Shake Shack shares up after better-than-expected Q2 sales

(Reuters) – Shake Shack (NYSE:) shares jumped around 16% after topping market expectations for second-quarter same-store sales, as demand for its burgers and chicken sandwiches stayed robust even as competition intensifies for value meals in the United States.

The fast-food chain also expects to achieve positive free cash flow for 2024, which would be a first since 2017.

Shake Shack, under new chief Rob Lynch, has invested in improving in-store experience for customers with efforts to reduce check-out time at its kiosks to help sales.

The company said it reduced average wait times in the second quarter on a sequential basis, and improved order accuracy year-over-year.

Fast-food giant McDonald’s (NYSE:) and coffee chain Starbucks (NASDAQ:) also said earlier in the week they had invested in improving customer experience at their stores in order to boost sales at a time when budget-conscious consumers in the U.S. are avoiding spending at restaurants.

Digital promotions and a special summer menu also came in handy as Shack went up against stiff competition from peers such as Wendy’s (NASDAQ:), McDonald’s and Burger King offering limited deals and discounts to invigorate demand.

While traffic at Shake Shack declined 0.8% in the quarter ended June 26, July traffic levels have turned positive, the company said.

Shake Shack’s traffic improvement in the current quarter was achieved without a “material step-up in digital discounts”, noted TD Cowen analyst Andrew Charles.

Its second-quarter same-store sales were up 4%, surpassing expectations of a rise of 3.3%, as per LSEG data.

Quarterly adjusted profit was also in line with expectations, with restaurant-level profit margin up 100 basis points compared with last year.