Shares of CAVA Group (NYSE:CAVA) surged 16% in Wednesday morning trading, adding approximately $1.13 billion to the company's market capitalization after the Mediterranean fast-casual chain reported quarterly sales and customer traffic that handily beat analyst expectations.
The stock climbed 15.95% to $70.50 by mid-morning, after touching an intraday high of $71.63. That move represented a $9.70 gain on the company's roughly 116.47 million shares outstanding, pushing its market value to approximately $8.21 billion. The one-day appreciation was equivalent to about 6.1 times the midpoint of the company's projected full-year adjusted EBITDA of $186 million.
CAVA's second-quarter results showed same-restaurant sales up 9.0% year-over-year, a significant acceleration from the 6.1% growth recorded in the same period last year. Guest traffic contributed 5.3 percentage points to that increase, while menu pricing and product mix accounted for the remaining 3.7 points. Total revenue jumped 31.3% to $368.4 million, surpassing the $359.4 million consensus estimate tracked by Google Finance.
Adjusted EBITDA came in at $54.7 million, ahead of the $52.1 million expected by analysts at LSEG, as cited by Reuters. However, restaurant-level margin contracted by 60 basis points to 25.7%, down from 26.3% in the prior-year quarter. The margin pressure was attributed to higher salmon costs, a greater mix of third-party delivery orders, and increased labor expenses, which partially offset the benefits of higher sales volumes.
Despite the margin dip, CAVA's growth story remains intact. The company opened 17 net new restaurants during the quarter, ending with 476 locations, a 19.6% increase from the same period last year. Average unit volume climbed to $3.09 million, up from $2.94 million a year earlier, reflecting continued operational strength.
CFO Tricia Tolivar highlighted that the company saw its strongest comparable-sales performance among lower-income customers, challenging the typical concern about discretionary spending in the restaurant sector. "Lower-income cohorts are generating the highest same-restaurant sales results," she told Reuters, suggesting that CAVA's value proposition is resonating across income brackets.
Management also addressed the temporary impact of a cyclospora outbreak that affected the broader restaurant industry in July, though CAVA's ingredients were not implicated. Comparable sales at the start of the month were flat to slightly positive, but rebounded later in the month to mid-single-digit growth, according to Reuters.
CAVA reaffirmed its upgraded full-year guidance, which was first raised in May. The company continues to expect 75 to 77 net new restaurant openings, same-store sales growth of 4.5% to 6.5%, and a restaurant-level margin between 23.7% and 24.3%. Adjusted EBITDA guidance remains at $181 million to $191 million.
Wall Street sentiment remains bullish following the report. Among 21 analysts tracked by Google Finance, 15 rate the stock a Buy, 6 rate it a Hold, and none recommend selling. The consensus price target stands at $91.17, implying roughly 29% upside from the morning share price. Notable reaffirmations came from Roth MKM (Buy, $95 target), Bernstein (Buy, $95), and UBS (Buy, $90).
The stock's performance outpaced its restaurant peers. Chipotle Mexican Grill (NYSE:CMG) advanced 2.3% in early trade, while Brinker International (NYSE:EAT) climbed about 2% following its own earnings release.
However, some caution is warranted. Traffic growth decelerated sequentially, with guest traffic up 5.3% in Q2 versus 6.8% in Q1, and same-restaurant sales growth slowed from 9.7% to 9.0%. The July disruption underscores that industry-wide food-safety concerns can affect demand even without direct product involvement. With guidance unchanged, CAVA has limited flexibility if traffic softens or costs rise further.
