Sweetgreen (SG -19%) is experiencing a significant decline, with shares dropping 67% from its peak of $45.12 in late November. This fast-food chain, known for its salads and bowls, is struggling as consumers become more price-sensitive, and Sweetgreen's offerings are on the higher end of the fast-food price range. While SG managed to thrive in 2024, 2025 is proving to be more challenging.
Sweetgreen missed its EPS expectations slightly but reported a slight revenue increase. The company also lowered its FY25 sales guidance to $740-760 million from $760-780 million, indicating a more cautious outlook. Recent industry data reveals a sharp decline in consumer sentiment.
Q1 same-store sales dropped by 3.1%, a significant decrease from +4% in Q4 and +6% for all of 2024. Although Q1 comps were at the higher end of the prior guidance of -5% to -3%, it offers little reassurance.
The lack of Q2 comp guidance is causing investor concern. Sweetgreen projects "approximately flat" comps for the full year 2025, suggesting improved performance in the second half, but this is a downgrade from its previous outlook of +1-3%.
After positive comps in March, April comps declined mid-single digits, coinciding with tariff announcements. Sweetgreen attributes the weak April sales to a broader consumer slowdown, particularly in major markets like NY, Boston, and LA. Despite these challenges, SG plans to open at least 40 new restaurants in 2025, with 20 featuring the Infinite Kitchen.
Regarding pricing, SG claims it has raised prices less than the industry average during inflationary times, opting instead to introduce heartier options like protein plates and steak. The company may adjust its seasonal menu to include options at different price points, though not necessarily as a value menu. Loyalty programs may also play a key role in offering promotions.
Sweetgreen was a standout in 2024, achieving impressive results despite a value-focused consumer base amid inflation. However, macroeconomic factors are catching up, and the first half of 2025 appears challenging. While SG anticipates better comps in the latter half of 2025, investor confidence remains low.