TLDR
- Cava stock plunged 22% after-hours following Q2 earnings miss and lowered full-year guidance
- Same-store sales growth collapsed to just 2.1%, well below 6% expectations and down from 10.8% in Q1
- Company cut 2025 same-store sales guidance from 6-8% to 4-6% due to economic uncertainty
- Revenue of $278.2 million grew 20% but still missed analyst estimates of $285 million
- High valuation at 147x forward P/E makes stock vulnerable to growth disappointments
Cava Group took a beating in after-hours trading Tuesday, with shares dropping 22% following second-quarter results that fell short on multiple fronts. The Mediterranean fast-casual chain’s earnings painted a picture of a company struggling to maintain the breakneck pace that made it a Wall Street darling.
The numbers tell a sobering story. Same-store sales grew just 2.1% in the quarter, a far cry from the 6% analysts expected and a steep decline from the 10.8% posted in the first quarter.
This marks a dramatic slowdown for a company that delivered 14.4% same-store sales growth in the same quarter last year. Revenue came in at $278.2 million, up 20% year-over-year but missing the $285 million consensus estimate.
CEO Brett Schulman didn’t mince words about the challenging environment. He described consumers as “navigating a fog” of economic uncertainty, a sentiment that led management to slash full-year same-store sales guidance from 6-8% to 4-6%.
The revised outlook spooked investors who had grown accustomed to Cava’s consistent outperformance. Trading at 147 times forward earnings, the stock carries a valuation that demands near-perfect execution and steady growth momentum.
Restaurant Sector Feels the Heat
Cava’s struggles mirror broader challenges facing the restaurant industry. Chipotle Mexican Grill reported same-store sales declines and cited concerns about consumer spending slowdowns and inflation pressures.
Sweetgreen also cut its outlook for the second consecutive quarter, lowering same-store sales guidance to negative 3-5% from previously neutral territory. The salad chain blamed decreased consumer spending and variable office attendance patterns.
These peer comparisons highlight that Cava isn’t facing its challenges in isolation. The entire fast-casual segment appears to be grappling with shifting consumer behavior and economic headwinds.
Bright Spots Remain
Despite the disappointing headline numbers, Cava demonstrated some operational resilience. Restaurant-level profit margins held steady at 26.3%, suggesting the company’s unit economics remain healthy even as traffic softens.
The chain opened 16 new locations during the quarter, bringing its total count to 398 restaurants. Management actually raised its 2025 store opening target to 68-70 units from the previous 64-68 range.
Digital orders continued to gain traction, representing 37.3% of total revenue. This growing digital mix provides operational leverage and suggests customers remain engaged with the brand, even if visit frequency has declined.
Adjusted EBITDA of $42.1 million came in 22.6% higher than the prior year. The company maintained its full-year adjusted EBITDA guidance range of $152-159 million.
Net income of $18.4 million translated to earnings per share of $0.16, which actually beat analyst expectations of $0.13. However, this represented a 6.6% decline from the same quarter last year.
If Tuesday’s after-hours losses hold into Wednesday’s regular trading session, it would mark Cava’s worst single-day decline on record. The stock has already fallen roughly 50% from its November 2024 peak and sits 25% lower year-to-date.
Retail traders on social media platforms showed mixed reactions, with some viewing the selloff as a buying opportunity while others predicted further declines toward $50 per share. Sentiment metrics showed heightened activity as message volume surged over 1,800% in 24 hours.
The company announced an investment in food-robotics startup Hyphen during the quarter, which automates the portioning of plates and bowls as part of ongoing operational efficiency initiatives.
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