Cava CEO Brett Schulman on Q3 Results and Moderating Sales Among Younger Consumers

Q3 Performance and Revenue Growth

• 📈 Cava reported 20% revenue growth year-over-year in Q3, with same-restaurant sales accelerating on a two-year basis.
• ⚠️ Despite overall growth, the company has observed a moderation in sales among younger consumers this year.

Factors Affecting Younger Consumers

• 💰 Younger consumers, particularly those aged 25-34, are facing headwinds such as student loan debt repayment and inflationary pressures.
• 🏠 Increased costs in areas like housing are also impacting their disposable income and spending power.
• 📊 While market share was gained within this demographic, their visit frequency has slightly decreased.

Cava's Value Proposition and Pricing Strategy

• 🍽️ Cava has focused on improving its relative value proposition by underpricing inflation since 2019.
• 📉 The restaurant industry has raised prices by 34% in aggregate, while Cava has raised prices by less than 17%.
• 🚶 Industry-wide transactions have declined 7% since 2019, indicating consumers find the industry too expensive.

Guidance and Economic Factors

• 📉 Cava has trimmed its full-year forecast for the second consecutive quarter due to economic uncertainties.
• 🏛️ A slight softness was observed among government workers in the DC area following a government shutdown.

Margin Pressures and Cost Management

• 🛠️ The company absorbed some excess spending on repairs and maintenance to ensure facilities are well-kept.
• 🌍 Cava absorbed approximately 20 basis points in tariff impact, particularly on imported goods like olive oil and beef.
• 📊 Low to mid-single-digit COGS inflation is anticipated for the next year, which Cava believes it can manage.