CAVA is still going strong. Its IPO halo seems to be diminishing with consumers but that’s not stopping the fast-casual restaurant brand from beating analysts’ predictions as the company announced its financials on Tuesday during its first-quarter earnings call.
Despite a 1.2% decrease in traffic, the Washington D.C.-based chain saw 2.3% same-store sales growth for the quarter, driven by 3.5% sales increase due to menu prices.
CEO Brett Schulman attributed the traffic decrease to unfavorable weather during the quarter that ended April 21.
While not the huge numbers of its fast-casual peers like Sweetgreen, Chipotle, and Wingstop, 2.3% is still a solid quarter in this economy.
The more impressive numbers come from year-over-year revenue growth of 30.3%, partially due to 14 net new restaurant openings during the first quarter, representing 23% unit growth.
Adjusted EBITDA was up 99% year-over-year to $33.3 million versus the consensus expectation of $27 million.
Systemwide AUVs reached $2.6 million.
That’s led CAVA to adjust its expectations for the rest of the year.
CAVA expects 2024 same-store sales growth of 4.5% to 6.5%, compared to the original estimate of 4.5%. Adjusted EBITDA guidance was lifted to a range of $100 million to $105 million from a prior outlook for $86 million to $92 million.
Net new restaurant openings of 50 to 54 are anticipated.
Financial-services company William Blair said in a statement that it sees “the potential for CAVA to generate more than $2.5 billion in revenue and roughly $400 million of adjusted EBITDA by 2032 at roughly 1,000 locations.”
Even with this news, shares of CAVA jumped to a new all-time high of $86.25 before earnings, and shares were down 5.15% to $77.30 after the end of market earnings call.
While CAVA may not have hit the same-store sales or traffic numbers many had hoped for, it is confident in the future as it’s been investing heavily in new menu items and technology.
A new steak protein option, which will debut nationwide on June 3 after a successful seven-month test in Boston and Dallas, is expected to boost dinner sales.
With many consumers trading down from casual-dining restaurants to fast casual, many chains are trying to emphasize their heartier offerings at that evening daypart.
Sweetgreen also just rolled out steak nationwide and specifically mentioned that it was to increase visits at dinner.
CAVA is also hoping for this dinner appeal.
Schulman said that dinner sales make up 46% of the chain’s revenue.
The steak is priced 20% higher than other proteins, which may also help the chain’s financials.
Menu items are not all CAVA is investing in though. The company is taking the next step and investing in technology, much like its competitors.
In 2021, CAVA received $190 million in funding that Schulman said would go toward technology advancements at CAVA, including AI.
That AI will be tested in four restaurants before the end of summer. The purpose of the “Connected Kitchen” is to identify levels of ingredients in the makeline, alerting grill staff when a refill is needed imminently so they can begin cooking another batch.
Eventually, the company hopes to include inventory management in this AI program, though that’s not indicated in the current plans, to save managers time.
During the earnings call, CAVA indicated that it would expand its testing of a new labor model that reallocates existing resources to increase efficiency. That test will expand from its current 29 restaurants to 60 across the system next month, with a company rollout by the end of this year.
Drive-thru units will be about one third of developments in 2024 and have AUVs around 10% to 15% higher than the traditional units. Currently there are 38 drive-thru pickup lanes in the system.
