Shake Shack slides 19% after saying its Grubhub partnership contributed to weak 3rd-quarter sales

• Shake Shack reported third-quarter earnings Monday that missed analyst expectations for same-store sales. The company said its transition to Grubhub as its only delivery partner contributed to the dip.
• Shares fell more than 19% on the news Tuesday, the largest single-day drop for Shake Shack.
• The company cautioned that there would be more volatility ahead due to the Grubhub transition, but said that it expects to see financial benefits over time.
• Watch Shake Shack trade live on Markets Insider.

Shares of Shake Shack tanked Tuesday morning, falling as much as 19.57% after the restaurant chain reported third-quarter earnings Monday that showed disappointing same-store sales, partially influenced by the company's partnership with Grubhub.

The fall is the largest single-day drop for Shake Shack, which went public in 2015.

"We believe the transition to GrubHub caused some noise in our Q3 numbers," said Shake Shack's CEO Randy Garutti on a call with analysts Monday. The transition will "certainly have an impact through the fourth quarter and into next year."

Here's what the company reported, versus what analysts surveyed by Bloomberg expected:

• Earnings per share: 26 cents, adjusted, versus 20 cents (expected)
• Revenue: $157.8 million, versus $157.9 million (expected)
• Same-store sales: +2%, versus +2.9% (expected)

Shake Shack announced that it would start using Grubhub as its only delivery service at the end of the second quarter. In the third quarter, the company began removing itself from other delivery platforms such as DoorDash, Postmates, and Caviar.

During this process, Shake Shack expects delivery revenue to take a hit. It also lowered its guidance for same-store sales for the full year 2019 to 1.5% from 2% because of the transition.

"With the uncertainty around the short- to mid-term financial impact of our delivery transition, there remains more inherent risk in our fourth-quarter performance than would typically be the case at this stage in the year," said Tara Comonte, Shake Shack's chief financial officer, during the company's earnings call.

Still, the company expects to see a boost from the partnership with Grubhub over time.

"We'll gradually see some financial benefit as our new economic terms with Grub start flowing through our financials," Comonte said.

Shake Shack is up 85% year-to-date, through Monday's close.