Cava's shares crater after first annual sales growth target cut since IPO
An uncertain macroeconomic environment has forced consumers to opt for more affordable meals at home, dampening demand for dining out over the last several months, impacting the results of other restaurant chains, including burrito giant Chipotle Mexican Grill (CMG.N), opens new tab and salad-focused Sweetgreen (SG.N), opens new tab.
Cava had reported a double-digit rise in same-store sales for the last four quarters, helped by demand for its pita wraps and salad bowls. However, customer traffic remained almost flat in the second quarter, with its same-store sales rising 2.1%, below estimates of 6.47%, according to data compiled by LSEG.
Cava now expects full-year same-restaurant sales growth between 4% and 6%, compared with its prior target of 6% to 8%.
Consumers were less confident than they were a year ago as economic uncertainties weighed, which led to weaker traffic in June and early July, but visits have improved since, said Brett Schulman, Cava's co-founder and CEO.
Cava is opening more stores to capitalize on the resilient demand for its menu items and has raised its target for annual new restaurant openings to a range of 68 to 70, from 64 to 68 expected earlier.
It also maintained targets for annual profit margin and core profit.
The company does not plan to increase prices and would try to absorb any inflationary costs from tariffs, Schulman added.
"As we've seen the last few weeks, I don't know that these recent announcements (on tariffs) will be the same announcements in a couple of weeks. So we're staying nimble," he said.
The company reported a profit of 16 cents per share for the quarter ended July 13, compared with estimates of 13 cents apiece.
As of last close, Cava's shares have more than doubled to $84.50 since its blockbuster IPO in June 2023.
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