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Why Habit Restaurants Inc. Stock Plunged Today

What happened

It was another rough quarter for fast-casual burger chain Habit Restaurants Inc. (NASDAQ: HABT), which fell sharply after reporting middling earnings last night.

As of 12:09 p.m. EDT, shares were down 14.2%.

Image source: Habit Restaurants.

So what

Comparable sales at company-operated locations were essentially flat, rising 0.1%, as overall revenue increased 17.2% to $83.3 million. That result, however, was short of estimates at $84 million.

On the bottom line, earnings per share slipped from $0.09 to $0.06, matching expectations. Expenses rose faster than revenue at the burger chain as food costs were up 180 basis points to 31.6% of revenue and labor ticked up 30 basis points to 32.6%. Increasing labor expenses are likely to continue being as problem as most of the company's restaurants are located in California where the minimum wage is set to steadily increase to $15 a hour.

CEO Russ Bendel noted a "choppy consumer environment" during the period but said the company was pleased with the results.

Now what 

Just as there was little for investors to cheer in the quarter's results, Habit's guidance was also uninspiring. The company sees full-year revenue of $335 million-$338 million, representing 18.6% growth at the midpoint of the range and down from a previous range of $338 million-$342 million. That was also below the analyst consensus at $338.8 million.

The company also lowered comparable sales guidance from 2% to flat to 1%, and tightened its restaurant-level operating margin expectations.

Habit has consistently disappointed since its 2014 IPO, as the stock is now trading near all-time lows and has lost more than half of its value since its debut. Unless the company can convert new-store revenue into profits, the stock is likely to remain mired in the teens.

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Jeremy Bowman owns shares of Habit Restaurants. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.