Shake Shack Is Still Struggling to Get Its Sales Back

Just like anyone born and raised in New York City, Shake Shack needs the urban hustle and bustle to thrive. Unfortunately, the chain is still waiting for cities to get back to the pre-pandemic normal as its latest earnings fall short of expectations.

According to the company's second-quarter earnings call, Shake Shack missed earnings estimates and reported June sales that were below expectations.

"While our sales were tracking in-line with our expectations for April and May, June sales were below our expectations," the chain said in a letter to investors. "We felt some impact of shifts in consumer patterns amidst elevated inflationary pressures. Additionally, key urban recovery trends broadly held, but in some cases reversed."

Shake Shack Is Launching Two Major New Items Today

Shake Shack's main issue has been the sluggish recovery of urban life. Office-goers and tourists, which made up a significant portion of the customer base during weekdays, have been slow to return in pre-pandemic droves. The chain's New York, Washington, D.C., and Boston locations, while growing same-store sales by 25% over the same time period in 2021, were still down significantly compared to 2019.

"Forty percent of our lunch guests just aren't here yet," said CEO Randy Garutti. "And you look at whether it's subway, mobility, tourism and other things, they just haven't returned to where they were."

On the other hand, the company sees drive-thrus as its saving grace. The six drive-thru locations it currently operates have been generating higher monthly sales than an average Shake Shack during this quarter, and the chain plans to have about 20 to 25 open by the end of 2023. This is also a promising avenue for the brand as it tries to break into suburban markets to reach a different customer base.

Overall, Shake Shack's same-store sales were up by over 10% year over year, signaling a slow but steady rebound for a chain that is currently at the mercy of macrotrends.