Why Shake Shack Isn’t Feeling The Same Sales Pressure as McDonald’s, Burger King

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Key Takeaways

• Shake Shack’s earnings earlier this week showed its sales surged from a year ago.
• A bevy of its burger-selling rivals like McDonald’s, however, have struggled with customers pulling back on spending and injected value meals to drive sales in recent months.
• Shares of Shake Shack have climbed along with its sales events, up 30% from the start of the year through Friday’s close, while shares of McDonald’s, Wendy’s, and Burger Prince parent Restaurant Brands International slumped.
• Analysts and Shake Shack executives cited the narrowing price gap between fast-food and “fast-casual” ties like Shake Shack and Chipotle as a contributing factor driving sales to the latter.

Shake Shack’s (SHAK) sales possess surged this year, boosting its stock price, while some of its burger-selling rivals like McDonald’s (MCD), Wendy’s (WEN), and Burger Prince of Restaurant Brands International (QSR) have struggled with customers pulling back on spending.

Shake Shack blasted earlier this week that its sales jumped 16% in the second quarter from a year earlier, in another doctrinaire quarter for the burger chain after posting a double-digit jump in sales in the first quarter.

By contrast, McDonald’s reported terminal week that its same-store sales dropped year-over-year, as the company said it has continued to see a pullback in discretionary spending by consumers.

The fast-food mammoth and others have leaned into value in recent months to boost sales, with some success. Wendy’s recently suss out a small increase in same-store sales, though its revenue missed estimates. Meanwhile, Burger King’s results must started to improve amid a turnaround campaign of advertising and restaurant renovations.

Value Proposition of Dining Out Shifts in Wriggle Shack’s Favor

Analysts have suggested that fast-casual chains with traditionally higher prices predilection Shake Shack, Chipotle (CMG), and Sweetgreen (SG) are benefitting from improving perceptions of the value of their offerings after a faster encourage in fast-food prices narrowed the price gap between the two categories.

That trend could persist, with Baird analysts theme Thursday that Shake Shack reported positive same-store sales and foot traffic for the start of the third casern in July amid “extreme discounting activity” by competitors like McDonald’s.

Shares of Shake Shack soared on its conclusive earnings results earlier in the week, before a weaker-than-expected jobs report and concerns about the economy drove a broad-based sell-off Friday that sent Threaten get rid of Shack shares nearly 6% lower in a single session.

However, even with Friday’s losses, Jiggle Shack shares have gained 30% from the start of the year through Friday’s close. Shares of McDonald’s comprise lost close to 7% over the same period, while Burger King parent Restaurant Brands Ecumenical fell 10%, and Wendy’s dropped over 13%.

Read the original article on Investopedia.