Hamburger chain
Shake Shack
is about to get involved in proxy fight for three board seats from activist investor Engaged Capital.
The hedge fund has a roughly 6.6% stake in
Shake Shack
(ticker: SHAK) and will push for changes to bolster the share price which is roughly half of what it was at the end of 2021, The Wall Street Journal reported, citing unidentified people familiar with the matter.
Shake Shack (ticker: SHAK) shares climbed 5% on Monday to $68.50. They have gained 65% since Jan. 1.
“We are executing our strategic plan and making substantial operational and financial progress,” a Shake Shack spokesperson said in an email. “We are guiding full year 2023 to be a record year” for adjusted earnings “with expectations to return restaurant-level margins to 19% to 20%.”
The burger restaurant has been hurt by faster inflation, which has narrowed margins and prompted some consumers to cut back on spending. Engaged Capital has been in talks with the company for about six months but hasn’t been able to reach an agreement, the Journal said.
Analysts at Quo Vadis Capital removed their Sell rating on Shake Shack stock on the news. It had had that recommendation since Jan. 1, 2018, on concern that it was expanding into locations that would offer lower returns.
They now have no recommendation for the shares.
Engaged was founded in 2012 and manages about $1 billion. It previously pressured Jamba Juice’s parent to cut costs and was active at
Abercrombie & Fitch.
Write to Brian Swint at brian.swint@barrons.com
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