CAVA Group (CAVA, Financial) saw a stock decline of 6% despite reporting strong Q1 results. The Mediterranean fast-casual chain exceeded expectations in both EPS and revenue. It slightly increased its FY25 adjusted EBITDA outlook to $152-159 million from $150-157 million and reaffirmed its FY25 same-restaurant comps of +6-8%. However, Q1 comps were lower than those in Q4.
- CAVA has a history of impressive comps, focusing on locations open for at least a year. It reported strong Q1 comps of +10.8%, with guest traffic growth at +7.5% and +3.3% from menu price and product mix. This is a decrease from +21.2% in Q4 and +18.1% in Q3, yet remains notable given the economic environment.
- This summer, CAVA launched its Spice World campaign, featuring bold, spicy offerings. New items include Hot Harissa Pita Chips and two chef-curated bowls: Steak + Harissa and Spicy Lamb + Avocado.
- CAVA opened 15 new locations in Q1, bringing the total to 382. It increased its FY25 outlook to 64-68 locations from 62-66 and aims for at least 1,000 restaurants by 2032. It entered Indiana and expanded in Florida, entering the Greater Miami area. Future plans include expansion in the Midwest and Mid-Atlantic, with new markets in Detroit and Pittsburgh.
- Despite economic challenges, CAVA's data shows no significant consumer struggle. Premium item sales, like pita chips and steak, remain high. The average per person spend is increasing, with positive traffic across all regions, income levels, formats, and times of day.
The stock decline may be due to Q1 comps being lower than Q4 and Q3, and the lack of an increase in full-year comp guidance despite a positive Q1 trend. Additionally, the upcoming lapping of the popular steak launch in 2H25 could present a comp challenge.
We were cautious ahead of this report, especially after Sweetgreen's (SG, Financial) weak results last week. Both chains are on the higher end of the price spectrum. However, CAVA's positive traffic comp was a pleasant surprise, as it indicates growth through increased customer visits rather than just price hikes.
