Shake Shack restaurant sales disappoint, stock drops

(Reuters) - Shake Shack Inc SHAK.N, known for indulgent antibiotic-free hamburgers, crinkle-cut fries and frozen custard shakes, on Wednesday said quarterly sales growth at established restaurants had slowed more than analysts expected, news that sent shares tumbling.

A customer holds a bag full of food inside of a Shake Shack store in New York January 30, 2015. REUTERS/Lucas Jackson

Shake Shack stock slid 8.5 percent to $37.40 in extended trading after the chain said closely watched same-restaurant sales were up 4.5 percent during the second quarter. Analysts had expected a 5.4 percent rise, according to research firm Consensus Metrix.

Those sales were up 9.9 percent in the first quarter.

Growth expectations have been sky-high for Shake Shack, which some proponents predicted could match the once red-hot growth of Chipotle Mexican Grill Inc CMG.N. The burrito chain hit the skids last year when a string of food safety lapses hammered sales and sent its stock plunging.

Shake Shack restaurants, particularly in Manhattan, often have long lines. Critics of the company worry that it cannot generate that sort of demand in other locations.

Traffic to U.S. fast-food chains has been weak due in part to competition from grocery stores, which have been raising food prices at a slower pace than restaurants.

Shake Shack Inc had second-quarter net income of $3.3 million, or 14 cents per share, up from net income of $1.1 million, or 8 cents per share, a year earlier.

Adjusted earnings were also 14 cents per share, topping analysts’ average estimate by a penny, according to Thomson Reuters I/B/E/S.

Total revenue rose 37 percent to $66.5 million.

Shake Shack shares debuted in January 2015 on the New York Stock Exchange at $21 a share and briefly topped $100 a share in May 2015. They have underperformed the S&P 500 since November.

Reporting by Lisa Baertlein in Los Angeles; Editing by Marguerita Choy, Jonathan Oatis and David Gregorio