Cava inventory tumbled 16% in afternoon buying and selling on Wednesday, making it the most recent fast-casual chain to really feel Wall Road’s wrath after reporting disappointing quarterly gross sales.
A 12 months in the past, eateries like Chipotle Mexican Grill and Cava had been reporting double-digit same-store gross sales development, even because the broader restaurant business posted falling site visitors and slumping gross sales. However occasions have modified. This spring, fast-casual chains noticed foot site visitors decline as gross sales slowed down and even shrank.
To elucidate the downturn, executives have stated that diners are “cautious,” within the phrases of Sweetgreen CEO Jonathan Neman, or coping with an financial “fog,” in line with Cava CFO Tricia Tolivar.
And simply as diners are discovering explanation why to chop again on their Shake Shack burgers or Chipotle bowls, traders are trimming their fast-casual holdings after rewarding the businesses final 12 months for outperforming the remainder of the business. To date in 2025, Shake Shack shares have fallen 16%; Chipotle inventory has slid 28%; Cava shares have tumbled 37%; and Sweetgreen inventory has plunged 70%. Of the notable publicly traded fast-casual chains, solely Wingstop has managed to remain within the inexperienced this 12 months, with beneficial properties of 20%.
Extra broadly, traders have grown extra cautious about betting on any eating places, given weak site visitors tendencies and issues about client spending, in line with a analysis observe on Sunday from UBS. Even fast-food corporations have struggled with the site visitors declines and sluggish gross sales development, regardless of their historic repute as a safer wager throughout financial uncertainty.
Whereas some fast-casual chains flagged company-specific causes for his or her weaker-than-expected outcomes, executives additionally stated that financial uncertainty is weighing on customers – and hurting their gross sales.
Usually, fast-casual diners are larger earnings and extra more likely to have white-collar jobs. Nevertheless, Chipotle CEO Scott Boatwright blamed a pullback from low-income customers for the chain’s same-store gross sales declines of 4% within the second quarter.
“It’s important to look no additional than what is going on with our rivals with snack events or $5 meals. That is the place the buyer is drifting in direction of, [with] worth as a worth level, due to low client sentiment. I believe as sentiment improves, the enterprise will enhance. I believe that is most likely the largest headwind we face,” he informed analysts on the corporate’s earnings convention name on June 23.
The College of Michigan’s index of client sentiment slid in April to 52.2, certainly one of its lowest-ever recorded readings. It held at that degree in Might earlier than rising in June to 60.7.
Quick-casual chains are seeing customers’ financial anxieties in their very own analysis, too.
“By our common client analysis, we hear issues about elevated costs, future job prospects and normal nervousness concerning the future,” Wingstop CEO Michael Skipworth stated on the corporate’s earnings convention name in late July.
The hen wing chain reported same-store gross sales declines of 1.9% for the quarter, a dramatic reversal in comparison with its development of 28.7% within the year-ago interval.
On the corporate’s earnings convention name on Thursday, Sweetgreen’s Neman stated that the chain noticed “a extra cautious client surroundings beginning in April” — coinciding with the drop in client sentiment. A “subdued business backdrop,” significantly in a number of of the chain’s greatest city markets, contributed to Sweetgreen’s “actually, actually tough quarter,” in line with Neman.
That is one purpose why the salad chain reported a steeper-than-expected decline in its same-store gross sales and reduce its full-year forecast for the second straight quarter. Sweetgreen executives additionally attributed the weak quarterly efficiency to a tricky comparability to final 12 months’s steak launch and the transition of its loyalty program.
To enhance its worth notion amongst clients, Sweetgreen is growing its hen and tofu parts by 25%, enhancing its hen and salmon recipes and implementing some promotional pricing, like $13 menu bowl drops for its loyalty program members.
As for Cava, the corporate had been wowing traders with spectacular same-store gross sales development since its preliminary public providing two years in the past. However this quarter, the Mediterranean chain reported same-store gross sales development of two.1%, nicely under Wall Road projections of 6.1%. Executives stated that it confronted tough comparisons to the year-ago interval’s same-store gross sales development of 14.4%, which was fueled by its personal steak launch and powerful demand at newer restaurant areas that waned this 12 months.
“Cava is not so particular in any case. After blowing out similar retailer gross sales in Q1 of 10.8%, it fell in step with the business at 2.1% in Q2. It isn’t detrimental, in order that’s useful,” Tracey Ryniec, inventory strategist at Zacks Funding Analysis, stated.
Cava executives additionally acknowledged that financial issues are weighing on diners.
“Definitely, we’re working in a fluid macroeconomic surroundings and it is one which form of creates a fog for customers the place issues are altering consistently and it is onerous to see the clear. And through these occasions, they have a tendency to step off of the fuel,” Tolivar stated on the corporate’s convention name on Tuesday night.
Nonetheless, Cava is not seeing customers commerce right down to cheaper protein choices, or experiencing every other deeper enterprise issues, co-founder and CEO Brett Schulman stated. And because it enters the third quarter, its same-store gross sales have improved, Tolivar stated.
And Cava is not the one fast-casual eatery anticipating a return to kind within the latter half of the 12 months, particularly as client sentiment improved in June and July.
Chipotle stated its site visitors began rising once more because the burrito chain exited the quarter and continued into July. Sweetgreen has seen “modest” enchancment in its same-store gross sales thus far into the third quarter, in line with Neman.
And whereas Wingstop executives stated that they are nonetheless seeing weaker client demand, the chain is dealing with simpler comparisons to final 12 months’s efficiency.
