Cava Shares Sink as Company Cuts Sales Outlook on Weak Same-Store Growth

Cava (CAVA, Financials) slashed its full-year same-store sales growth forecast Tuesday to 4%6% from a prior 6%8% after reporting a weaker-than-expected second quarter, sending shares down more than 20% in after-hours trading.

Warning! GuruFocus has detected 5 Warning Sign with CAVA.

Revenue came in at $280.6 million, short of the $285.6 million Wall Street estimate. Net income fell to $18.4 million, or 16 cents per share, from $19.7 million, or 17 cents, a year earlier, though EPS still topped the 13 cents analysts projected, according to LSEG. Net restaurant sales rose 20% to $278.2 million, driven by new openings.

Same-store sales grew 2.1% for the quarter, well below analyst expectations for 6.1%. Cava said traffic was roughly flat, compared with nearly double-digit growth last year following the introduction of grilled steak. Management noted that sales momentum slowed after the product's one-year anniversary.

The company reiterated its 2025 adjusted EBITDA forecast of $152 million to $159 million and restaurant-level margins of 24.8% to 25.2%. Cava also disclosed a $25 million Series B investment in Hyphen, a restaurant automation startup, joining Chipotle Mexican Grill in the funding round.

Investors will be watching whether new store openings and automation initiatives offset softer same-store sales in the coming quarters.

This article first appeared on GuruFocus.

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