Cava Cuts Outlook on Weak Second Quarter as Consumers Face ‘Fog and Uncertainty’
The fast casual chain reported same-restaurant sales growth of 2.1%, well below analysts’ expectations
- Cava’s second-quarter same-restaurant sales grew 2.1%, below the 6.1% expected, due to flat customer traffic and weaker consumer sentiment.
- Cava lowered its full-year same-restaurant growth forecast to 4% to 6% from its previous 6% to 8% due to economic uncertainty.
- Cava is investing $10 million in Hyphen, joining Chipotle in funding automated food-production, while closely monitoring rising beef prices.
Cava reported second-quarter same-restaurant sales well below analysts’ expectations and lowered its full-year guidance for the metric, citing weaker consumer sentiment.
The Mediterranean fast casual restaurant reported same-restaurant sales growth of 2.1%, well below analysts’ expectations of 6.1%, according to FactSet. The company said the growth came primarily from price increases and product mix with customer traffic flat.
Shares plunged 22%, to $65.90, in after-hours trading.
Cava Chief Executive Brett Schulman said challenging comparisons to last year’s robust business contributed to the weaker same-restaurant sales, including when the chain launched grilled steak as a menu option nationwide. Deflated consumer sentiment also was a contributor, he said.
“The consumer isn’t as ebullient as they were last year,” Schulman said in an interview Tuesday. “They’re dealing with a lot of headwinds, a lot of fog and uncertainty.”
Cava lowered its full-year same-restaurant growth guidance to 4% to 6% from its previous forecast of 6% to 8%. Wall Street expects 7.3%.
Earlier this month, Sweetgreen posted a 7.6% decline in second-quarter same-store sales, citing diminished consumer spending particularly in its largest urban markets. In July, Chipotle reported a 4% decline in second-quarter same-store sales and said it was seeing declining consumer confidence.
Schulman said sales gained more momentum as the second quarter concluded, and Cava’s consumers continue to buy premium ingredients instead of trading down. The company doesn’t plan to raise menu prices for the rest of the year, he said.
Schulman said the company is watching the beef market amid a surge in prices, but said most of its beef is priced into contracts for now.
The company is also making what could become a $10 million investment in automated-kitchen company Hyphen to help advance automated food-production tools. Cava’s investment is part of a Series B funding round that also includes burrito chain Chipotle, according to Hyphen. Schulman said the company is exploring Hyphen’s automated bowl-building technology for the chain’s digital, to-go orders.
A Chipotle spokeswoman said the company made a $15 million investment in Hyphen in July 2024 through its Cultivate Next Fund.
On Tuesday, Cava reported second-quarter net income of $18.4 million, or 16 cents a share, down from $19.7 million, or 17 cents a share, the year prior.
Adjusted earnings were also 16 cents a share, beating the 13 cents expected by analysts.
Revenue was $280.6 million, up from $233.5 million the previous year. Wall Street expected $285.5 million. Top-line gains were fueled by 75 net new restaurant openings during or after the second quarter of last year.