Here’s Why Shake Shack’s Shares Just Plunged

August 10, 2016, 9:00 PM UTC
Inside A Shake Shack Inc. Restaurant Ahead Of Earnings Figures
A customer picks up an order at a Shake Shack Inc. restaurant in Bridgewater, New Jersey, U.S., on Friday, March 4, 2016. Shake Shack Inc. is scheduled to release earnings figures on March 7. Photographer: Ron Antonelli/Bloomberg via Getty Images
Photograph by Ron Antonelli—Bloomberg via Getty Images

Shake Shack (SHAK), known for indulgent antibiotic-free hamburgers, crinkle-cut fries, and frozen custard shakes, on Wednesday reported a weaker-than-expected rise in quarterly sales at established restaurants.

The Big Numbers: The company had net income of $3.3 million, or 14 cents per share, versus net income of $1.1 million, or 8 cents per share, in the year-ago period.

Adjusted earnings were also 14 cents per share, topping analysts’ average estimate by a penny, according to Thomson Reuters I/B/E/S.

Total revenue rose 37% to $66.5 million.

Why It Matters: Traffic to U.S. fast-food chains has been weak due in part to competition from grocery stores, which have been raising food prices at a slower pace than restaurants.

Shares in the company tumbled 8.7% to $37.30 in extended trading after the chain said closely watched same-restaurant sales were up 4.5% during the second quarter. Analysts had expected a 5.4% rise, according to research firm Consensus Metrix.

Shake Shack shares debuted in January 2015 on the New York Stock Exchange at $21 a share and briefly topped $100 a share in May 2015. They have underperformed the S&P 500 since November.

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