(Bloomberg) -- Shake Shack Inc. shares surged after the burger chain forecast that for the first time since 2017 it will generate positive free cash flow on an annual basis.
The company said it will achieve this because of revenue gains and decreased costs for opening restaurants.
The chain also reported same-store sales increased 4% in the second quarter, topping the average of analyst estimates. That performance stands out amid weakening results at other burger chains, including Wendy’s Co. and McDonald’s Corp.
Shake Shack has also kept outperforming as competitors pitch more deals — including McDonald’s new $5 value meal — as a way to lure customers.
“Pricing is not a way to drive sales,” Shake Shack’s Chief Executive Officer Rob Lynch said on a call with analysts. Using other methods, including loyalty programs, is a better strategy, he said. Shake Shack has been able to “not just hang on during $5 meal deals, but actually thrive.”
Under Lynch, who started in May, the company has been working to to rebuild profits that took a hit during the pandemic partly because of the chain’s concentration of stores in city centers.
Shake Shack’s stock jumped 18%, the biggest intraday gain since February. The stock had gained 18% this year through Wednesday.
--With assistance from Daniela Sirtori.
(Updates shares in final paragraph.)
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