Cava Group (NYSE: CAVA) raised its full-year sales and profit outlook on Tuesday, after reporting first-quarter results that defied broader concerns about a slowdown in the restaurant industry. The company's performance was fueled by a significant increase in customer traffic, offering a bright spot for investors watching consumer spending trends.
For the quarter ended April 19, Cava's same-restaurant sales climbed 9.7%, with guest traffic rising 6.8%. Menu price and mix contributed an additional 2.9% to the growth. The company uses same-restaurant sales to measure performance at locations open at least a year.
Revenue reached $438.3 million, surpassing analyst expectations of $418.5 million, according to MarketBeat. Net income, however, slipped to $23.6 million from $25.7 million a year earlier, due to a smaller tax benefit from equity compensation and higher depreciation and amortization costs. Restaurant-level profit margin held steady at 25.1%.
Shares of Cava jumped 6.1% to $82.80 in after-hours trading, recovering from a 2.3% decline during the regular session. The move reflected investor optimism around the company's ability to drive traffic and its upwardly revised guidance.
Cava now expects same-restaurant sales growth of 4.5% to 6.5% for the full year, up from its previous forecast of 3% to 5%. The company also raised its adjusted EBITDA outlook to a range of $181 million to $191 million, and increased its net new restaurant target to 75 to 77 units, up from 74 to 76. Pre-opening costs are now expected to be between $22 million and $22.5 million, higher than the earlier range of $19.5 million to $20 million.
During the quarter, Cava opened 20 net new restaurants, bringing its total count to 459, a 20.2% increase year-over-year. CEO and co-founder Brett Schulman highlighted expansions into Cincinnati, St. Louis, and Columbus, and emphasized the company's "compelling value proposition" in the current market.
The strong results stand in contrast to challenges faced by other restaurant chains. The Wall Street Journal has noted that many operators are focusing on value as consumers remain cautious. McDonald's has introduced value meals, while Shake Shack is grappling with higher costs to boost traffic. Chipotle and other fast-casual brands have also faced pressure to appeal to younger and lower-income customers.
Schulman has resisted aggressive price increases, holding the line on items like the $11.67 grilled chicken bowl to protect value and attract cost-conscious diners. However, the company cautioned that results could still be affected by competition, store execution, food and labor costs, and consumer trends.
Cava's higher outlook increases the pressure to deliver consistent results. The company noted that a greater share of sales from third-party delivery and higher wage spending partially offset the quarter's sales leverage. Despite these headwinds, the key takeaway for the market was clear: more customers are walking through Cava's doors, providing a strong counter-narrative to the broader restaurant slowdown.
