Shake Shack’s sales have surged this year, boosting its stock price. Meanwhile, some of its burger-selling rivals like McDonald’s, Wendy’s, and Burger King have struggled with customers pulling back on spending.
Shake Shack reported earlier this week that its sales jumped 16% in the second quarter from a year earlier, marking another strong quarter for the burger chain after posting a double-digit jump in sales in the first quarter.
In contrast, McDonald’s reported last week that its same-store sales dropped year-over-year. The company noted it has continued to see a pullback in discretionary spending by consumers.
The fast-food giant and others have leaned into value in recent months to boost sales, with some success. Wendy’s recently reported a small increase in same-store sales, though its revenue missed estimates. Meanwhile, Burger King’s results have started to improve amid a turnaround campaign involving advertising and restaurant renovations.
Value Proposition of Dining Out Shifts in Shake Shack’s Favor
Analysts have suggested that fast-casual chains with traditionally higher prices, like Shake Shack, Chipotle, and Sweetgreen, are benefitting from improving perceptions of the value of their offerings. This is happening after a faster rise in fast-food prices narrowed the price gap between the two categories.
That trend could persist, with Baird analysts writing Thursday that Shake Shack reported positive same-store sales and foot traffic for the start of the third quarter in July, despite “extreme discounting activity” by competitors like McDonald’s.
Shares of Shake Shack soared on its strong earnings results earlier in the week. However, a weaker-than-expected jobs report and concerns about the economy drove a broad-based sell-off on Friday, sending Shake Shack shares nearly 6% lower in a single session.
Despite Friday’s losses, Shake Shack shares have gained 30% from the start of the year through Friday’s close. In contrast, shares of McDonald’s have lost close to 7% over the same period, while Burger King’s parent, Restaurant Brands International, fell 10%, and Wendy’s dropped over 13%.