Shake Shack surges as strong burger demand fuels quarterly beat

(Reuters) -Shares of Shake Shack soared 21% after the company topped market expectations for quarterly earnings on Thursday, propelled by higher prices and consumers' strong appetite for the restaurant chain's gourmet burgers and spicy fries.

While the restaurant industry has been reeling under a demand slowdown spurred by cautious consumer spending, Shake Shack's relatively upscale offerings and initiatives to improve service and speed at its restaurants have helped buck the trend.

Fast-food industry traffic declined 1.6% in the fourth quarter, according to data from Placer.ai, with major names including McDonald's and Taco Bell also seeing weaker store visits.

But traffic at Shake Shack jumped about 15% in October and held strong throughout the period to round out 2023 with a 24% surge in December, data showed.

Shake Shack has banked on new launches such as its spicy burgers and crinkle-cut fries to capture customers, while limited-time promotions including the Trolls-themed shakes during the quarter also helped.

"We had a good limited-time offer ... we had a lot of that advertising targeting various different promos. It's been a really well-played playbook by our marketing team ... So that was really a good part of Q4," CEO Randy Garutti said on an earnings call.

Its shares, which touched a more than two-year high, were last trading at $94.50. The stock has gained about 33% over the past 12 months.

Shake Shack projected full-year same-store sales growth in the low-single-digit percentage range, while analysts expect a 2.6% rise, per LSEG data.

"For Shake Shack, quality and value,... is sustaining organic sales growth despite a challenging, competitive (quick-service restaurant) sector," said Northcoast Research analyst Jim Sanderson.

Shake Shack's total revenue rose 20% to $286.2 million for the quarter ended Dec. 27, above estimates of $280.3 million.

(Reporting by Deborah Sophia in Bengaluru; Editing by Krishna Chandra Eluri)