Shake Shack Climbs After Analyst Says New Locations Are Thriving

(Bloomberg) -- Shake Shack Inc., the New York-based burger and milkshake chain, rose the most in four months after an analyst upgraded the stock, saying new locations are doing well.

The gain came after the shares plunged in late trading Thursday, hurt by a surprise decline in same-store sales. The company blamed the sluggish sales on cold weather in the Northeast, where its restaurants are concentrated.

But the same-store benchmark only measures locations that have been open for at least two years, and that's a small portion of Shake Shack's fleet. Only 32 of its 127 restaurants fit that description. Newer restaurants, meanwhile, are opening with “very robust volumes,” said John Zolidis, an analyst at Buckingham Research Group. He raised his rating on the stock to buy from neutral.

The shares climbed as much as 8.2 percent to $35.85 in New York Friday. Shake Shack had dropped 7.5 percent this year through Thursday, compared with a 14 percent gain for the Standard & Poor's 500 Restaurants Index.

The company, founded by New York restaurateur Danny Meyer, posted a same-store sales drop of 2.5 percent on Thursday. Analysts had predicted a 0.2 percent gain, and the result jarred investors.

But Shake Shack total revenue came in a bit above analysts' estimates. The company reported sales of $76.7 million, topping the $74.7 million projection. Earnings amounted to 10 cents a share, excluding some items. Analysts had predicted 8 cents.

While Shake Shack also lowered its forecast for same-store sales this year, it raised its outlook for revenue to as much as $355 million. Its prior goal was $353 million, with analysts estimating $356.1 million.

--With assistance from Janet Freund

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Lisa Wolfson