Sweetgreen’s Sales Fall Short of Expectations

Sweetgreen, a popular salad chain, reported quarterly sales that did not meet Wall Street’s expectations. However, the company did manage to narrow its losses compared to the same period last year.

Improved Forecast and Profitability Goals

Sweetgreen raised its forecast for restaurant-level margins and stated that it could break even on its adjusted earnings before interest, taxes, depreciation, and amortization within this year. As a company that went public in November 2021, Sweetgreen aims to achieve profitability for the first time by 2024.

Stock Performance

Following the announcement, Sweetgreen’s stock fell 7% in extended trading. The stock had already experienced a decline of over 5% during regular trading hours on Thursday.

Financial Results

Here is a summary of Sweetgreen’s financial results:

• Loss per share: 24 cents (Refinitiv consensus estimates had predicted 16 cents per share)
• Revenue: $152.5 million (versus analysts’ expectation of $156.7 million)

In the second quarter, Sweetgreen reported a net loss of $27.3 million, or 24 cents per share, which is an improvement from the $40.5 million net loss, or 37 cents per share, recorded in the same quarter of the previous year.

The company’s adjusted EBITDA was $3.3 million, a positive swing from the $7.8 million loss in the same period last year.

Expansion of Margins and Cost Savings

Sweetgreen’s CEO, Jonathan Neman, highlighted the expansion of the company’s margin at the restaurant level. The chain’s restaurant-level profits increased from 19% to 20% compared to the previous year. Neman attributed this improvement to labor savings resulting from reduced turnover and more efficient store staffing. Additionally, the company has been able to spend less on ingredients while maintaining high quality.

Net Sales and New Locations

Net sales for Sweetgreen rose by 22% to $152.5 million, driven by the opening of new restaurants. Notably, the company opened its automated Infinite Kitchen restaurant in Naperville, Illinois, in May. This location achieved restaurant-level margins of 26%, surpassing the typical margin for new Sweetgreen restaurants. Another Infinite Kitchen is scheduled to open in Huntington Beach, California, by the end of the year.

Challenges and Outlook

Sweetgreen faced challenges with a drop in delivery orders and promotions aimed at boosting its loyalty program, which negatively impacted same-store sales. Despite these challenges, the company expects restaurant-level margins of 16% to 18% for 2023, up from the previous range of 15% to 17%. It also projects adjusted EBITDA to range from a $10 million loss to breaking even, in contrast to the earlier estimate of a loss between $13 million and $3 million. Sweetgreen maintains its outlook of revenue between $575 million and $595 million and same-store sales growth of 2% to 6%.