Cava Crashes 24% After Sales Growth Stalls — Is the Fast-Casual Darling Losing Its Flavor?

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Cava Group (CAVA) shares were slammed in premarket trade Wednesday, tumbling about 24% after the Mediterranean fast-casual chain delivered a Q2 revenue miss, sharply slower same-store sales growth, and lowered its full-year comp forecast. Heading into the report, the stock carried a rich valuation, which left little room for disappointment. The combination of a high bar, softer sales trends, and recalibrated guidance triggered a swift investor exodus, with the size of the earnings gap lower suggesting the selling may not be done.

The headline miss was driven by comps: same-restaurant sales rose just 2.1% in the quarter, well below consensus expectations for roughly 6.5%. While total revenue climbed 20.3% year-over-year to $278.2 million, the figure fell short of the $285.6 million Street forecast. Adjusted EPS came in at $0.16 versus $0.13 expected, as better restaurant-level margins and lower G&A offset the sales shortfall, resulting in an adjusted EBITDA beat at $42.1 million. Restaurant-level profit margin held relatively steady at 26.3%, down just 20 basis points from last year, but traffic was “roughly flat,” with the bulk of comp growth coming from pricing and product mix rather than guest count gains.

Management attributed much of the slowdown to tough comparisons, particularly lapping last year’s blockbuster steak launch, which drove double-digit traffic gains in the prior year’s period. This “honeymoon effect” from new stores—where Year 1 outperformance moderates once units enter the comp base—also weighed on the numbers. CEO Brett Schulman noted that July trends improved sequentially as the lap of steak passed, but the company still reset full-year same-store sales guidance to 4–6% from the prior 6–8% range. By contrast, new unit performance remains strong, with 2024 class average unit volumes running above $3 million and cash-on-cash returns above 40% in the first year—metrics that already meet Year 2 targets.

In other operational highlights, Cava opened 16 net new restaurants in Q2, ending the quarter with 398 units, a 16.7% year-over-year increase. It now plans to open 68–70 net new restaurants this year, up from the prior 64–68 target, underscoring confidence in unit growth even as comps moderate. Management maintained its FY25 adjusted EBITDA guidance of $152–$159 million and restaurant-level margin outlook of 24.8–25.2%, suggesting no major deterioration in profitability. Pre-opening cost guidance was nudged higher to $15.5–$16.5 million to account for the increased unit count.

On the innovation front, Schulman highlighted menu initiatives, including a planned company-wide launch of chicken shawarma in early fall and ongoing salmon tests. The company is also investing in technology to improve operations, announcing a $25 million Series B investment in Hyphen, a restaurant automation startup. Hyphen’s automated digital makeline is expected to boost order accuracy and throughput during peak digital hours while reducing complexity for team members. A pilot test is planned in coming quarters.

From a market perspective, the disappointment centers not only on the magnitude of the comp miss, but also on the narrative shift. Investors had been treating CAVA as one of the market’s fast-casual standouts, with a premium multiple justified by robust traffic trends, margin stability, and long runway for expansion. This quarter challenged that perception—comps barely positive, traffic flat, and macro pressures clearly biting—just as buy-side expectations for mid-single-digit or better comp growth in 2H were being priced in.

Analyst reactions reflected the split between long-term believers and near-term skeptics. Jefferies cut its PT to $100 from $125 but kept a Buy, noting tough laps masked healthy demand. Stifel argued the selloff is overdone given strong new unit economics and a Q3-to-date comp rebound, calling the weakness a temporary setback. KeyBanc trimmed its PT to $85 from $100 but reiterated Overweight, highlighting best-in-class new unit returns and category leadership. Still, others see the need for a reset, with the Street likely to model more conservative comp growth until traffic acceleration is proven.

For traders, the setup is tricky. The earnings gap lower is disruptive, wiping out a chunk of market cap in a single move and breaking technical support. Rich valuation heading into the print amplified the downside, and while there’s a case for a reflexive bounce if comps stabilize, the size of the drop and the sentiment shift suggest caution on buying the dip too early. With investors in a market mood to pick winners and punish misses, CAVA has landed firmly in the latter camp this week.

Bottom line: CAVA’s long-term growth story—anchored by category leadership, scalable operations, and strong new unit economics—remains intact, but the short-term picture has darkened. Until the company can reestablish comp momentum and demonstrate that the Q2 softness was a blip rather than a trend, the stock is likely to face continued selling pressure in the wake of this quarter’s disappointment.

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