Shake Shack to close 9 underperforming locations

By Dean Seal

Shake Shack (SHAK) said it was closing nine company-owned restaurants in California, Texas and Ohio that were underperforming and, in some cases, cannibalizing sales from other locations.

The burger chain said Tuesday that the closings were expected to optimize Shake Shack's footprint in those states and maximize profitable growth. The company reaffirmed its financial guidance for the year and its plans for future store openings.

The closures came after an evaluation of Shake Shack's portfolio that found the locations were underperforming because of changes in the trade area, and that they sometimes hurt nearby Shake Shacks, the New York company said.

"These Shacks are not projected to provide acceptable returns in the foreseeable future," the company said.

The company said it didn't plan to close any additional locations based on its latest portfolio review.

Management at the closing Shake Shack restaurants will be offered positions in nearby locations, while hourly workers will be eligible for rehire at other locations, the company said. Employees who don't accept a transfer will be offered up to 60 days pay.

The company said it expects to record pretax charges of $28 million to $30 million in the fiscal third quarter ending Sept. 25 as a result of the closures. Cash costs are projected to reach $14 million to $15.2 million, most of which is tied to lease terminations and future lease obligations.

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08-27-24 1737ET

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