SHAK Gets Cooked By Inflation

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Popular burger chain Shake Shack (SHAK) reported 4Q21 earnings Thursday afternoon. While the quarter itself looked fine to me with Same Shack Sales +20.8% vs 2020 and +2.2% vs 2019, I think it’s their margin guidance that is concerning investors.

SHAK is guiding 1Q22 Shack-level operating profit margin to 11%-14% compared to 16.7% for all of 2021. That’s going to cause quite a hit to profitability. As a result, SHAK shares are currently -11% in the after hours to ~$67.

However, SHAK will be raising prices late in 1Q22 to partially offset margin pressure. In addition, SHAK food is delicious IMO, the brand is strong and I’m a fan of Founder and Chairman of the Board Danny Meyer. Below $60 SHAK shares start to look tasty to me.

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