Shares of Cava Group (NYSE: CAVA) rose sharply today after the fast-casual restaurant chain delivered another strong earnings report with impressive growth in sales and profit.
At 9:51 a.m. ET, Cava shares were up 14.1% following the news.
Cava shines again
Cava said comparable sales rose 14.4% during the period, driven by 9.5% traffic growth.
This pushed revenue up 35.2% to $231.4 million, beating estimates of $219.5 million.
Cava also continues to expand its presence, adding 18 restaurants to bring the total to 341, up 22% from the previous year.
The company also saw strong margin improvement, as restaurant-level profit margin improved to 26.5% from 26.1% in the year-ago quarter. Margins benefited from the leverage of higher sales. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) nearly tripled from $12.7 million to $34.3 million, and net income under generally accepted accounting principles (GAAP) tripled to $19.7 million, or $0.17 per share, beating the consensus of $0.12.
CEO Brett Schulman said, “Our second quarter results once again demonstrated the strength of our category-defining brand and our unique and compelling value proposition.” He also spoke about the addition of grilled steak to the menu, saying, “Grilled steak significantly exceeds our expectations and gives guests another reason to visit Cava and come back more often.”
Can Cava continue to gain weight?
Cava also significantly raised its full-year guidance. The company now expects comparable sales growth of 8.5 to 9.5 percent (up from a previous range of 4.5 to 6.5 percent), as well as increases in restaurant-level profit margin and adjusted EBITDA.
The figures show that Cava is operating at a high level, with average unit volumes and profit margins at restaurant level that are comparable to those of Chipotle‘S.
The stock is expensive, but Cava has proven it deserves a premium. While its valuation carries some risk, the restaurant stock continues to look like a long-term winner.
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Jeremy Bowman has a position in Chipotle Mexican Grill. The Motley Fool has a position in and recommends Chipotle Mexican Grill. The Motley Fool recommends Cava Group and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
Why Cava Group Stock Soared Today was originally published by The Motley Fool
