Here’s Why Shake Shack Shares Are Sinking
Where’s the beef?
That seemed to be the question investors in Shake Shack (SHAK) were asking themselves on Monday after the high-end burger chain gave a downbeat sales forecast for 2016.
Shake Shack told investors it expects sales at established restaurants to rise 2.5% to 3% this year, a marked cool down from the 13.3% clip last year, sending shares down 10% in afterhours trading.
A few months after Shake Shack went public in early 2015, shares quadrupled from their $21 IPO price. But the restaurant chain’s shares have now lost more than half their value since then because of fears the burger joint is losing steam. Shake Shack’s forecast was the same as it was in November, likely disappointing investors hoping for an increase to justify one of the highest valuations in the restaurant business.
Shake Shack, which opened its first location in New York City 12 years ago, enjoys high demand for its gourmet burgers. But as the company looks to expand to 450 stores eventually (from 75 in the fall), it faces a challenges to keep high growth of rates at existing stores.