Cava Group Inc. shares tumbled more than 20% in after-hours trading on Tuesday after the fast-casual restaurant chain reduced its full-year same-store sales growth forecast, following weaker-than-expected results in the second quarter.
The company now expects same-store sales growth between 4% and 6% for 2024, down from its earlier projection of 6% to 8%. This revision adds to an already challenging year for Cava’s stock, which has fallen 40% year-to-date, including the latest drop.
Q2 Earnings vs. Wall Street Expectations
According to data from LSEG, Cava’s performance compared to analyst estimates was:
- Earnings per share: $0.16 vs. $0.13 expected
- Revenue: $280.6 million vs. $285.6 million expected
Net income for the quarter came in at $18.4 million (or $0.16 per share), down from $19.7 million ($0.17 per share) in the same period last year.
Despite opening new locations, which boosted net restaurant sales by 20% to $278.2 million, same-store sales only grew 2.1%, well below the 6.1% growth forecasted by Wall Street.
Traffic Growth Stalls
Quarterly customer traffic was reported as “roughly flat,” a stark contrast to the 14.4% same-store sales growth and nearly double-digit traffic increase seen a year ago. CEO Brett Schulman previously attributed last year’s surge to the successful launch of grilled steak, which helped draw repeat customers.
CFO Tricia Tolivar noted that while Q2 began with strong momentum, sales growth slowed after the one-year anniversary of the grilled steak launch.
Industry-Wide Slowdown
Cava is not alone in facing a slowdown. Rival chains have also reported disappointing results this quarter:
- Chipotle Mexican Grill saw same-store sales drop 4%.
- Sweetgreen slashed its outlook for the second consecutive quarter, causing its shares to slide.
Full-Year Outlook
Despite the sales forecast cut, Cava reaffirmed other financial targets, including:
- Adjusted EBITDA: $152 million to $159 million
- Restaurant-level profit margins: 24.8% to 25.2%
Investment in Automation
In a strategic move, Cava announced participation in a $25 million Series B funding round for Hyphen, a company that automates plate and bowl portioning. Chipotle, an existing investor in Hyphen, led the round.
Schulman said piloting Hyphen’s automated digital makeline could help improve order accuracy, speed up service during peak digital hours, and reduce complexity for staff.