Confronted with slumping lunch visitors from downtown places of work and waning shopper curiosity in expensive salads, Sweetgreen CEO Jonathan Neman is leaning into America’s 2020s-era protein craze. The fast-casual salad chain introduced vital adjustments to its menu this summer time—a response to shifting habits in company America, the place workers are much less prone to order supply salads for solitary desk lunches, and are demanding extra worth for his or her greenback.
Sweetgreen’s turnaround technique contains 25% greater parts of hen and tofu, recipe upgrades for proteins like hen and salmon, and member offers on salads as low-cost as $13. The choice follows months of disappointing gross sales: Similar-store gross sales have dropped by as a lot as 7.6% this summer time, with a reported 10.1% plunge in buyer visitors. Sweetgreen additionally minimize its annual outlook for the second quarter in a row because it struggles to maintain budget-strained diners excited by salads averaging $16 a bowl.
Similar-store gross sales at the moment are anticipated to say no 4%-6% for 2025, a stark reversal from earlier hopes for flat efficiency. It was a bruising second quarter for the salad chain, and traders responded by sending Sweetgreen shares plunging greater than 25% to their lowest ranges since 2023. The inventory has misplaced greater than 70% of its worth since January, and is buying and selling properly beneath its IPO worth of $28.
“So I believe it’s fairly apparent that the patron isn’t in an excellent place total,” Neman mentioned Thursday within the firm’s second-quarter earnings name. A number of elements have converged to drive Sweetgreen’s hand. The largest: Working habits have completely modified because the pandemic. Company lunch orders, as soon as the spine of Sweetgreen’s city enterprise, have slumped as workplace occupancy fluctuates and hybrid schedules persist. Prosperous prospects, lengthy prepared to shell out for digitally ordered salads, at the moment are scrutinizing each expense as inflation pinches and financial uncertainty lingers.
Enterprise districts, as soon as Sweetgreen’s prime areas, are now not full of lunchtime regulars. As a substitute, city shops now rely upon native visitors and dinner orders—which require extra substantial fare than a bowl of greens. Sweetgreen’s personal shopper surveys reveal company need extra protein—the gravitational heart of a “meal” that feels value its ticket worth.
Slowing development and mounting losses
For the quarter ended June 29, Sweetgreen reported whole income of $185.6 million, barely up from $184.6 million a 12 months prior—a rise of simply 0.5% and properly beneath Wall Road expectations of $191.73 million. Site visitors sharply deteriorated at the same time as Sweetgreen raised menu costs, with executives citing a “extra cautious shopper atmosphere” and headwinds in city markets the place workplace lunch visitors stays weak.
Restaurant-level revenue margin dropped to 18.9% from 22.5% a 12 months prior, squeezed by larger meals prices (notably new tariffs on packaging) and rising labor prices. The corporate posted a internet lack of $23.2 million, widening from a $14.5 million loss within the prior 12 months, and reported adjusted EBITDA of $6.4 million—down by practically half from final 12 months’s $12.4 million.
Neman cited drag from the revamped SG Rewards loyalty program, which prompted fewer repeat visits; solely one-third of Sweetgreen eating places at present meet operational requirements for pace and consistency. The agency not too long ago employed former Chipotle govt Jason Cochran as COO to deal with points starting from portioning to hurry throughout each digital and in-store channels. Sweetgreen can be closing two underperforming areas and recording a $5.3 million impairment cost.
Administration cautiously optimistic, however confidence shaken
Regardless of the rocky efficiency, Sweetgreen is forging forward with enlargement, opening 9 new eating places (together with 4 Infinite Kitchens) in Q2, and plans for at the least 40 new openings this 12 months—many that includes automation and decrease labor necessities. Neman and CFO Mitch Reback burdened “actions taken are already exhibiting optimistic outcomes,” pointing to regular enchancment in visitor frequency from the revamped loyalty program and enthusiasm for seasonal menu objects.
Nonetheless, the road stays skeptical. Sweetgreen’s stumbles have strengthened doubts about whether or not premium salad chains can thrive in at the moment’s value-conscious eating atmosphere, particularly as hybrid work saps the desk-lunch crowd and shoppers seek for extra reasonably priced choices.
Suggestions on the brand new protein parts has been swift: Visitor satisfaction improved by 30% following the July rollout of bigger hen and tofu servings. In current weeks, Sweetgreen has expanded its repertoire with “protein plates”—bigger servings of steak, hen, or tofu over grains, aimed toward profitable dinner visitors and assembly buyer demand for heartier choices.
When Sweetgreen first examined steak protein plates in Boston, the merchandise accounted for practically 20% of dinner orders—an indication that extra substantial meals could also be a key to capturing misplaced income from desk salads. “We have to meet folks the place they’re. For us, it’s about more healthy choices which are nonetheless filling,” Neman mentioned. Steak is sourced from grass-fed, regenerative farms to maintain Sweetgreen’s sustainability ethos intact.
At the same time as Sweetgreen tweaks its menu, evaluations and scores stay combined. Some loyalists grumbled for months about skimpy hen parts. Reddit threads catalog the query of whether or not parts are getting smaller for the $16 bowl, and firm executives acknowledge that consistency stays a priority.
For this story, Fortune used generative AI to assist with an preliminary draft. An editor verified the accuracy of the data earlier than publishing.
