Takeout/Delivery Only at Shake Shack Now as Dining Rooms Close

LinkedIn Pinterest Tumblr

The New York City-headquartered Shake Shack burger chain has provided a business update on the impact of the novel coronavirus pandemic and steps the company has taken to conserve cash and increase available liquidity to maximize financial flexibility until current market conditions stabilize. The contagion, which originated in Wuhan, China during late 2019, has been attributed to over 1,900 Covid-19 deaths in the city, 4,159 statewide and more than 69,000 globally as of April 5.

“We are navigating through an unprecedented time that continues to evolve rapidly. Our message across the company has been to lead with hope, while acting on reality, and to make the necessary choices today to ensure our strength and growth continues for many years to come. We are taking the crucial steps to safeguard the health of our teams and communities, while we work to serve our guests to the best of our ability. In addition to our focus on the pre-ordering convenience of our Shack app and web channels, we are taking this moment to add additional delivery partners to all Shacks where available. Postmates, DoorDash, Caviar and Uber Eats, in addition to Grubhub, will be integrated into our systems to provide maximum availability for our guests,” said CEO Randy Garutti.

In addition to menuing 100% all-natural Angus beef burgers, Shake Shack offers crinkle-cut fries, chicken sandwiches, flat-top Vienna beef dogs, frozen custard, beer and wine and more.

“With nine company-operated Shacks temporarily closed, and the remainder relying solely on to-go and delivery orders, our sales have been severely impacted and we are working to align our operating costs as best we can,” said the chief executive officer. “Over the last two weeks, as mandated shutdowns and stay at home orders have gone into place across the country, sales at all Shacks have been dramatically reduced. Compared to last year, excluding Shacks that are temporarily closed, sales across our domestic company-operated Shacks are currently down between 50% and 90%, averaging down approximately 70% in total.”

Business Update

Same store sales were down approximately 2% through the first two months of the First Quarter of 2020, in line with previous guidance. Following the outbreak of the spreading coronavirus in the United States in early March, receipts started to decline significantly, with the impact becoming more acute as the month progressed, resulting in a sales downturn of 29% compared to the same period last year.

With Shake Shack real estate heavily indexed towards high volume, urban and premier shopping locations, the impact to the company will continue to be significant during the period of stay-at-home orders across the country. From mid-March, Shacks that remained open were operating in a limited to-go or delivery model, with all dining rooms closed. As April 2, most Shacks do not allow guests inside and have creatively converted to curbside to-go ordering and even modified drive-up configurations to keep employees and customers safely distanced.

The company’s licensed Shack business has also been deeply impacted during this time. Beginning in China in January and subsequently around the globe, licensed partners have seen dramatic sales declines. The stadium business is fully closed, and of the airport locations that have remained open, they are currently seeing a small fraction of the travelers passing through just a few weeks ago before travel was curtailed.

Across the UK and the Middle East, Shake Shacks are mostly closed or running on modified hours with delivery only. Throughout Asia, Shacks are closed in the Philippines, and sales are deeply impacted in Japan, Korea, and Singapore. In one bright spot, business in Shanghai and Hong Kong began to see a slow but steady rebound towards the end of March from low points earlier in the quarter. At this time, just 70 of 120 total licensed Shacks remain open.

On March 16, the company withdrew financial guidance for the fiscal year ending December 30, 2020. Further details around business performance will be shared during the first quarter earnings call.

Shake Shack drew down on its revolving credit facility of $50 million on March 24 to enhance financial flexibility. As of April 1, the company had $104 million in cash and marketable securities on hand, providing adequate liquidity for the foreseeable future.