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CAVA Shares Get Torched After Lukewarm Sales — Peers Catch the Smoke Too
When your same-store sales come in at a third of what Wall Street wanted, the market doesn’t just frown — it grabs the hot sauce and sets your stock on fire.
CAVA Group (NYSE: CAVA), the fast-casual Mediterranean darling once hyped as the “Chipotle of hummus,” dropped 19% in after-hours trading on Tuesday after its Q2 results served up more pita than punch.
The Quarter in a (Less-Than-Overstuffed) Pita
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Revenue: $278.2M, up 20.3% year-over-year — helped by 16 new restaurants, not by a rush of new diners.
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Same-restaurant sales growth: +2.1%, way below the +6.1% consensus. Nearly all of it came from price hikes and product mix tweaks. Guest traffic? Flat as a pressed falafel.
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Margins: Restaurant-level profit margin dipped 20 basis points to 26.3%, hit by higher steak rollout costs and wage hikes, partially offset by higher sales leverage.
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Earnings: Adjusted EBITDA $42.1M (beat estimates), EPS $0.16 (beat by $0.03) — but net income actually slipped from $19.7M last year to $18.4M this year.
Translation: The top line looked healthy, the bottom line looked meh, and the middle (traffic) looked like it had been skipping leg day.
The Guidance Diet Plan
CAVA now expects 2025 comp sales growth of 4%–6% (down from 6%–8%) and 64–68 new openings (down from earlier guidance). Adjusted EBITDA guidance stays at $152M–$158M, suggesting they’re not throwing in the kitchen towel just yet.
CEO Brett Schulman tried to keep spirits up, noting the 400th restaurant milestone and a still-ambitious goal of 1,000 locations by 2032. But investors, like picky lunch customers, clearly didn’t love today’s special.
Collateral Damage: Chipotle, Noodles, Portillo’s
The CAVA sell-off sent ripples across the fast-casual pond:
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Chipotle (CMG): down in sympathy (or maybe just annoyed by the “Chipotle of…” comparisons).
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Noodles & Co (NDLS): slipped, perhaps on fears carbs are out and cold tzatziki is in trouble.
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Portillo’s (PTLO): also dipped, proving no hot dog is safe from the macro menu.
The Real Recipe Problem
CAVA’s long-term growth story still sizzles — unit economics remain strong, digital sales are 37% of revenue, and average unit volumes (AUVs) for 2025’s new stores are tracking above $3M.
But here’s the rub: flat traffic in a premium-rent, high-labor-cost business is like running a marathon in sandals. You might finish, but you’re going to feel it.
Wall Street’s math: at a triple-digit P/E ratio, you need to deliver triple-digit excitement. Two percent comps don’t cut it.
Bottom Line for Investors
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If you’re a believer: CAVA’s drop could be a healthy pullback for a long-term compounder — especially if you buy the “1,000 locations by 2032” dream and trust management to re-ignite traffic.
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If you’re cautious: Wait until they prove they can drive actual guest counts, not just menu prices. The macro environment is softening, and restaurant stocks can feel that pinch before your credit card does.
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If you’re skeptical: This may be another example of a great concept hitting the limits of scale before the customer base says, “Yeah, I’m good.”
For now, the hummus is still creamy — but the market clearly wanted more spice.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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