3 days ago
Sweetgreen Shares Tumble After Ripple Fries Fail to Thrill
(Bloomberg) -- Sweetgreen Inc. is discontinuing its ripple fries, a menu item that it promised customers could 'feel good about,' after only five months.
The move comes as the chain booked a second consecutive quarterly sales drop. Shares plummeted 23% Friday in New York for their biggest decrease on record.
Sweetgreen's fries were meant to appeal to customers looking for a healthier option than what's offered at other restaurants. They were air fried and made with avocado oil instead of seed oils, which have become a target of US Health Secretary Robert F. Kennedy Jr., despite limited evidence that they cause harm.
But without the fry volume of, say, a McDonald's, Sweetgreen's fries would often sit on the counter and the fresh taste would suffer. Many customers drawn to the chain for salad and healthy fare weren't coming to the restaurant for the $4.95 fries, which the company promised would 'redefine fast food.'
Sweetgreen said customers liked the fries, but they added too much complexity to restaurant operations, Chief Executive Officer Jonathan Neman said Thursday on a call with analysts.
'Starting next week, we will be discontinuing ripple fries in order to focus on our core' products such as chicken and vegetables, he said.
The salad chain is struggling to improve operations and lure diners back to its $15 salads and bowls.
On Thursday, the chain slashed its sales guidance after its restaurants posted a 7.6% drop in second-quarter comparable sales. The company now anticipates that sales at restaurants open for at least a year will drop between 4% and 6% this year, a big step down from prior expectations that the measure would be flat.
The stock had already lost about 61% of its value this year through Thursday's close, compared with a decline of less than 1% for the Russell 2000 Index.
Sweetgreen said its sales pullback was more pronounced in several of the company's large urban markets and that it would work on how customers perceive the value of its meals.
In May 2024, the chain launched steak as a protein option, which drew in diners and boosted sales numbers thanks to its higher price tag. This time around, traffic declined and people switched to cheaper alternatives, according to the company.
Neman said comparable sales have improved modestly so far in the third quarter. The chain has boosted chicken and tofu portions by 25%, upgraded some recipes to improve taste and quality, and started $13 limited-time offers, he added.
In July, it reintroduced its seasonal menu after finding that the novelty appeals to frequent customers. It also launched a new loyalty program to draw people in.
--With assistance from Tonya Garcia.
(Updates with closing share price in second paragraph.)
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