Shake Shack (SHAK) shares tumbled on Wednesday following the company posting disappointing second-quarter earnings. The company’s shares fell 8% since the release of their earnings report, and deaccelerating sales have caused investor sentiment to wane.
The most concerning figures to pay attention to in the company’s report are:
Same-Store Sales
Same-store sales missed expectations for year-over-year in all stores that were open for at least 24 months. The company’s same-store sales increased by 4.5%, missing expectations of 4.8% growth.
The growth problem becomes even bigger when compared to the same period one year prior.
Last year, same-store growth reached 12.9% in the same quarter and 9.9% in Q1 2015. The sharp drop in same-store growth compared to one year ago has investors worried that this is a new trend for the company.
If sales continue to fall at a rapid pace, the company can quickly start posting negative growth figures.
The company is relatively new, so the same-store sales growth is a concern. The company was founded 12 years ago in 2004, and same-store sales growth of 4.5% is normally not a concern. Rival McDonald’s (MCD) posted a 3.1% same-store sales growth on the quarter, which didn’t cause the stock to tumble.
Shake Shack’s “youth” is the concern, as the company should be posting higher growth numbers. The company’s price-to-earnings ratio is also inflated at 122, or roughly six times higher than the average stock.
Revenue Growth
Same-store sales growth may have missed the mark, but the company posted 37% growth in revenue in the second-quarter. Four new company-owned stores were opened and three licensed stores were opened in the second quarter.
The company’s guidance has been raised, too,
Earnings beat the consensus, which is another positive for the company. The company posted $66.5 million in revenue, $3.3 million in earnings and an EPS of $0.14. Analysts had the company’s revenue at $63 million with an EPS of $0.13.
