Written by Brenda Nakalema

Shake shack stock drops on weaker sales outlook.

Shake Shack stock dropped Friday after an underwhelming outlook overshadowed a lower than expected quarterly loss. The restaurant chain announced …

Shake Shack stock dropped Friday after an underwhelming outlook overshadowed a lower than expected quarterly loss. The restaurant chain announced expected revenue in the range of $196 million to $204 million in March, a figure that falls below the consensus call of $203.1 million. Aside from this, the company’s same-store sales estimates, also known as “same-shack” sales, of $190 million-$195 million are a little below analysts’ estimates of $195.2 million.

Shake Shack (ticker: SHAK) dropped 5.6% to $70.95 on Friday. It dropped as low as 16% to $63 in premarket trading.

In December, the burger chain delivered an adjusted loss of 11 cents per share, a lot lower than the 17 cents per share analysts expected. Revenue of $203.3 million was well within the analyst expectations as surveyed by FactSet.

CEO Randy Garutti stated that the company started the year with alot more volatility owing to the Omicron outbreak and its resulting effects on the global business environment.

“The lower than average sales per hour reduced operating hours and outright closures due to Covid 19 resulted in materially lower sales versus our seasonal expectations.”

According to Garutti, these trends are expected to continue and affect sales through the first quarter. In light of this, Shake Shack reported a steady rise in sales for fiscal February so far, with month to date same shack sales up approximately 13% year over year, as of Tuesday.

The company also made the announcement of its intention to raise prices by 3% to 3.5% in March in an attempt to offset inflation after a 3%- 3.5% price increase in October. It is expected that this will result in a net pricing increase of 6% to 7% in the second quarter.

Shake Shack also raised its premium price on third party delivery orders from 10% to 15% in order to improve the profit profile and direct customers to its own digital channels for better value.

According to Brian Vaccaro, an analyst at Raymond James, the menu prices might negatively affect traffic, especially when the company’s premium price point position is taken into consideration. The analyst maintained his underperform rating on Shake Shack stock and lowered his estimate for 2023 adjusted earnings to 13 cents a share from 28 cents.