Shares of Cava Group Inc. tumbled by more than 22% in pre-market trading on Wednesday, extending steep after-hours losses from Tuesday, after the Mediterranean fast-casual chain lowered its full-year same-store sales forecast.
The move comes as the company faces challenging comparisons with last year’s performance and navigates what its chief executive described as a “fog” over the US economy.
The steep selloff has decreased the share price by close to 27% YTD.
CEO cites unpredictable economic backdrop
Chief Executive Brett Schulman said in an interview on Tuesday that shifting economic conditions, including fluctuating tariff policies, had left consumers uncertain.
“That fog has gotten denser and lighter depending on the month, depending on the tariff policy that comes out in a given week,” Schulman said.
He added that President Donald Trump’s budget law provided some clarity — “good or bad” — but absent that, many consumers are in “a bit of a holding pattern.”
The company now expects full-year same-store sales growth of 4% to 6%, down from prior guidance of 6% to 8%.
While still ahead of the broader industry, the revision fell short of analysts’ expectations.
Growth outlook still exceeds industry average, but slowdown is notable: analysts
Schulman noted that sales trends moderated in the second quarter but regained momentum in the third.
However, the company is facing tougher comparisons to last year, when the launch of grilled steak drew more dinner orders and male customers.
For the second quarter, revenue rose 20.3% year-over-year to $278.2 million, missing Wall Street’s estimates.
Same-store sales grew 2.1%, also below expectations. GAAP earnings per share came in at 16 cents, topping forecasts of 13 cents.
Tracey Ryniec, a strategist at Zacks, said in emailed comments in a MarketWatch report, that while Cava’s growth outlook still exceeds the industry average, the slowdown was notable.
“Cava isn’t so special after all,” she said.
“After blowing out same-store sales in Q1 by 10.8%, it fell in line with the industry at 2.1% in Q2. It’s not negative, so that’s helpful,” she said.
Industry under pressure to offer value
Cava’s update comes as the restaurant sector intensifies efforts to attract budget-conscious diners.
McDonald’s has noted continued spending from higher-income customers, while lower-income patrons remain pressured.
Wendy’s recently said multiple promotions had confused customers and hurt sales. Starbucks is revamping store layouts to improve customer experience.
In May, Cava announced plans to redesign its restaurants with more natural light, comfortable seating, and greenery to create warmer, more inviting spaces.
“We will continue to challenge the idea that the dining room is a relic of the past,” Schulman said at the time.
Investing in automation to ease kitchen strain
Separately on Tuesday, Hyphen — a developer of automated make-lines for restaurant kitchens — said it raised $25 million in a funding round led by Cava and Chipotle Mexican Grill.
The investment reflects growing interest in automation as restaurants grapple with delivery demand and labour shortages.
Schulman said automation could enhance customer service rather than replace staff. “We think automation can be relevant to enhance the human experience, not replace it,” he said.
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