CAVA slides after comparable sales disappoint; restaurant peers dip as well

CAVA Group experienced a 20.3% increase in revenue in Q2, totaling $278.2 million, driven by 16 new restaurant openings and steady guest traffic; however, same-restaurant sales rose only 2.1%, falling short of expectations due to menu adjustments.

The restaurant-level margin decreased to 26.3%, reflecting increased input costs from new menu items and wage investments, though higher sales volumes partially offset these challenges.

CAVA's adjusted EBITDA grew 17% to $42.1 million, exceeding estimates, while net income declined to $18.4 million; shares dropped 19% following the earnings report due to lower future sales growth projections.

Looking ahead, CAVA anticipates 2025 comparable sales growth of 4.0% to 6.0% and plans to open 64 to 68 new restaurants, revising earlier projections amid ongoing macroeconomic challenges.

CAVA Group Revenue and Growth Performance Review

CAVA Group (NYSE:CAVA) reported a remarkable 20.3% increase in revenue for the second quarter, totaling $278.2 million. This growth stemmed from 16 new restaurant openings and same-restaurant sales rising by 2.1%. However, this figure fell short of the consensus forecast, which anticipated a growth rate of 6.1%. The limited increase in same-restaurant sales was largely due to adjustments in menu pricing and product mix, while guest traffic remained steady.

In terms of profitability, the restaurant-level margin decreased by 20 basis points from the previous year, settling at 26.3% of sales. This decline was mainly attributed to increased input costs linked to the introduction of grilled steak mid-second quarter of the fiscal year and additional wage investments. Nonetheless, higher sales volumes provided some offset to these challenges.

CAVA also reported an adjusted EBITDA growth of 17% year-over-year, amounting to $42.1 million—surpassing the consensus estimate of $40 million. The company achieved a net income of $18.4 million during this quarter, slightly down from $19.7 million a year prior. Earnings per share (EPS) were reported at $0.16, exceeding the consensus estimate of $0.13 while down from $0.17 a year earlier. Free cash flow for the year-to-date reached $21.9 million.

CEO Brett Schulman remarked, "Despite the challenges in the macroeconomic landscape, we achieved a 20.3% revenue growth at CAVA. Our new restaurant class for 2025 is expected to deliver average unit volumes (AUVs) exceeding $3 million. The opening of our 400th restaurant is a significant milestone as we work towards our goal of 1,000 restaurants by 2032, showcasing the robustness of our growth strategy."

Looking into the future, CAVA Group anticipates comparable sales growth for 2025 to be between 4.0% to 6.0%, a revision from the earlier forecast of 6.0% to 8.0%. The adjusted EBITDA for the full year is expected to remain within the range of $152 million to $158 million. The company expects to open between 64 and 68 new restaurants, which is fewer than previously projected.

In response to these results, shares of CAVA Group (CAVA) fell by 19% in early trading following a 2.7% increase in the regular session. The short interest in CAVA currently stands at 11.5% of the total float. The company has scheduled an earnings conference call for 5:00 p.m. to discuss these figures further.

In a related market movement, competitors Chipotle (CMG), Noodles (NDLS), and Portillo's (PTLO) also experienced declines in their stock prices during the late trading session.