Cava (CAVA) appears to be in good form ahead of its second-quarter earnings report.
After the market closes Thursday, the Mediterranean fast-casual chain is expected to report net sales up nearly 27% to $219 million and adjusted earnings per share of $0.13.
Same-store sales are expected to rise 7.45% thanks to increased traffic and the successful launch of Grilled Steak, which Stifel analyst Chris O’Cull said “sold out quickly in many markets.”
“Deal activity will accelerate over the next two years, with steak launches being the most significant driver,” Wedbush analyst Nick Setian said in a statement.
Cava shares hit a record high of $102.39 on Wednesday. The stock is up more than 140% year to date, compared with a 20% gain for Chipotle (CMG) and a 19% gain for the S&P 500 (^GSPC).
“Fundamentals remain strong, so we encourage investors to take advantage of the volatility caused by short-term sentiment fluctuations,” Ocull said, raising his price target to $110.
CAVA in Waldorf, Maryland, is introducing digital order pickup. (CAVA)
Slow and steady expansion has been Cava’s go-to approach: The company plans to grow the number of Cava stores to 1,000 by 2032.
Citi analyst John Tower said in a client note that there’s still room to grow: “Increasing store density and margin tailwinds as stores move into lower-cost markets will drive store-level growth opportunities and continue to reposition opportunities for individual same-store sales, price and margin improvement.”
The company opened 14 new locations in the first quarter, bringing its total to 323.
Cava’s growth comes at a time when fast-casual dining appears to be bucking the overall food industry slowdown as consumers become more value-conscious.
Cava CEO Brett Schulman recently told Yahoo Finance’s Morning Brief that the chain is seeing “consistent strength across all revenue segments.”
“We are able to offer a unique mix of Mediterranean cuisine that combines flavor and health at a reasonable price,” he said.
StockStory aims to help retail investors beat the market.
Chipotle reported strong beats in its report, reporting same-store sales growth of 11.1% year over year, beating Wall Street’s expectations of 9.23%. Shake Shack (SHAK) saw same-store sales increase of 4%, beating expectations of 3.2%.
Sweetgreen (SG) reported its strongest same-store sales growth in two years, rising 9%, driven by increased foot traffic and higher prices.
“We’re going to be very careful about how we spend it,” the company’s CEO, Jonathan Neman, told Yahoo Finance. [pricing power]Neman argued that the chain has increased prices less than its competitors since the pandemic.
“If you look at the relative price differential between Sweetgreen, its fast-casual competitors and its QSRs, the gap has really closed. At the QSRs, you can’t get in or out for under $15 now,” he told Yahoo Finance.
The story continues
Here’s what Wall Street expects from Cava’s second quarter report, compared to last year’s second quarter report.
Revenue: $219.5 million ($172.89 million in the same period last year)
Adjusted earnings per share: $0.13 ($0.35)
Same-store sales growth: 7.45% vs. 18.20%
The company raised its first-quarter sales growth outlook to 4.5% to 6.5% from its previous forecast of 3% to 5%.
City Tower said it expects Kava, like the rest of the industry, to “experience some moderation in sales” as it enters the third quarter, “which may lead management to adopt a more conservative stance in the second half of the year.”
—
Brooke DiPalma is a senior reporter at Yahoo Finance. Follow @ on X.Brooke DiPalma Or email me at bdipalma@yahoofinance.com
Find all the latest retail stock news and events here to better tailor your investment strategy.