Cava (CAVA) presents tasty numbers for its investors.
After the market closed on Thursday, the Mediterranean fast-casual chain reported second-quarter results that beat expectations for sales, profit and comparable-store sales.
Net sales rose 35.2% year over year to $233.5 million, compared with expectations of $219 million. Adjusted earnings per share came in at $0.17, versus expectations of $0.13.
Same-store sales rose 14.4%, beating Wall Street’s 7.45% expectation. The sales growth was driven by increased foot traffic, up 9.5% year over year, new locations and the June 3 launch of grilled steak.
CEO Brett Schulman said during the earnings call that steak is far exceeding expectations. The company is at the “intersection of consumer convergence” as they eat less at fine-dining restaurants and more at fast food.
“At a time when consumers are increasingly feeling the pressure of an uncertain economy and are more critical about where and how they spend their money, they are choosing to dine at Cava,” he said.
Wedbush analyst Nick Setyan expects transaction trends to accelerate over the next two years, driven primarily by the launch of steak.
On Wednesday, Cava shares hit an all-time high of $102.39 and on Thursday they hit an intraday high of $104.84. In after-hours trading, the stock even rose as high as $112.
Shares have risen more than 140% so far this year, compared with 19% for Chipotle (CMG) and 17% for the S&P 500 (^GSPC).
Slow and steady is Cava’s go-to approach to expansion. By 2032, the company aims to have 1,000 Cava locations.
Citi analyst Jon Tower said there is still room for growth in a note to clients. “A growth opportunity for units that have higher, discrete same-store sales opportunities, price and margin opportunities continue to reset as the system densifies and margin tailwinds as the footprint shifts to lower-cost markets.”
In the second quarter, Cava opened 18 new stores, bringing the total to 341. For comparison, in the first quarter there were 14 new stores.
Cava remains popular at a time when fast-casual dining appears to be sidestepping the general food industry downturn as consumers increasingly place value on price.
“Cava was one of the few publicly traded restaurant brands to achieve positive traffic growth in the second quarter,” Schulman said. “We believe our performance is a reflection of our unique and compelling value proposition.”
Chipotle beat expectations in its report after same-store sales rose 11.1% year over year, compared to the 9.23% Wall Street had expected. Shake Shack (SHAK) saw same-store sales rise 4%, beating estimates of 3.2%.
Sweetgreen (SG) reported its best revenue growth in two years, up 9%, thanks to increased store traffic and higher prices.
CEO Jonathan Neman told Yahoo Finance that “we’re going to be very careful in how we use it. [pricing power]Neman claimed the chain has increased prices less than its competitors since the pandemic.
“If you look at the relative price difference between Sweetgreen, some of our fast-casual competitors, and QSR, the gap has really closed. QSR, you can’t get in and out for less than $15 these days,” he told Yahoo Finance.
Here’s what Cava reported, compared to Wall Street estimates, according to Bloomberg consensus data:
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Gain: $233.5 million vs. $219.5 million
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Adjusted earnings per share: $0.17 vs $0.13
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Same-store sales growth: 14.4% versus 7.45%
The company raised its fiscal 2024 forecast for restaurant openings, revenue growth and restaurant-level profit margin.
Revenue growth is now expected to be 8.5% to 9.5%, up from 4.5% to 6.5% in the first quarter and the previous growth was 3% to 5%.
The total number of new restaurants will now be between 54 and 57, up from 50 to 54. Restaurant-level profit margins are expected to be between 24.2% and 24.7%, up from 23.7% to 24.3%.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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