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Steak n Shake shares battered after report

November 16, 2007

Grim results in Steak n Shake Co.'s fiscal fourth quarter prompted a sell-off of its stock this morning.

Shares in the Indianapolis-based restaurant chain dropped nearly 14 percent before staging a small comeback to trade near $11.65-still 9 percent below yesterday's close.

After the market closed yesterday, the company reported that same-store sales fell 3.9 percent in the quarter ended Sept. 26. Revenue dropped to $151.1 million compared with $152 million during the same period in 2006.

The company's outlook for 2008 isn't much better.

The company forecast a decline in same-store sales of 1 percent to 5 percent in fiscal 2008, due in large part to the rising cost of dairy and minimum-wage increases.

Steak n Shake officials said in a conference call with analysts that they plan to return the company to its roots-hamburgers and milk shakes.

Diversifying the menu with chicken and other healthier entrees was not a mistake, they said, but diverting marketing efforts toward the new fare and not continuing to focus on core products was a big mistake.

As a result, restaurants weren't even clean, said Chairman and Interim CEO Alan Gilman.

Gilman's portrayal of the company's woes was so plain-spoken that C.L. King & Associates analyst Michael Gallo thanked him for his "candor."
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