Cava Group Inc. expects higher profits this year, although it cautioned that a muddy consumer-spending picture could limit sales gains.
(Bloomberg) — Cava Group Inc. expects higher profits this year, although it cautioned that a muddy consumer-spending picture could limit sales gains.
The shares rose 5.2% at 4:31 p.m. in late New York trading.
In its first annual outlook after going public in June, the fast-casual Mediterranean chain projected restaurant-level profit margins of at least 23%, which is three percentage points higher than in 2022. Same-restaurant sales growth, a measure of how stores open for at least a year are performing, are seen 13% to 15% higher. At the low end, that figure implies a slight deceleration from last year’s 14.2% advance.
For now, Cava is maintaining its allure, with same-store sales in the three months through July 19 powered by higher diner traffic — in contrast with some peers. Still, Chief Executive Officer Brett Schulman is keeping an eye on how the restart of student loan payments, higher utility bills and elevated interest rates are affecting consumer spending.
“We’ve been very pleased with the momentum in the business,” Schulman said in an interview. “But like many others, we’re mindful of the potential macroeconomic headwinds on the horizon.”
Cava’s Mediterranean dishes, which include crispy falafel pitas and lemon chicken bowls, are resonating as the chain expands into states such as Missouri and Rhode Island, Schulman said. It opened 16 new locations in the second quarter. The company’s diners ordered more premium dishes in the period, bolstering sales, he said, adding that prices have risen less than 4% from the prior year.
Traffic has remained positive into the third quarter but has moderated slightly, Schulman said. Some customers are also opting for pickup over delivery, mirroring industry trends.
Cava revenue was $172.9 million in the quarter through July 9, up 27% from the prior year. Net income per share was 21 cents in the period, compared with a loss of $6.23 a year earlier.
The shares have risen 111% from its June 14 IPO through Tuesday’s close. The S&P 500 Index restaurants index has advanced 3.5% in that period.
The company expects to open a total of 65 to 70 new locations this year.
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