Sweetgreen shares tumble after salad chain reports weak sales but narrowing losses

Sweetgreen on Thursday reported quarterly sales that fell short of Wall Street’s expectations, but losses did narrow from the year-earlier period.

The company also raised its forecast for restaurant-level margins and said it could break even on its adjusted earnings before interest, taxes, depreciation and amortization this year. Sweetgreen, which went public in November 2021, is aiming to turn a profit for the first time by 2024.

Shares of the company fell 7% in extended trading. The stock closed Thursday down more than 5%.

Here’s what the company reported:

• Loss per share: 24 cents (That’s not comparable to an estimate of 16 cents, according to Refinitiv consensus estimates.)
• Revenue: $152.5 million vs. $156.7 million expected by analysts polled by Refinitiv

The salad chain reported a second-quarter net loss of $27.3 million, or 24 cents per share, narrower than its net loss of $40.5 million, or 37 cents per share, a year earlier.

The company reported an adjusted EBITDA of $3.3 million, swinging from a loss of $7.8 million in the year-ago period.

“We were able to expand our margin pretty significantly at the restaurant-level margin, all while doing it with less G&A,” CEO Jonathan Neman told CNBC.

The chain’s restaurant-level profits expanded to 20% from 19% in the year-ago period.

Neman said the company’s improved restaurant-level margins were largely due to labor savings from less turnover and more efficient store staffing. He also said the company has been spending less on its ingredients.

“I think our supply chain procurement team did an awesome job around the cost of our goods, maintaining the high quality we expect, but doing it in a much more disciplined way,” Neman said.

Net sales rose 22% to $152.5 million, fueled by new restaurants.

One of those new locations includes its automated Infinite Kitchen restaurant in Naperville, Illinois, in May. The location has restaurant-level margins of 26%, well above that of the typical new Sweetgreen restaurant, Neman told investors on the conference call. A second Infinite Kitchen will open in Huntington Beach, California, by the end of the year.

The company’s same-store sales grew 3% in the quarter, bolstered by price hikes. But a drop in delivery orders and promotions to boost its loyalty program weighed on its same-store sales, CFO Mitch Reback said.

For 2023, Sweetgreen now expects restaurant-level margins of 16% to 18%, up from its prior range of 15% to 17%. It also expects adjusted EBITDA in a range of a $10 million loss to breaking even. The company previously said is adjusted EBITDA would be a loss of $13 million to $3 million.

The company reiterated the rest of its outlook, projecting revenue of between $575 million and $595 million and same-store sales growth of 2% to 6%.