Cava inventory tumbled 16% in afternoon buying and selling on Wednesday, making it the newest fast-casual chain to really feel Wall Road’s wrath after reporting disappointing quarterly gross sales.
A yr in the past, eateries like Chipotle Mexican Grill and Cava had been reporting double-digit same-store gross sales progress, even because the broader restaurant trade posted falling visitors and slumping gross sales. However instances have modified. This spring, fast-casual chains noticed foot visitors decline as gross sales slowed down and even shrank.
To elucidate the downturn, executives have mentioned that diners are “cautious,” within the phrases of Sweetgreen CEO Jonathan Neman, or coping with an financial “fog,” in accordance with Cava CFO Tricia Tolivar.
And simply as diners are discovering the reason why to chop again on their Shake Shack burgers or Chipotle bowls, buyers are trimming their fast-casual holdings after rewarding the businesses final yr for outperforming the remainder of the trade. To this point in 2025, Shake Shack shares have fallen 16%; Chipotle inventory has slid 28%; Cava shares have tumbled 37%; and Sweetgreen inventory has plunged 70%. Of the notable publicly traded fast-casual chains, solely Wingstop has managed to remain within the inexperienced this yr, with good points of 20%.
Extra broadly, buyers have grown extra cautious about betting on any eating places, given weak visitors traits and issues about shopper spending, in accordance with a analysis word on Sunday from UBS. Even fast-food firms have struggled with the visitors declines and sluggish gross sales progress, regardless of their historic popularity as a safer wager throughout financial uncertainty.
Whereas some fast-casual chains flagged company-specific causes for his or her weaker-than-expected outcomes, executives additionally mentioned that financial uncertainty is weighing on shoppers – and hurting their gross sales.
Typically, fast-casual diners are larger earnings and extra prone to have white-collar jobs. Nonetheless, Chipotle CEO Scott Boatwright blamed a pullback from low-income shoppers for the chain’s same-store gross sales declines of 4% within the second quarter.
“It’s important to look no additional than what is going on with our rivals with snack events or $5 meals. That is the place the buyer is drifting in the direction of, [with] worth as a worth level, due to low shopper sentiment. I feel as sentiment improves, the enterprise will enhance. I feel that is in all probability the most important headwind we face,” he instructed analysts on the corporate’s earnings convention name on June 23.
The College of Michigan’s index of shopper sentiment slid in April to 52.2, certainly one of its lowest-ever recorded readings. It held at that stage in Might earlier than rising in June to 60.7.
Quick-casual chains are seeing shoppers’ financial anxieties in their very own analysis, too.
“By way of our common shopper analysis, we hear issues about elevated costs, future job prospects and basic anxiousness in regards to the future,” Wingstop CEO Michael Skipworth mentioned on the corporate’s earnings convention name in late July.
The hen wing chain reported same-store gross sales declines of 1.9% for the quarter, a dramatic reversal in comparison with its progress of 28.7% within the year-ago interval.
On the corporate’s earnings convention name on Thursday, Sweetgreen’s Neman mentioned that the chain noticed “a extra cautious shopper surroundings beginning in April” — coinciding with the drop in shopper sentiment. A “subdued trade backdrop,” significantly in a number of of the chain’s greatest city markets, contributed to Sweetgreen’s “actually, actually tough quarter,” in accordance with Neman.
That is one cause why the salad chain reported a steeper-than-expected decline in its same-store gross sales and minimize its full-year forecast for the second straight quarter. Sweetgreen executives additionally attributed the weak quarterly efficiency to a troublesome comparability to final yr’s steak launch and the transition of its loyalty program.
To enhance its worth notion amongst prospects, Sweetgreen is growing its hen and tofu parts by 25%, bettering its hen and salmon recipes and implementing some promotional pricing, like $13 menu bowl drops for its loyalty program members.
As for Cava, the corporate had been wowing buyers with spectacular same-store gross sales progress since its preliminary public providing two years in the past. However this quarter, the Mediterranean chain reported same-store gross sales progress of two.1%, properly under Wall Road projections of 6.1%. Executives mentioned that it confronted troublesome comparisons to the year-ago interval’s same-store gross sales progress of 14.4%, which was fueled by its personal steak launch and robust demand at newer restaurant areas that waned this yr.
“Cava is not so particular in spite of everything. After blowing out identical retailer gross sales in Q1 of 10.8%, it fell in keeping with the trade at 2.1% in Q2. It isn’t adverse, in order that’s useful,” Tracey Ryniec, inventory strategist at Zacks Funding Analysis, mentioned.
Cava executives additionally acknowledged that financial issues are weighing on diners.
“Definitely, we’re working in a fluid macroeconomic surroundings and it is one which kind of creates a fog for shoppers the place issues are altering always and it is laborious to see the clear. And through these instances, they have a tendency to step off of the gasoline,” Tolivar mentioned on the corporate’s convention name on Tuesday night.
Nonetheless, Cava is not seeing shoppers commerce right down to cheaper protein choices, or experiencing another deeper enterprise issues, co-founder and CEO Brett Schulman mentioned. And because it enters the third quarter, its same-store gross sales have improved, Tolivar mentioned.
And Cava is not the one fast-casual eatery anticipating a return to type within the latter half of the yr, particularly as shopper sentiment improved in June and July.
Chipotle mentioned its visitors began rising once more because the burrito chain exited the quarter and continued into July. Sweetgreen has seen “modest” enchancment in its same-store gross sales to this point into the third quarter, in accordance with Neman.
And whereas Wingstop executives mentioned that they are nonetheless seeing weaker shopper demand, the chain is going through simpler comparisons to final yr’s efficiency.
