CAVA shares surge 10% on strong comparable sales growth, new unit performance

WASHINGTON – CAVA Group, Inc. (NYSE:CAVA) saw its shares jump nearly 10% after the fast-casual Mediterranean restaurant chain reported second-quarter earnings and revenue that surpassed analyst estimates. Comparable sales growth and new unit performance during the quarter also impressed. 

The company posted adjusted earnings per share of $0.17, beating the consensus forecast of $0.10. Revenue climbed 35.2% YoY to $231.4 million, exceeding expectations of $209.7 million.

CAVA’s same-restaurant sales growth was robust at 14.4%, including traffic growth of 9.5%. The same-restaurant growth came well ahead of consensus estimates of 7.4%. 

The company opened 18 net new restaurants during the quarter, topping the estimated 12 openings. 

“We were pleased with the strength of the comp and new unit performance, with the latter outpacing the company’s underwriting targets,” Stifel analysts commented in a post-earnings note.

“We believe that confirmation of new unit performance is a critical factor for the stock, as unit growth will build brand awareness and, in turn, comp sales.”

Separately, Morgan Stanley analysts said the CAVA story “continues to be very strong,” emphasizing that the company is “one of few still driving impressive traffic, sales and unit growth y/y.”

“Setting aside the legitimate valuation debate, which may well become more prominent, upside for numbers continues to be visible here, and therefore we think this supports the stock post print, as we have seen for some others in the same boat this earnings season where fundamentals are good,” they added.

CAVA’s restaurant-level profit margin expanded to 26.5% from 26.1% a year ago, despite higher labor costs and expenses related to the launch of grilled steak in June.

Looking ahead, CAVA raised its full-year 2024 guidance. The company now expects adjusted EBITDA of $109 million to $114 million, up from its previous outlook of $100 million to $105 million.

“Our results in the second quarter continued to demonstrate the strength of our category-defining brand and our unique and compelling value proposition,” said Brett Schulman, Co-Founder and CEO.

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