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

(Reuters) - Shake Shack 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 and coffee chain Starbucks 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, 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.

(Reporting by Juveria Tabassum; Editing by Krishna Chandra Eluri)

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