Sweetgreen outlines 2026 slowdown to 15–20 net unit growth following $186.4M Spyce sale and new operational focus

Earnings Call Insights: Sweetgreen (SG) Q3 2025

MANAGEMENT VIEW

* CEO Jonathan Neman stated that Sweetgreen is “addressing the headwinds from the current operating environment with agility and focus,” emphasizing tightened operations, accelerated menu innovation, and a deepened focus on guest engagement. The company has introduced the “Sweet Growth Transformation Plan” centered on operational excellence, brand relevance, food quality and menu innovation, personalized digital experience, and disciplined profitable investment.
* Neman explained that early results from operational changes include “improved peak hour throughput” and that the percentage of restaurants meeting internal operational standards has risen to “approximately 60%.”
* The company announced the launch of a protein-focused campaign, a new macros calculator, and a pipeline of menu items entering a stage-gate process in Q4. Sweetgreen is also reviewing its menu and pricing architecture, aiming for “clear entry prices and logical trade-up opportunities.”
* Expansion efforts included eight new restaurants in Q3, six of which feature Infinite Kitchen, and entry into Arizona. The company expects to open 17 new restaurants in Q4 and finish 2025 with 37 net openings.
* Neman revealed the strategic sale of Spyce for $186.4 million to Wonder, which is expected to add approximately $100 million in liquidity to the balance sheet. The Infinite Kitchen technology remains central to future operations, with a continued rollout planned through a partnership with Wonder.
* Neman highlighted leadership transitions: “Before I conclude my prepared remarks, I want to take a moment to recognize Mitch Reback, who retired in September as our CFO,” and welcomed Jamie McConnell as the new Chief Financial Officer.
* CFO Jamie McConnell stated, “I’ve launched a full review of our restaurant level expenses and G&A structure to ensure we’re operating as efficiently as possible, identifying savings, simplifying processes and investing only in what drives the business forward.”

OUTLOOK

* Sweetgreen updated its 2025 guidance to 37 net new restaurant openings, revenue in the range of $682 million to $688 million, negative same-store sales of 8.5% to 7.7%, restaurant level margin of 14.5% to 15%, and adjusted EBITDA between negative $13 million and negative $10 million.
* For 2026, the company plans to open 15 to 20 net new restaurants, with about half featuring Infinite Kitchen technology, and expects to enter two to three new markets, including Salt Lake City.
* Management stated a focus on “lowering capital expenditures and driving strong returns,” and continues to target “cash-on-cash returns above 40%.”

FINANCIAL RESULTS

* Q3 sales were $172.4 million with a same-store sales decline of 9.5%.
* Restaurant-level margin was 13.1% and adjusted EBITDA was a loss of $4.4 million.
* Q3 food, beverage, and packaging costs represented 30.7% of revenue, up 320 basis points year-over-year, with higher protein costs and tariffs cited as key drivers.
* Labor and related expenses were 29.1% of revenue, a 170 basis point increase from last year, primarily due to “deleverage from lower sales volumes and higher wage rates.”
* Other operating expenses increased to 17.6% of revenue. Operating support center costs improved to 14% of revenue, down from 15.2% last year.
* Q3 net loss was $36.1 million, compared to a net loss of $20.8 million last year. The loss includes a $4.3 million impairment charge for four underperforming restaurants.
* The sale of Spyce is expected to produce $8 million in annualized G&A savings.
* The company ended Q3 with a cash balance of $130 million, with the Spyce transaction expected to add about $100 million in cash upon closing.

Q&A

* Brian Mullan, Piper Sandler: Questioned menu and pricing architecture review. CEO Neman explained new entry points, value messaging, and upcoming protein-focused campaigns.
* Jon Tower, Citi: Asked about Q4 guidance step-down and consumer demand. CFO McConnell responded that 25- to 35-year-old consumers are “the most under pressure,” and Northeast and L.A. markets account for “about 800 basis points of negative comp.” Tower also asked about Infinite Kitchen costs, with Neman stating the new agreement provides “units at about -- around cost plus 5%.”
* Andrew Charles, TD Cowen: Queried 2026 net openings and handheld product development. McConnell projected a net 15 openings, and Neman said operationalization and stage-gate process are key for the new handheld product.
* Rahul Krotthapalli, JPMorgan: Asked about net cash proceeds from the Spyce sale. McConnell expects the tax impact to be immaterial, with no material legal fees.
* Sara Senatore, BofA: Inquired about softness in dinner daypart; McConnell confirmed “it’s the dinner time that we’re seeing that decrease.” Senatore also questioned the timing and rationale for the Spyce sale. Neman said owning the technology is “not needed as long as we have a level of control and license.”
* Logan Reich, RBC: Asked about flexibility in unit growth. Neman said there is pipeline flexibility for “slightly increase next year’s unit count” if performance improves.
* Kelly Anne Merrill, Morgan Stanley: Requested an update on loyalty. Neman said, “We are seeing continued activations at almost 20,000 per week in terms of new customers.”
* Anisha Datt, Barclays: Asked about restaurant margin reduction. McConnell cited “about half of sales deleverage,” 140 basis points in protein costs, and 50 basis points in tariffs.
* Edward Farley, Goldman Sachs: Asked if menu pricing review includes loyalty rewards. Neman confirmed all aspects, including tiers and personalized offers, are under evaluation.

SENTIMENT ANALYSIS

* Analysts’ tone was probing and slightly negative, focusing on margin reductions, guidance step-down, cost increases, and rationale for strategic shifts.
* Management maintained a neutral to slightly defensive tone in response, using phrases such as “we expect to offset,” “it will continue to be a huge part of our business,” and “we believe this strikes the right balance.”
* Compared to the previous quarter, analyst skepticism has increased as headwinds persist, while management’s tone shifted from cautious optimism to emphasizing financial discipline and operational improvements.

QUARTER-OVER-QUARTER COMPARISON

* Guidance was reduced from at least 40 net new restaurant openings and $700 million to $715 million in revenue, to 37 net openings and $682 million to $688 million in revenue.
* Restaurant-level margin guidance moved from approximately 17.5% to 14.5%–15%, and adjusted EBITDA from $10 million–$15 million to negative $13 million–negative $10 million.
* The previous quarter highlighted early signs of same-store sales improvement and operational initiatives, while the current quarter focused on cost discipline, a major asset sale, and slowing unit growth for 2026.
* Analyst questions shifted from operational improvements and marketing to immediate financial pressures and capital allocation.
* Management’s confidence is now more closely tied to cost control, cash preservation, and strategic partnerships, rather than near-term growth.

RISKS AND CONCERNS

* Management cited ongoing headwinds in key urban markets and among younger consumers, with “softer sales trends in our Northeast and Los Angeles markets” and “lighter spending among younger guests.”
* Cost pressures include higher protein costs, tariffs, and increased labor expenses.
* Restaurant-level margin is under pressure from sales deleverage and higher input costs.
* The strategic sale of Spyce brings operational risk in maintaining access to and control over Infinite Kitchen technology, but management emphasized contractual safeguards and ongoing partnership with Wonder.

FINAL TAKEAWAY

Sweetgreen’s third quarter was marked by operational headwinds, strategic restructuring, and a major asset sale intended to strengthen liquidity and sharpen focus on core operations. Management outlined a deliberate reduction in new unit growth for 2026, with increased attention on cost control and operational excellence, while continuing to invest in menu innovation and digital engagement. The company’s priorities now center on restoring profitability and adapting to shifting consumer dynamics, as Sweetgreen positions itself for future growth through disciplined investment and strategic partnerships.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/sg/earnings/transcripts]

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