Cava's Impressive Performance Ahead of Q2 Earnings
Cava, the Mediterranean fast-casual restaurant chain, is poised for an exciting financial reveal with its second-quarter earnings report. Scheduled for release after the market closes on Thursday, analysts predict a robust 27% increase in net sales, reaching $219 million. Additionally, adjusted earnings per share (EPS) are anticipated to be $0.13. The company's same-store sales are expected to grow by 7.45%, a rise partly fueled by the successful introduction of a new grilled steak menu item. According to Stifel analyst Chris O'Cull, this steak option "sold out quickly in many markets," highlighting its popularity among customers.
Current Stock Performance and Market Sentiment
On the stock market front, Cava recently achieved an all-time high with its stock price reaching $102.39. Year-to-date, Cava's share price soared by over 140%, significantly outperforming competitors like Chipotle, which saw a 20% increase, and the S&P 500 at 19%. Analysts like O'Cull advise investors to capitalize on any short-term market fluctuations, citing strong company fundamentals. O'Cull has set a new price target of $110 for Cava's stock.
Growth Strategy and Market Expansion
Cava's long-term strategy is focused on steady expansion. By 2032, the company aims to open 1,000 locations. This growth plan is supported by Citi analyst Jon Tower, who highlights opportunities for expanding unit growth, same-store sales, pricing, and margins. Tower notes that as Cava shifts towards markets with lower costs, margin improvements are expected. In the first quarter, Cava added 14 new locations, increasing its total to 323.
Fast-Casual Dining Industry Context
The fast-casual dining sector is currently experiencing a renaissance, with chains like Cava thriving despite broader industry slowdowns. Cava's CEO, Brett Schulman, emphasized the chain's appeal across diverse income segments, offering affordable Mediterranean cuisine that combines flavor and health.
Other fast-casual brands like Chipotle, Shake Shack, and Sweetgreen have also reported strong performance. For instance, Chipotle's same-store sales surged by 11.1%, surpassing Wall Street's expectations of 9.23%. Shake Shack experienced a 4% rise, while Sweetgreen reported a 9% increase in same-store sales, the best in two years.
Q2 Financial Expectations and Industry Outlook
For Cava's upcoming Q2 report, Wall Street predicts:
- Revenue: $219.5 million, up from $172.89 million last year.
- Adjusted EPS: $0.13, compared to $0.35 previously.
- Same-store sales growth: 7.45%, down from 18.20%.
In the first quarter, Cava revised its sales growth guidance to 4.5% to 6.5%, an upward shift from earlier projections of 3% to 5%. However, Citi's Tower anticipates that Cava might report "some sales moderation" as the year progresses, prompting a potentially more conservative management outlook for the latter half of 2023.
