SHAK Activist deck
Shake Shack (SHAK) is a Hedgeye Restaurants Best Idea Short.
Next Wednesday at 2 PM we will be hosting a SHAK activist black book going through our understanding of the current setup for the company and why we are short. What is Engaged Capital end game? The activist said they could double EBITDA in three years, instead they settled and did not get control of the company. Engaged had the option to participate in a proxy battle and request that the shareholders elect three new directors to replace the CEO (which needs to be done) and three other current directors. Even though Engaged or the new board would not have had the authority to veto Danny Meyer and his current directors, it would have sent a clear message to them that the shareholders desired change. Instead, Engaged agreed to appoint one director, who was not even one of the three they had proposed initially, and a second who would be chosen later also unlikely to be one of the three the firm had initially suggested.
This deal it struck essentially makes no changes and denies Engaged any additional authority to implement the reforms necessary to increase shareholder value. Highlighting the issues is one thing but solving them is quite another. The current management team has total control of the future of SHAK.
In the end what did they accomplish, except highlighting that SHAK is broken?
EVENT DETAILS:
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Online Grocery Slows
Brick Meets Click/Mercatus Grocery Shopping Survey May 30-31, 2023
The U.S. online grocery market finished May with $6.9 billion in total sales, down 2.8% compared to last year’s $7.2 billion, while Pickup defied the downward trend, capturing its largest sales share to date, according to the latest monthly. The dip in overall sales for May 2023 was driven by a combination of fewer households buying groceries online during the month than last year and a decline in the average number of orders placed by active shoppers. "The decline in order frequency results from the growing number of MAUs who placed only one eGrocery order during the month. This accounted for one-third of all active customers and caused headwinds across all the segments," said David Bishop, Partner of Brick Meets Click.
- Pickup recorded the only year-over-year growth and captured its largest share of sales to date, climbing 9.1% and contributing 50.7% of total eGrocery sales.
- Ship-to-Home fell 17.0% versus last year and accounted for 16.8% of eGrocery sales during the month, continuing to post weaker results each year since 2020.
- Delivery declined 11.7% compared to last year, and its dollar share dropped nearly two points to 32.5% for the month.
- Fewer households buying groceries online
- Lower order frequency by active shoppers
- Higher spending per order for Pickup and Delivery
- Repeat intent scores trended down, especially for Grocery
