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Shake Shack Is The Latest Victim Of The Slow Office Return

Shake Shack on 53rd Street and Seventh Avenue in New York City

Shake Shack is blaming its lagging sales on the fact workers are not returning to work en masse, particularly in the major cities where the chain makes most of its money.

Analysts had expected the company would see revenue hit $238.4M last quarter, but on Thursday Shake Shack reported $230.8M in revenue, Bloomberg reported. Its stock price fell 15% after the report. 

Company heads revised forecasts down, while casting doubt on robust recovery in urban areas. Shake Shack's lunchtime traffic is still below 2019 numbers,  especially in New York City, where it is down 40%. 

“There is still a long way to go,” Shake Shack CEO Randy Garutti said on the company's earnings call, per the publication. He added he is “cautious” about the timing of a “full urban recovery.”

Shake Shack is forecasting the third quarter’s revenue to be $226.5M, well below analysts’ average estimate of $245.2M. Prices will be raised by 7%, the company said, as it looks to recoup cost increases.

New York office occupancy is still hovering at 40%, according to Kastle System's latest data. Many office landlords and brokers predict a more healthy return after Labor Day.

The sluggish return is increasingly becoming more of an urban issue, as rural parts of the country have experienced a higher rate of returning workers. 

In cities with fewer than 300,000 people, the percentage of full-time, paid work-from-home days fell to 27% in the spring, down from 42% in October 2020, according to research led by economists Steven Davis, Nick Bloom and Jose Maria Barrero. However, of the 10 largest cities in the country, the share was at 38% in spring, down from 50%.

Shake Shack isn’t the only chain that relies on inner city foot traffic that has been hit hard by the fallout of remote work. Grab and go concept Pret A Manger was hit by multiple lawsuits from landlords over unpaid rent last year.