Cava is doing what other fast-casual chains are working on: attracting customers.
Macro uncertainty persists due to President Trump’s tariff impact, which led to the second highest recorded consumer sentiment reading, and Kava’s results show strength.
Mediterranean-inspired chain reported Thursday that same-store sales rose 10.8% in the first quarter and traffic rose 7.5%. Cava sales exceeded expectations, opposing consumer slowdowns in peers like Chipotle (CMG) and Sweetgreen (SG).
Cava CEO Brett Schulman told Yahoo Finance (video above) that the brand’s goal is to “become a port of uncertainty and inflationary storms for our guests.” He added that American consumers “have become more selective, but they are still choosing to eat in Cava.”
Still, Kava shares have been priced similar to their peers in recent months, with its November 52-week high of $172.43. CAVA shares have fallen 14% so far, while Shake Shack (Shak), Chipotle and Sweetgreen have fallen 8%, 13%, and 52%, respectively.
The fast-casual leader hasn't had the same luck in the past quarter, even though the average cost of its chicken burritos or bowl is about $10, and the average order price below the kava is about $14.50.
Chipotle's same-store sales fell 0.4% year-on-year, the first decline since Covid-19, causing the chain to close stores in the second quarter of 2020. Trading fell 2.3%, the first decline since 2022.
"We talked extensively with consumers about what caused them to sit on the sidelines," Chipotle CEO Scott Boatwright told Yahoo Finance in an interview. "It's really about saving money (and) uncertainty around what's going on around the global economy."
Read more: What Trump’s tariffs mean to the economy and your wallet
Other fast casual chains face similar challenges. Sweetgreen's same-store sales growth fell 3.1%, and CEO Jon Neman said it "reflects a wider consumer slowdown".
Shake Shack's same-store sales rose 0.2%, but traffic fell 4.6% in the quarter. CFO Katherine Fogertey attributes lower traffic to “advantage weather and wider industry pressure.”
William Blair analyst Sharon Zackfia told Yahoo Finance that “this is always the market share in restaurants.” Zackfia added that “Cava has been winning” because casual dining options offer “quite sharp prices” that allow them to share from fast food chains and one another.
Cava is a newer concept, which also contributed to its early experiences similar growth to Chipotle and Starbucks (Sbux). For comparison, Kava received $331.8 million in revenue in the first quarter, while Chipotle's $2.8 billion received revenue.
Cava reiterated full-year guidance for same-store sales growth of 6% to 8% and investors were not excited about it. Although the street hopes to get guidance, Zackfia remains confident in companies whose mentors are lowered.
She added that the 6% increase over the rest of the year was a "very reliable result".
As the full impact of the tariffs will not be realized in several quarters, Kava, chipotle and sweetgreen have all promised not to raise prices for the time being.
"I don't know that the tax levels today will make us rethink pricing," Schulman said. "In the long run, our work."
Schulman added that Cava works with suppliers and businesses to “absorb” the effects of tariffs, i.e. “about 20 to 40 basis points” while maintaining the year-round restaurant-level margin guidelines of 24.8 to 25.2%.
Chipotle CEO Scott Boatwright told Yahoo Finance in an interview that the company does not intend to raise prices “in the near future” given the consumer situation. However, he said the company will "assess the full impact before determining whether (the tariff) is permanently hitting the business."
Zackfia said Cava and Chipotle's "very healthy profit" helps them absorb higher costs.
"When you consider having a level of profit margin of 25% or higher, you can eat a little inflation or look for other efficiencies to offset it," Zackfia said.
Sweetgreen chief financial officer Mitch Reback also told investors that the chain expects “any price will rise for the rest of the year.”
Shake Shack's chief financial officer stated in a different tone that the company plans to increase the price by about 3% across all channels.
Brooke Dipalma is a senior journalist at Yahoo Finance. Follow her on @Brookedipalma Or email her at bdipalma@yahoofinance.com.
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