CAVA is offering some tasty numbers to its investors.
After the market closed on Thursday, the Mediterranean fast-food chain reported second-quarter results that beat estimates across revenue, earnings and same-store sales.
Net sales rose 35.2% year over year to $233.5 million, compared with expectations of $219 million. Adjusted earnings per share were $0.17, compared with expectations of $0.13.
Comparable store sales rose 14.4%, beating Wall Street expectations of 7.45%. Sales growth was driven by higher foot traffic (up 9.5% year over year), higher menu prices, new locations, and the launch of grilled steak On June 3.
Kava stock hit a record closing high of $102.39 on Wednesday, and on Friday, it hit an intraday high of $122.95, its biggest daily rise ever.
CEO Brett Schulman told Yahoo Finance that the steak launch has “exceeded expectations,” saying the team is “working on a whole host of innovations” over the next few years. Schulman said the company’s “value proposition” is appealing to diners as consumers shift to fine dining but shift to fast-casual dining.
The company raised its full-year sales growth forecast to 8.5% to 9.5%, he told Yahoo Finance, adding that he expects to maintain momentum in the third and fourth quarters.
“This means comparable-store sales growth will be down by double digits for the rest of the year,” he said.
The company’s shares are up 180% since the beginning of the year, compared with 20% for Chipotle (CMG) and 18% for the S&P 500 (^GSPC).
Cava’s approach to expansion is slow and steady. By 2032, the company plans to have 1,000 Cava locations.
There is still room for growth, Citi analyst John Tower said in a note to clients. “Unit growth opportunity that continues to recalibrate separate same-store sales, pricing and margin opportunities as the system ramps up, and margin tailwinds as the footprint shifts toward lower-cost markets.”
Kava opened 18 new locations in the second quarter, bringing its total number of locations to 341.
TD Cowen analyst Andrew Charles sees Cava’s 2032 goal as hitting that target, noting its broad appeal. He expects 50% of new locations next year to have digital walkways to welcome customers. There are currently 45 such walkways.
Stifel analyst Chris Okul, who has a buy rating on Kava, expects long-term revenue growth in the 17-20% range, supported by 15% unit growth and low- to mid-single-digit same-store sales growth.
In existing markets, there is still room to build more brand awareness, Schulman said. Other future growth drivers include the relaunch of the loyalty program in October and catering services.
The company aims to market its experiential catering services in major cities in 2025 and launch them nationwide in 2026.
The company currently has 10 digital kitchen hubs and 10 hybrid kitchen hubs in various locations, in addition to regular Cava locations testing catering.
Kava is also experimenting with AI technology in the kitchen to increase production and detect food shortages. Unlike its competitors, humans will guide consumers through the production line to build the bowls.
“Our mission is to bring heart health and humanity to food, and if we lose that humanity, I don’t think we’ll be up to our mission,” Schulman told Yahoo Finance.
The company continues to perform well at a time when fast-casual restaurants appear to be bucking a broader slowdown in the food industry as consumers double down on their value.
“Kava was one of the few publicly traded restaurant brands to achieve positive traffic growth in the second quarter,” Schulman said on the earnings call.
He added that from 2019 to 2023, the company raised prices by 12%, which is less than fast-food price increases and grocery price increases in general, according to Consumer Price Index data.
“For an extra dollar or two… you can get a plate of fresh Mediterranean food at Cava compared to traditional fast food, which is frozen and then fried. We’ve seen people replace us and replace us with something better,” he told Yahoo Finance.
Chipotle beat expectations in its report after comparable-store sales rose 11.1% year over year, versus the 9.23% Wall Street had expected. Shake Shack (SHAK) saw comparable-store sales rise 4%, beating estimates of 3.2%.
Sweetgreen (SG) reported its best same-store sales growth in two years, up 9%, driven by higher foot traffic and prices.
“We’re going to be very judicious in how we use our pricing power,” CEO Jonathan Neiman told Yahoo Finance, claiming the chain has raised prices less than its competitors since the pandemic.
“When you look at the relative price differential between Sweetgreen, some of our fast-casual competitors, and then QSRs, the gap has really narrowed. You can’t get in and out of a QSR for less than $15 today,” he told Yahoo Finance.
Here’s what Kava reported, compared to Wall Street estimates, according to Bloomberg Consensus data:
-
profit: $233.5 million vs. $219.5 million
-
Adjusted earnings per share:$0.17 vs $0.13
-
same store sales growth: 14.4% vs 7.45%
The company raised its fiscal 2024 outlook for restaurant openings, sales growth and restaurant-level gross margin.
The company now expects sales growth of 8.5% to 9.5%, up from 4.5% to 6.5% in the first quarter and its previous forecast of 3% to 5%.
The total number of new restaurants is expected to range between 54 and 57, up from 50 to 54. The profit margin at the restaurant level is expected to range between 24.2% and 24.7%, up from 23.7% to 24.3%.
—
Brooke DePalma is a Senior Reporter at Yahoo Finance. You can follow her on Twitter @Brooke De Palma Or email her at bdipalma@yahoofinance.com.
Click here for the latest retail stock news and events to better inform your investment strategy.
Comments are closed, but trackbacks and pingbacks are open.