CAVA beats Q2 revenue estimates as same-store sales jump 9%

CAVA Group reported Q2 revenue of $368.4 million, up 31.3 percent year over year and 2.4 percent above consensus, with same-restaurant sales rising 9 percent.

"The glazed salmon rollout will be a roughly 100-basis-point headwind to restaurant-level margins," CFO Tricia Tolivar said.

GAAP profit of $0.19 per share beat the $0.18 consensus. Same-restaurant sales growth of 9 percent was driven by 5.3 percent guest traffic growth, with average unit volumes rising to $3.1 million. The chain ended the quarter with 476 locations, up from 459 at the end of Q1, and restaurant-level profit margin came in at 25.7 percent, down 60 basis points year over year on higher input costs from new menu launches and a rising mix of third-party delivery orders.

Metric	Actual	Consensus	Beat/Miss
Revenue	$368.4M	$360M	+2.4%
EPS	$0.19	$0.18	+$0.01
Same-restaurant sales	+9.0%	~8.6-11.4%	Beat

Shares jumped 10.2 percent to $67.62 after the report. Management reaffirmed full-year adjusted EBITDA guidance of $181 million to $191 million and same-restaurant sales growth of 4.5 percent to 6.5 percent. The company plans 75 to 77 net new openings this year, targeting more than 1,000 locations.

The Mediterranean fast-casual chain's 25.5 percent annualized revenue growth over the past five years has been driven by both new restaurant openings and strong existing-store performance. Over the last two years, CAVA has averaged 18.1 percent annual unit growth and 9.2 percent same-store sales growth, among the fastest in the restaurant sector.

The results come as the broader fast-casual sector faces headwinds. Sweetgreen cut its full-year outlook last week after a cyclosporiasis outbreak linked to recalled Taylor Farms iceberg lettuce knocked roughly 600 basis points off its July comparable sales, even though the company said it does not use the implicated lettuce. CAVA's fiscal second quarter ended in mid-July, just before consumer concern intensified, so the impact on tonight's numbers was minimal.

Digital orders now account for nearly 40 percent of CAVA's sales, giving the company a large pool of customer data through its CavaCore platform to personalize offers and forecast demand. The glazed salmon, launched in April as CAVA's first seafood item, contributed to the margin headwind but has driven menu innovation. The company is also testing Roasted Garlic Shrimp in select markets.

Wall Street has taken notice of the growth trajectory. Morgan Stanley upgraded CAVA to Overweight with a $90 price target in July, and UBS raised its rating to Buy with a $90 target in June. The stock had fallen about 15 percent in the month before earnings, erasing most of this year's rally, making the post-earnings jump particularly notable.

The guidance hold after a strong first half is the signal investors will focus on heading into the back half of the fiscal year. Holding full-year guidance steady suggests management expects July traffic to hold up despite the food safety headlines affecting the broader sector. Investors will watch the Q3 earnings call for updated same-restaurant sales trends and any impact from the cyclosporiasis outbreak.

This article is for informational purposes only and does not constitute investment advice.