Sweetgreen (SG, Financial) has been rewarding investors with significant gains, recently hitting a new 52-week high. The stock has been on an upward trend since early March, and with its Q3 earnings report approaching, here's a detailed look at its recent performance and future prospects.
- Sweetgreen has consistently seen its stock rise post-earnings for the past three quarters. The Q3 results are expected in early November.
- In Q2, Sweetgreen reported a larger-than-expected loss, but investors focused on the substantial increase in adjusted EBITDA to $12.4 million from $3.3 million a year ago. The adjusted EBITDA margin also improved to 7% from 2%. The company raised its FY24 adjusted EBITDA guidance to $16-19 million from $10-19 million and exceeded revenue expectations, boosting FY24 sales guidance.
- Despite higher pricing, Sweetgreen has outperformed struggling fast food chains. Its Q2 comparable sales (comps) rose by 9%, driven by a 5% increase in menu prices and a 4% rise in traffic and mix. FY24 comp guidance was increased to 5-7% from 4-6%.
- The Caramelized Garlic Steak, introduced in May, has been popular among customers. Sweetgreen's strategy to expand beyond lunch into the dinner segment has been successful, with dinner now accounting for 40% of sales, excluding the 2-4 PM period. New protein options have boosted dinner and weekend sales.
- Sweetgreen's growth strategy includes new store openings, with four new locations in Q2, including its first in New Hampshire. Recently, it opened in Charlotte, marking its entry into the Carolinas, with plans for further expansion in the region.
In a challenging fast food market, both Sweetgreen and CAVA Group (CAVA, Financial) have excelled, targeting higher quality and price points. As lower-income customers feel the impact of inflation, these brands continue to perform well, unlike some burger chains.
