Latest news with #Brett Schulman
Yahoo
4 days ago
- Business
- Yahoo
Chipotle, Cava, and Sweetgreen results reveal a challenging summer for America's favorite office lunch spots
The second quarter was a tough period for some of America's favorite office lunch spots. Cava stock fell 16% on Wednesday after the company reported a larger-than-expected growth slowdown in the second quarter. Peers like Sweetgreen (SG) and Chipotle (CMG) both reported a second straight quarter of same-store sales declines in Q2 as demand for the trusty lunch bowls of choice for America's white-collar workforce waned. "We do see what I would classify as a macroeconomic fog around the consumer that they're trying to navigate through, and that has the consumer less front-footed, less ebullient, less forward-leaning than they were, say, this time last year," Cava CEO Brett Schulman told Yahoo Finance on Wednesday. Same-store sales at Cava rose 2.1% in the second quarter, a deceleration from the double-digit growth seen in each of the prior three quarters. Analysts had expected the company to post same-store sales closer to 6%. At Chipotle, same-store sales fell 4% in the second quarter, a larger drop than the 2.3% fall seen in the year's first quarter. CEO Scott Boatwright told investors it was due to "ongoing volatility in our trends in the consumer environment," which prompted the company to cut its full-year same-store sales forecast. Sweetgreen posted the steepest decline among the three, with same-store sales falling 7.6% in the quarter. Co-founder and CEO Jonathan Neman said it was "pretty obvious that the consumer is not in a great place overall" on a call with investors. The "pressure on consumer spending for many of our consumers has persisted longer than we expected," he added. Shares of the salad chain fell more than 20% on the news. Shares of Chipotle are down more than 25% this year, while Cava stock has lost over 35%. Sweetgreen stock has fallen nearly 70%. A challenge for these chains, in part, is lapping a strong 2024. "The backdrop of the restaurant environment has not changed that dramatically since last year," Bank of America analyst Sara Senatore said, noting these fast-casual players "can't take massive share every year." At Cava, Schulman said the current quarter has shown signs of a pickup in sales and that the company is "encouraged by what we're seeing in the exit rate of the quarter." Still, all three brands are considering a mix of more carefully curated menus and emphasizing value in an effort to win back sales at a time when consumers seem keen to scrutinize their budgets more closely. Cava, for instance, is introducing chicken shawarma in September and cinnamon sugar pita chips later on this year, as well as testing salmon. Sweetgreen announced plans to stop selling the ripple fries it rolled out just five months ago. "We've got to figure out a way we can communicate value for the consumer and showcase the value we are to QSR and fast casual," Chipotle's Boatwright said. "There's more work to do there, and that's what we'll lean into in the back half of the year." Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@ Click here for all of the latest retail stock news and events to better inform your investing strategy
Yahoo
5 days ago
- Business
- Yahoo
Cava stock plunges on Q2 results: CEO explains what happened
Cava (CAVA) shares are sinking after its Q2 same-store sales growth disappointed Wall Street. CEO Brett Schulman explains how difficult comparisons and the "macroeconomic fog around the consumer" impacted the quarter. He also discusses expansion, tariffs, and the company's investment in Hyphen, a foodservice automation platform. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts. Shares of Cava are sinking after the company's same-store sales came in below estimates in the second quarter. The fast casual restaurant also cut its full year sales growth forecast for the first time since going public as it navigates a quote "fluid macroeconomic environment." Joining me now, Brett Schulman, Cava CEO, as well as Yahoo Finance's senior reporter Brooke DiPalma who covers the consumer facing names for us. Uh, Brett, thanks for being here. Appreciate it. Thanks for having me. So, I guess I have to ask first of all, what this means, what this tells you about the consumer, is that higher income consumer in particular weakening? And we should say, you know, your comps didn't fall, they were up by 2.1%, but that was worse than estimated. So what is, what message is that telling you about consumer spending? Yeah, for us, uh, to Cava specifically, it was a combination of factors. We did have very significant, uh, challenging year-over-year comparisons. We launched steak, which was our most meaningful protein launch in a number of years last year in the same quarter, so that did create a more pronounced, uh, lap of the comp. And then we also saw that our 2024 restaurant class, new restaurant class, opened at record levels and when they entered the comp base, they didn't contribute what they typically do, given that they had opened at such elevated levels to begin with. Now, having said that, we do see what I would classify as a macroeconomic fog around the consumer that they're trying to navigate through, and that has the consumer less front footed, less ebullient, uh, less forward leaning than they were, say this time last year. And as we see whether it's the budget bill, uh, and getting clarity on that, whether you like what's in the bill or not, at least you have a sense of what the future is going to look like. But then when the tariff policy shifts, that creates a little bit more density in that fog. So just trying to make sure we're putting a great everyday value out there for our guests, so to help them navigate this situation. Um, and what you were talking about, about lapping, not just steak, but those first year restaurants that showed really strong growth, what are you sort of trying to put in place then to keep momentum going at those new locations? Yeah, we want to focus on the long term and our new class is attracting toward three million dollar plus average unit volumes, which is higher than our existing AEV around 2.9 million. So super encouraged by the strength that shows and the portability around the country, whether that's plantation in Florida or Pittsburgh, we recently opened in Pennsylvania. And we want to be thoughtful about the long-term strength of this business. And so, for example, we have Chicken Shawarma launching in September, and we have a very good innovation cadence going forward, but we didn't want to rush Chicken Shawarma this year and perfectly align it to lap that steak comp from last year and, uh, potentially put, uh, too much pressure on operations. So excited to bring that in September. We've also got cinnamon sugar pita chips coming later this year, and we also noted that we're testing salmon in our market test of our innovation process that you can see on our menu next year. So putting that consistent pulse of innovation from the culinary standpoint, and then we just continue to see these macro tailwinds for Mediterranean as a category that unique cuisine, where taste and healthy unites, the growing appreciation for it, as evidenced by when we open in all these markets around the country, the increasing AEVs we're seeing and elevated levels of the openings. Now you're in both urban and suburban markets. And particularly we got some new data out that show that New York City office workers are returning to work pre compared to pre-COVID. It's now up. But yet you're experiencing a bit of a slowdown. So are people just packing their lunches more perhaps? Well, that's what is actually encouraging to us. The underlying structural strength of the business, we did not see any specific weakness in a region, a market, urban versus suburban, or even an income cohort. We stratify our restaurants by the average household income in these markets, and our lowest income markets are actually performing the best on comps. So the fleet of restaurants is moving in unison, and as we lapped those very significant hurdles in June, we saw them decelerate. But as we exited the quarter, we saw the fleet start to regain momentum and reaccelerate into the third quarter. I do want to dive into that a bit more, cuz what are you seeing in the beginning of these Q3? Is that that fog that surrounded the consumers slowly moving behind them? Well, what remains to be seen, you know, with the shifting tariff policies, but we did note our comp has reaccelerated over our Q2 level in the beginning of Q3. So encouraged by what we're seeing in the exit rate of the quarter. Will you ever return to that double digit sales growth that we saw? We're always working to continue to drive traffic over the long term. Again, we want to build this for the next 10 years and beyond, not the next 10 weeks. I do want to hit on tariffs and the impact that it's having on your company. What are you seeing now with the current system that's in place? Yeah, that's, I'm super proud and want to give a shout out to our supply chain team. They've been incredibly agile this year, really working on behalf of our guests to mitigate any of those cost pressures we're seeing. And when you put all the puts and takes together and the things we've been able to do to drive efficiency and economies of scale and sourcing, we've actually been able to mitigate that. We have not taken additional price since January, where we only took 1.7%. We've underpriced CPI by almost 900 basis points now in recent years, and we beat restaurant level margin and EBITDA in the quarter and EPS. So we've been able to drive that really strong bottom line profitability without having to raise menu prices. I'm curious where on the menu you are seeing tariffs hit. Is it something like avocados, or you know, where? Olive oil? Yeah. Olive oil's one. We get our olive oil from Greece or we do get some of our hormone antibiotic free beef from Australia, and you know, those tariffs are well advertised on what they has been enacted on those countries, as well as potentially basmati rice that we get overseas, but it's been a great rice crop. So that's helped offset some of that. So a lot of puts and takes there, but those are very high quality specific ingredients we're going to continue to source. Now we do source a lot domestically. We do source the majority of our ingredients domestically and we are a domestic manufacturer. We have two production facilities where we are vertically integrated, and we produce all of our dips and spreads and some of our dressing bases that allows us that efficiency, cost effectiveness and consistency that we can pass along in the savings for our guests. I'm a red pepper hummus girlie myself. Crazy Feta's a good hummus, don't miss it. And then, um, speaking about other macro effects, I, I want to ask about labor as well. Um, are you guys having trouble finding people to staff the restaurants? What does that flow look like? Our turnover rates have consistently come down at the team member level for the last few years. So we're seeing, um, you know, not just the ability to get, uh, team members to fill roles, but the ability to get high quality team members to fill those roles. So we haven't seen, uh, you know, any challenges on the labor front. I was going to say, for pre-opening costs for the year end, you do expect it to be higher. Does that have anything to do with tariffs? No, we haven't seen any increase in our buildout costs. It's really more directly related to the increase in our unit growth rate. So we raised new unit guidance to 68 to 70 restaurants, again reflecting the strength we're seeing in all these new unit openings and the opportunity we have to bring Mediterranean across the country. So that just adds more pre-opening costs and the total number of units we're building. And then we wanted to ask too about this hyphen investment. So, um, we're seeing this trend among fast casual in particular recently. It's sort of maybe automation of parts of the assembly process. So how, how is this going to work for you? How quickly are you going to put it into action in the restaurants also? Yeah, we very much believe in human connection. Our mission is to bring heart, health and humanity to food. So I wouldn't envision Cava being all automation and robots, but we do look at technology and automation to enhance the human experience, not replace it. And so we see a real opportunity on our second digital makeline. So we have one in every restaurant dedicated to digital order production, and what we see on that channel is our guests are really looking for convenience, accuracy, and speed. And accuracy is a real opportunity for us, and this is where automation can help our team members deliver on that commitment while freeing up that labor component, being more efficient from a production standpoint, to then reallocate that labor into our dining room, engaging with our guests, engaging in our in-restaurant serving lines. And we looked to test, uh, a test pilot in the coming quarters and more to come on that front. But, uh, really liked what we saw from the hyphen team over the last few years that we've been talking to them and looking at the producers of this equipment and excited to work with them. Is there anything that maybe Chipotle has done because they only introduced into a few restaurants last September. We haven't really heard much about this hyphen digital makeline since. So what are you gauging? What needs to happen for this to work ultimately? Yeah, for us, we need to see it improve our team members experience, improve digital order accuracy, and improve the guest experience. You know, when we check all those boxes, it's definitely a win for the business, and that's how we viewed, whether it's culinary innovation, equipment innovation, investments in our team, uh, to make sure it's giving a return to the guests, as well as our shareholders. Yeah. When you come to pick up that online order, you want it to be there and ready and right. On time and accurate. The full ball. Brett, thank you so much. Appreciate it. Brooke, thank you as well. Related Videos Mortgage rates dip below 6%: What this means for homebuyers CoreWeave earnings don't answer the big question bears are asking Starbucks turnaround check-in: 1 yr. since CEO shake-up Tencent pops, Chinese tech stocks, UnitedHealth approves dividend Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
