Personal Finance

Why Shake Shack Stock Fell 11% in February

^SPX Chart

What happened

Shares of "better burger" chain Shake Shack (NYSE: SHAK) lost 11% last month, according to data provided by S&P Global Market Intelligence , trailing the broader market's 4% decline.

^SPX data by YCharts .

The drop left shareholders just slightly ahead of the S&P 500 over the past year.

So what

Investors weren't excited about the chain's fourth-quarter earnings numbers , which were released in the middle of the month. In that report, Shack Shack revealed a 31% sales spike that was driven almost entirely by its growing restaurant footprint.

Two plates with burgers and fries on them, sitting on a table with a glass of water and a glass of iced tea, next to a fork

Image source: Getty Images.

Revenue at existing locations ticked higher by less than 1% for the quarter and dipped by 1% for the full year to significantly lag established rivals, including McDonald's .

Now what

CEO Randy Garutti and his team have warned investors to expect profitability and average sales volumes to continue falling over the coming quarters as Shake Shack diversifies its geographic base to include less densely populated areas than its current New York metropolitan focus. Yet the company still believes it can eventually reach 450 restaurants across the country, and management's plans call for that base to roughly double to 200 locations between now and 2020.

10 stocks we like better than Shake Shack

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Shake Shack wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 5, 2018

Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool is short shares of Shake Shack. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

SHAK

Other Topics

Stocks

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More