Cava appears to be in a favorable position ahead of the release of its second-quarter earnings report.
After the market closes on Thursday, the Mediterranean fast-casual chain is expected to report a nearly 27% increase in net sales to $219 million, while adjusted earnings are expected to be $0.13.
Sales in the stores are expected to increase by 7.45 percent. This is due to higher customer frequency and the successful launch of grilled steak, which, according to Stifel analyst Chris O’Cull, “sold out quickly in many markets.”
Wedbush analyst Nick Setyan said the company expects “an acceleration in transaction trends over the next two years, primarily due to the launch of Steak.”
On Wednesday, Cava shares hit a new record of $102.39. Shares are up more than 140% year-to-date, compared to 20% for Chipotle (CMG) and 19% for the S&P 500 (^GSPC).
O’Cull said, “We recommend investors take advantage of the volatility created by short-term sentiment swings as fundamentals remain solid,” and raised the price target to $110.
Cava’s approach to expansion is slow and steady. By 2032, the company plans to have 1,000 Cava locations.
Citi analyst Jon Tower said in a note to clients that there is still room for growth. “A growth opportunity for the individual units that continues to provide higher, discrete same-store sales, pricing and margin opportunities as the system becomes denser and margins gain tailwinds as the footprint shifts toward lower-cost markets.”
In the first quarter, the company opened 14 new locations, bringing the total to 323.
Cava continues to see growth at a time when fast-casual dining appears to be bucking a general downturn in the food industry as consumers prioritize quality.
Its CEO Brett Schulman recently told Yahoo Finance’s Morning Brief that the chain is experiencing “consistent strength across all income segments.”
“We are able to offer this unique Mediterranean cuisine that combines taste and health at a reasonable price,” he said.
Chipotle beat expectations in its report after comparable-store sales rose 11.1% year over year, while Wall Street expected 9.23%. Shake Shack (SHAK) reported a 4% increase in comparable-store sales, beating estimates of 3.2%.
Sweetgreen (SG) reported its best comparable-store sales growth in two years, up 9%, driven by higher customer traffic and higher prices.
CEO Jonathan Neman told Yahoo Finance, “We will use our pricing power very prudently.” Neman claimed the chain has increased prices fewer than its competitors since the pandemic.
“If you look at the relative price differences between Sweetgreen, some of our fast-casual competitors and QSR, you can see that the gap has narrowed significantly. You can’t get in and out of QSR for less than $15 anymore,” he told Yahoo Finance.
Compared to last year’s Q2 report, Wall Street expects the following from Cava’s Q2 report:
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revenue: $219.5 million compared to $172.89 million
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Adjusted earnings per share: $0.13, compared to $0.35
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Sales growth in comparable stores: 7.45%, compared to 18.20%
In the first quarter, the company raised its revenue growth forecast to 4.5 to 6.5 percent, compared to previous expectations of 3 to 5 percent.
Citi analyst Jon Tower expects Cava to see “some slowdown in sales” at the start of the third quarter, similar to the rest of the industry. “This could lead to management adopting a more conservative tone in the second half of the year.”
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on X at @Subscribe or email her at [email protected].
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