Key Points:
- Cava shares dropped 20% after missing sales and lowering guidance.
- Same-store sales rose just 2.1% despite 20% revenue growth.
- Expansion continues with up to 70 new locations planned for 2025.
Cava Group Inc., the Mediterranean fast-casual chain, reported its fiscal second-quarter 2025 results, delivering earnings that exceeded profit expectations but missed key sales targets. For the quarter ended July 13, the company reported adjusted earnings per share of $0.16, exceeding market forecasts, with revenue increasing 20.3% year-over-year to $278.2 million. However, this figure came in slightly below analysts’ projections.
Same-restaurant sales grew just 2.1%, well under the anticipated mid-single-digit range. The softer performance was attributed to lower traffic and more cautious consumer spending. During the quarter, Cava added 16 net new restaurants, expanding its footprint to 398 locations nationwide. Digital orders accounted for 37.3% of total sales, while restaurant-level margins reached 26.3%.
Guidance Cut Triggers Market Sell-Off
In a move that rattled investors, Cava reduced its full-year same-restaurant sales growth forecast to 4%–6%, down from a prior 6%–8% range. The company maintained its adjusted EBITDA target of $152 million–$159 million but raised its new-store opening plan to 68–70 locations this year, signaling continued expansion despite near-term demand challenges.
Cava’s leadership pointed to a challenging consumer environment, describing economic conditions as a “fog” influenced by inflation pressures and broader uncertainty. The company reiterated that it would not implement additional menu price hikes, choosing instead to manage costs internally.
The market reaction was swift and sharp. Cava’s shares tumbled more than 20% in after-hours trading, marking one of the steepest post-earnings declines since the company went public in 2023. The drop came after the stock closed regular trading near the $84–$86 range, before sliding into the low-to-mid-$60s in extended trade.
Growth Plans Remain Intact Despite Headwinds
Despite the disappointing sales momentum, Cava’s shares remains focused on long-term growth. The company emphasized the strength of its unit-level economics, with average annual restaurant volumes projected between $2.9 million–$3 million. Expansion remains a priority, with management confident that new locations and disciplined cost control will sustain profitability.
Executives expressed optimism about improving trends heading into the third quarter, highlighting opportunities to increase guest frequency without relying on further price increases. The decision to hold prices steady is aimed at maintaining customer loyalty during a period of strained household budgets.
Despite a steep drop in Cava’s shares, the company’s 20% year-on-year revenue growth highlights its enduring brand appeal, even as cautious consumer behavior weighs on same-store sales. The company’s ability to expand its footprint, protect margins, and navigate cost pressures will be critical in restoring investor confidence in the months ahead.
Visit The Enterprise World for the most recent information.
