Cava Group, the fast-casual Mediterranean restaurant chain, reported better-than-expected earnings for the second quarter late Thursday, resulting in a surge in its stock price to a new record high on Friday.
The company announced adjusted earnings of 17 cents per share, surpassing analysts’ expectations of 13 cents. Revenue increased by 35% year-over-year to $231.4 million, compared to the anticipated $219.5 million.
This quarter marked the first earnings decline for Cava in six quarters. Same-store sales rose by 14.4%, though this growth was slower than last year’s 18.2%. However, it still exceeded analysts’ expectations of an 8.2% increase.
CEO Brett Schulman highlighted in the earnings release that the company experienced a 9.5% increase in traffic and opened 18 new locations during the quarter.
Following these results, Cava slightly upgraded its future guidance. The chain now forecasts same-restaurant sales growth for 2024 to be between 8.5% and 9.5%, a revision from the previous estimate of 4.5% to 6.5%. Cava also expects adjusted EBITDA to fall between $109 million and $114 million, up from the previously expected range of $100 million to $105 million.
In addition, the company plans to open 54 to 57 new restaurants, exceeding the earlier goal of 50 to 54 locations. Cava anticipates its restaurant-level profit margin to be between 24.2% and 24.7%, an increase from the May prediction of 23.7% to 24.3%.
On Monday, Stifel projected continued strong performance in same-store sales and new restaurant openings. The firm analyzed customer data and indicated a sequential improvement in traffic for Cava since the first quarter, believing the company’s sales momentum is sustainable. Stifel expects Q2 results to demonstrate the “organic flywheel effect,” where the brand’s expansion enhances consumer awareness and product appeal.
Stifel has raised its price target for CAVA stock from $90 to $110, maintaining a buy rating.
CAVA shares soared nearly 20% on Friday, closing at a record high of 122, following a 0.9% drop on Thursday, just shy of Wednesday’s peak of 102.90. The stock is well above its buy zone for a cup base, having surpassed the 98.69 buy point on August 16. The current buy zone, extending 5% above the buy point, reaches up to 103.62.
Cava Group stands at the forefront of the Retail-Restaurants sector according to IBD Stock Checkup, with CAVA stock rising approximately 184% this year.