to the damage caused by COVID-19. CEO Randy Garutti said Thursday that with nine locations temporality closed and the rest relying on delivery and carry-out only, same-store restaurant sales for March were down 29% from a year ago.

"Our message across the company has been to lead with hope, while acting on reality, and to make the necessary choices today to ensure our strength and growth continues for many years to come," CEO Randy Garutti said in a company press release. "We are taking the crucial steps to safeguard the health of our teams and communities, while we work to serve our guests to the best of our ability.

Those steps included:

• Laying off or furloughing about 20% of its home office staff with remaining corporate workers taking salary reductions.
• implementing a hiring freeze across the company and is reviewing operating hours and future potential closings. 
• Pausing ew design and construction of future Shacks with the exception of a handful where construction is near complete
• Pausing new openings.
• Focusing on the company's pre-ordering convenience of its Shack app and web channels and adding additional delivery partners, including Postmates, DoorDash, Caviar and Uber Eats, in addition to its original partner, Grubhub, which the chain had a former exclusivity deal.
• Launchingcook-at-home ShackBurger meal kits in collaboration with Goldbelly.
• Suspending non-essential capital expenditures.
• Deferring Board of Directors cash compensation.
• Assessing the stimulus bill to see how it may benefit Shake Shack and its team members
   

"Over the last two weeks, as mandated shutdowns and stay at home orders have gone into place across the country, sales at all Shacks have been dramatically reduced," he said. "Compared to last year, excluding Shacks that are temporarily closed, sales across our domestic company-operated Shacks are currently down between 50% and 90%, averaging down approximately 70% in total."

U.S. business update

Same-Shack-sales were down about 2% through the first two months of the First Quarter of 2020, in line with previous guidance. Following the outbreak of the coronavirus in the US in early March, however, SSS started to decline significantly, with the impact becoming more acute as the month progressed, resulting in March Same-Shack-Sales being down 29% compared to the same period last year, according to the release.

Global business is down
The company’s licensed Shack business has also been deeply affected.

Beginning in China in January and subsequently, around the globe, licensed partners have also seen dramatic sales declines. The stadium business is fully closed, and of the airport locations that have remained open, they are seeing a small fraction of the travelers they saw just a few weeks ago before travel was curtailed, according to the company.

Throughout the UK and the Middle East, Shake Shacks are mostly closed or running on modified hours with delivery only. Throughout Asia, Shacks are closed in the Philippines, and sales are deeply impacted in Japan, Korea, and Singapore. In one bright spot, business in Shanghai and Hong Kong has begun to see a slow but steady rebound toward the end of March from their low points earlier in the quarter. At this time, just 70 of 120 total licensed Shacks remain open.

Financial update

On March 16, the Shake Shack withdrew financial guidance for the fiscal year ending Dec. 30, 2020. Further detail around business performance will be shared in its Q1  earnings call.

The company drew down on its revolving credit facility of $50 million on March 24 to enhance financial flexibility, and as of April 1, it had $104 million in cash and marketable securities on hand, providing adequate liquidity for the foreseeable future, according to the release.

Shake Shack has more than 280 locations in 30 U.S. States and the District of Columbia, including more than 95 international locations.

Read more COVID-19 coverage here.