UNITED STATES
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FORM
CURRENT REPORT
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Item 2.05 Costs Associated with Exit or Disposal Activities.
Shack Inc. (the “Company”) regularly evaluates its portfolio of Company-owned and operated Shack restaurants (“Shacks”). As a result, it has identified locations that are underperforming at the Shack level in part due to changes in the trade area and, in some cases, are negatively impacting other Shacks within their proximity by cannibalizing sales. These Shacks are not projected to provide acceptable returns in the foreseeable future.
As a result of this evaluation, the Company has determined to close nine Company-owned and operated Shacks in California, Ohio and Texas. These closings are expected to optimize the Company’s footprint in these states and maximize profitable growth moving forward, and are not anticipated to impact the Company’s plans to open additional Shacks in these states. The Company currently does not anticipate closing any additional Shacks based on this evaluation for the foreseeable future.
Management in these Shacks will be offered a position in neighboring Shacks and hourly team members will be eligible for rehire at other Shacks, and hourly team members (and any managers who do not accept a transfer) will receive up to 60 days pay. This Shack closure plan was communicated to impacted employees on August 27, 2024 and is expected to be completed by September 25, 2024, subject to finalizing third-party agreements and other contingencies.
The Company expects to record cumulative pretax charges in a range of approximately $28.0 to $30.0 million during the third quarter ending September 25, 2024 as a result of these Shack closures. Cash costs are expected to be in a range of approximately $14.0 to $15.2 million. Included in these cash costs are pretax charges currently expected to be in a range of $12.8 to $13.6 million related to lease termination costs and future lease obligations; employee-related costs currently expected to be in a range of approximately $1.0 to $1.2 million; and other cash costs currently expected to be in a range of approximately $0.2 to $0.4 million, which will primarily consist of charges related to Shack-related closing expenses. Non-cash costs are expected to be in a range of approximately $14.0 to $14.8 million and primarily consist of asset impairment, accelerated depreciation, and asset write-offs.
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Item 2.06 Material Impairments.
The information set forth in Item 2.05 is incorporated by reference into this Item 2.06.
Item 7.01 Regulation FD Disclosure.
The Company’s overall growth and strategic priorities have not changed as a result of the announced Shack closures, including our previously disclosed expectations for Shack openings in FY 2024 and beyond. The Company is reaffirming its fiscal third quarter 2024 and full-year 2024 guidance as set forth in the Shareholder Letter dated August 1, 2024 furnished to the Securities and Exchange Commission as Exhibit 99.2 to the Current Report on Form 8-K on August 1, 2024.
Forward Looking Statements
This Current Report on Form 8-K contains “forward-looking statements” with expectations concerning, among other things, the expected timing, benefits and costs associated with the Company’s closure plan described in this report. Forward-looking statements include predictions of future results or activities and may contain the words “expect,” “believe,” “will,” “can,” “anticipate,” “project,” “should,” or words or phrases of similar meaning. The Company’s actual results or activities may differ materially from these predictions. The Company’s future results could be affected by a variety of factors and other risks and uncertainties described in its reports and other documents filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date of this report, and the Company undertakes no obligation to publicly update them except as required by law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Shake Shack Inc. | |||
| (Registrant) | |||
| Dated: August 27, 2024 | By: | /s/ Ronald Palmese, Jr. | |
| Ronald Palmese, Jr. | |||
| Chief Legal Officer | |||