Shake Shack store closures have mixed read-through, says Deutsche Bank

Deutsche Bank analyst Lauren Silberman keeps a Hold rating on Shake Shack with a $115 price target after the company announced plans to close nine underperforming company-operated stores by the end of Q3 across California, Ohio and Texas. The company reiterated all aspects of its Q3 and 2024 guidance, suggesting these underperforming stores generate below system-level average unit volumes and margins, the analyst tells investors in a research note. The firm views the read-through on the closures as mixed. On one hand, the closures are unprecedented for Shake Shack, but the company has previously signaled some headwinds from select sub-optimal trade area selections and in-fill pressures in specific markets, and it is common for new CEOs to take the opportunity to reassess and optimize portfolios, contends Deutsche Bank.