Roadside burger chain Shake Shack (NYSE: SHAK) updated investors on the effect of the COVID-19 pandemic on its business on Thursday, while also providing details on its immediate financial condition.
The company noted that nine of its company-operated units are completely closed (out of 280 stores), while the rest are "relying solely on to-go and delivery orders." Excluding the temporarily shuttered units, domestic restaurants are seeing sales declines of 50% to 90% and are averaging a 70% drop in business against the same period last year. Shake Shack reported that its international licensed stores are also experiencing dramatic sales erosion.
For now, liquidity doesn't appear to be an issue. Management drew down the company's $50 million revolving credit facility last week. As of April 1, Shake Shack had $104 million in available cash and marketable securities, which it believes will "[provide] adequate liquidity for the foreseeable future."
The company noted that it has furloughed or laid off 20% of its corporate employees while reducing corporate salaries and instituting a companywide hiring freeze. It's even deferred cash-compensation payments to its board of directors.
The organization has also undertaken "significant reductions" in store staffing and store-level operating expenses. Shake Shack is currently evaluating store hours and identifying locations where sales levels don't justify continued operation.
Finally, the fast-casual chain has halted all construction, shelved plans to open any new locations at present, and placed a hold on non-critical capital expenditures. In sum, the "Shack" has gone into a fully defensive posture in an attempt to outlast the COVID-19 pandemic.
Shares gained more than 1% in Thursday's trading session.
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