Mediterranean fast-casual restaurant chain CAVA (NYSE: CAVA) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 20.2% year on year to $280.6 million. Its non-GAAP profit of $0.16 per share was 18.7% above analysts’ consensus estimates.

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StockStory’s Take

CAVA’s second quarter saw a steep negative market reaction following results that missed Wall Street’s revenue expectations, despite non-GAAP earnings per share outpacing analyst forecasts. Management pointed to a challenging comparison with last year’s steak launch, which had boosted prior results, as well as the impact of a “honeymoon effect” from recently opened restaurants. CFO Tricia Tolivar described the macroeconomic backdrop as “a fog for consumers,” noting that while guest traffic remained flat, menu price and product mix drove modest same-store sales growth. CEO Brett Schulman emphasized the strength of new openings and the resilience of the brand even amid these headwinds.

Looking ahead, CAVA’s guidance is underpinned by ongoing expansion into new markets, a robust pipeline of menu innovation, and continued operational investment. Management expressed confidence that a combination of new product launches—such as chicken shawarma and cinnamon sugar pita chips—and enhancements to the loyalty program will help drive guest engagement and sales. Schulman stated that the company’s strategy is designed for the long term, emphasizing, “We are in this for the next 10 years, not the next 10 weeks.” Tolivar also highlighted the expected benefit from new restaurant cohorts, which are outperforming initial targets and supporting higher average unit volumes.

Key Insights from Management’s Remarks

Management attributed quarterly performance to the tough comparison with last year’s steak launch and noted exceptional results from newly opened restaurants, while highlighting steady margins despite sales headwinds.

• Steak launch comparison: The anniversary of last year’s steak menu introduction created a difficult sales comparison, as the item had previously filled a major menu gap and drove guest excitement.
• New restaurant “honeymoon” impact: Exceptional first-year performance from the 2024 and 2025 new restaurant classes contributed to lower year-over-year same-store sales growth, but provided outsized cash returns and validated CAVA’s expansion strategy.
• Flat guest traffic: Same-store sales growth was primarily driven by price and product mix rather than increased guest visits, signaling a cautious consumer but stable demand for premium menu options.
• Operational investments: The rollout of kitchen display screens, TurboChef ovens, and AI camera vision technology continued, aiming to improve operational efficiency, digital order accuracy, and reduce food waste.
• Stable margins despite headwinds: Restaurant-level profit margins remained steady year over year, with Tolivar attributing this to strong cost control, improved labor leverage, and disciplined management of operating expenses.

Drivers of Future Performance

CAVA’s outlook is shaped by new menu innovation, ongoing expansion into untapped markets, and operational investments designed to sustain growth while navigating a complex consumer environment.

• Menu innovation pipeline: Management expects new product launches such as chicken shawarma and cinnamon sugar pita chips to drive both guest interest and higher average check, while salmon is in early test phases as a potential future menu addition.
• Accelerated new store expansion: The company plans to continue rapid market entry, focusing on regions like the Midwest and Southern Florida, with leadership targeting at least 1,000 restaurants by 2032. Recent classes are showing higher-than-expected first-year volumes, supporting long-term unit economics.
• Operational technology enhancements: Ongoing rollout of kitchen display systems and piloting of automated make lines are expected to improve efficiency, guest satisfaction, and operational scalability, mitigating labor pressures and supporting future margin stability.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) the performance of new menu additions like chicken shawarma and their impact on guest frequency, (2) the pace and productivity of new store openings in emerging markets, and (3) the rollout and effectiveness of operational technologies like kitchen display systems and automated make lines. Execution on loyalty program enhancements and continued margin discipline will also be key to assessing CAVA’s progress.

CAVA currently trades at $63.71, down from $84.63 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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