Sweetgreen's disappointing sales offer a reality check for restaurants, after Cava's rally

By Bill Peters

Salad chain is currently testing new wrap sandwiches, offered at lower prices, as diners stay selective on spending

Fast-casual chains like Sweetgreen and Chipotle have been dealing with discounted competition from fast-food and sit-down dining chains.

A day after Cava's upbeat sales forecast raised hopes for the restaurant industry, rival fast-casual chain Sweetgreen is bringing them back to earth.

Sweetgreen (SG) on Thursday forecast another year of falling same-store sales and said it would accelerate plans to turn itself around, as it deals with budget-conscious consumers and aggressive competition and discounting.

The fast-casual salad chain, in a statement, said the results came up short of even its own expectations. Those results arrived just two days after Sweetgreen launched new wrap sandwiches, priced a bit lower than some of its bowls and salads, after more expensive fare kept some customers away last year.

Shares of Sweetgreen (SG) were down 7% after hours on Thursday.

The drop in Sweetgreen's stock price came after shares of rival Cava (CAVA) rocketed higher on Wednesday, following a forecast for a same-store sales gain this year. The Mediterranean fast-casual chain's CEO said customers could be getting tired of chasing discounts. However, other chains, like McDonald's (MCD) and Chipotle (CMG), have been more tempered in their expectations for the year.

Shares of Cava were down 0.6% after hours Thursday.

Sweetgreen's management on Thursday said it would move ahead with more urgency to strengthen service standards, introduce new menu items and speed up checkout times. It also plans to improve marketing around things like high-quality ingredients.

CEO Jonathan Neman said that the company was currently testing new wrap sandwiches, which it introduced on Tuesday in parts of New York, the Midwest and California. If those items do well, he said Sweetgreen plans to expand the offerings beyond that trial run in the middle of the year. The prices for those wraps start at $10.95.

Sweetgreen said fourth-quarter sales fell 3.5% to $155.2 million, with a per-share loss of 42 cents. Both figures were worse than analysts expected. Same-stores sales were down 11.5%, which weren't as bad as anticipated.

The chain said it expects same-store sales to fall 2% to 4% this year.

Over the past year, fast-casual restaurants - which try to offer the quality of a sit-down chain at the speed of fast food - have been squeezed by value offerings from rivals like Chili's and McDonald's. Against that backdrop, Sweetgreen's stock is down 73.5% over the past 12 months. Over recent months, consumers have showed signs of waning interest in often-pricey salad and bowl offerings.

Ahead of the results, UBS analysts said Sweetgreen faced concerns over spending among younger consumers, who make up about a third of the people who visit the chain. They also noted that the chain has struggled in cities like Los Angeles and areas in the Northeast. During an earnings call in November, Sweetgreen said New York was its "most challenged market."

Many restaurants, after raising prices to cover for the past several years of supply shocks, are now trying to find ways to cut them after scaring customers away. But the discount war has weighed on margins and, in some cases, stock prices.

-Bill Peters

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02-26-26 2033ET