Shares of Shake Shack Inc. (SHAK) fell 4.7% to a seven-week low in premarket trading on Thursday following the release of the company's second-quarter earnings report. While Shake Shack beat profit expectations, it fell short on sales and revised its full-year outlook downwards.
Strong Profit Growth, but Disappointing Sales
Shake Shack reported a net income of $6.95 million, or 16 cents per share, for the quarter, compared to a loss of $1.19 million, or 3 cents per share, in the same period last year. After adjusting for nonrecurring items, the company's earnings per share came in at 18 cents, surpassing the FactSet consensus estimate of 10 cents.
However, total revenue for the quarter only grew by 17.8% to $271.81 million, falling short of the FactSet consensus of $274.5 million. The company's same-store sales growth of 3.0% also missed expectations of a 5.0% increase.
Lowered Full-Year Guidance
As a result of the lower-than-expected sales performance, Shake Shack revised its total revenue guidance range for 2023 to $1.07 billion to $1.08 billion, down from the previous range of $1.06 billion to $1.11 billion. The midpoint of the guidance now stands at $1.075 billion, a decrease from the previous midpoint of $1.085 billion.
Despite the disappointing sales figures and lowered outlook, Shake Shack's stock has seen significant growth this year, surging by 80.7% year-to-date as of Wednesday. In comparison, the S&P 500 has advanced 17.6% over the same period.
The market's reaction to Shake Shack's latest earnings report emphasizes the importance of sales growth going forward, as investors reassess the company's performance in relation to its peers and the broader market.