Shares of Shake Shack
Shake Shack's Q1 revenue guidance sits at $196 million to $201.4 million, below the average analyst projection of $210.9 million. Unfortunately, the story is a common one for many businesses large and small as of late: Omicron-related downward pressure.
"Drivers of our business such as office returns, events, travelers and the general gathering of people that contribute to Shake Shack's best results (turned) downward," Shake Shack CEO Randy Garutti noted during the company's earnings call.
In addition, inflation continues to press on the fast-casual restaurant chain. With a menu known for its burgers and chicken just as much as its titular shakes, Shake Shack has had to endear through rising prices and supply dysfunction in the pandemic-wracked meat market. The Great Resignation and the sudden shift in labor-market power to workers has also caused labor costs to rise as jobseekers turn to higher-paying work.
In the short term, offsetting those rising costs will come by way of a price increase.
"In order to offset some inflationary pressures, we took a price increase of 3% to 3.5% in October of last year. Given the continued outlook, we've decided to take another 3% to 3.5% in March, resulting in inflation-based price raise of 6% to 7% heading into Q2," Garutti noted in the call.
The company is also planning to increase listed prices for delivery services such as DoorDash
The company is also looking to diversify geographically. More commonly found in major cities and some adjacent suburbs, Shake Shack is set to open restaurants in more diverse locations to reach a broader customer base.
While the company's revised guidance doesn't seem overly weak, the price hikes are certainly worth noting. Given the rising cost of consumer goods across the board, a price hike so soon after a previous hike in October might turn some consumers off.
Shake Shack shares slumped 4.1% on Friday with news of the weaker guidance and price hikes. Given the current geopolitical situation, with markets down due to escalating Russian encroachment on Ukraine, it's hard to tell how negatively investors took the news based on that figure alone.
