(Bloomberg) -- Weather, war, volatile exchange rates -- companies have long blamed factors beyond their control for shrinking profits and slowing sales.
The hot new scapegoat? Remote workers.
Shake Shack Inc. said Thursday the pace of workers returning to offices in cities including New York stalled last quarter, causing the company’s sales growth to trail Wall Street’s forecasts. Its shares briefly fell by the most since the early days of the pandemic.
The upscale burger chain isn’t alone -- a scan of recent earnings calls shows companies of all stripes attributing lackluster performance to the sluggish rate of returning to offices, known as RTO. It isn’t just landlords bemoaning their fate: Financial, consumer and even insurance companies have called out slow RTO.
Clorox Co., the maker of disinfecting wipes and bleach whose sales soared during the pandemic, said “low office occupancy rates” hurt demand for its commercial-grade cleaners. Kimberly-Clark Corp., which makes tissues and toilet paper for office washrooms, also suffered, leading Chief Executive Officer Michael Hsu to say, “I don’t think all that office demand is coming back in a minute.”
Cubicles might not fill up for quite a while. Office occupancy across 10 major metro areas averaged 44% in the week ended July 27, according to data from security company Kastle Systems. And it’s consistently below that level in big office hubs like New York and San Francisco.
Nicholas Bloom, an economics professor at Stanford University who conducts a monthly survey of work-from-home patterns, has found that cities are experiencing a “donut effect,” where central business districts get hollowed out while suburbs get denser.
Average New York City office workers intend to reduce their time at their desks by nearly half and slash annual spending in the city by $6,730, Bloom estimates, from an estimated $12,561 before the pandemic.
Raj Choudhury, a professor at Harvard Business School who also studies remote work, expects these patterns to continue, which translates into fewer orders of double ShackBurgers, fries and milkshakes.
Shake Shack said lunchtime traffic is still “well below” 2019 levels in cities such as New York, where it’s down 40%. Asked when it might rebound, Chief Executive Officer Randy Garutti essentially shrugged.
Read more: Return-to-office plans unravel as workers rebel in tight market
“I don’t have the crystal ball to tell you where it’s going to land,” he said Thursday. “I don’t think anybody knows where this is going to go.”
The uncertainty isn’t limited to burgers. Progressive Corp. Chief Executive Officer Tricia Griffith is eyeballing office-occupancy levels, which reflect how many people are driving to work in cars insured by her company.
“I talked to a lot of my peers in other industries and there is a lot less people coming in,” she said Aug. 3. “Could that change after the summer, we don’t know.”
Nearly two out of three organizations polled by consultant Gartner Inc. last month said workers want more flexibility to reduce commuting costs, up from about one out of three who said so in June.
Credit-card issuer Visa said that while affluent shoppers are spending big on travel and restaurants again, smaller purchases often made by people during their daily commutes haven’t returned to pre-pandemic levels.
Fewer workers in the office also means fewer workers’ compensation insurance claims, Verisk Analytics Inc. said Aug. 3, which weakened its transaction-based revenue.
“That’s a function of you working at home,” said Verisk Chief Operating Officer Mark Acquillare. “There’s not a lot of slip and falls when you’re sitting in your living room.”
©2022 Bloomberg L.P.