Cava Delivers Strong Q1 Growth But Stock Slides as Outlook Remains Conservative

Cava Group (NYSE: CAVA), the fast-casual Mediterranean restaurant chain, delivered strong first-quarter fiscal 2025 results that topped Wall Street expectations across key metrics, reflecting continued brand momentum and consumer preference shifts toward its value-driven offerings. Yet, despite the company’s outperformance and slightly raised full-year EBITDA and unit growth guidance, shares fell more than 5% in after-hours trading Thursday, as investors reacted to a reiteration of the same-store sales outlook and ongoing concerns about the broader consumer environment and tariff headwinds.

Beating Expectations Across the Board

For the quarter ended April 20, Cava reported revenue of $332 million, up 28% year-over-year and ahead of the $327 million expected by analysts. Same-store sales rose 10.8%, also exceeding consensus estimates of 10.3%, driven by a 7.5% increase in guest traffic and a 3.3% boost from pricing and product mix. This growth comes at a time when much of the restaurant industry is grappling with declining traffic and reduced discretionary spending.

Earnings per share came in at $0.22, notably above the $0.14 expected and significantly higher than the $0.12 reported a year ago. Net income surged to $25.7 million from $14 million, aided in part by a $10.7 million tax benefit related to equity-based compensation. Adjusted EBITDA rose 34.6% year-over-year to $44.9 million, supported by operating leverage and improved performance across new stores.

Key Drivers: Strong Demand and Unit Growth

Cava opened 15 new restaurants in the quarter, bringing its total to 382 locations across 26 states and the District of Columbia. The company’s average unit volumes (AUVs) rose to $2.9 million from $2.6 million a year ago, with new units performing ahead of internal expectations. Digital sales accounted for 38% of revenue, reflecting continued consumer engagement across ordering platforms.

Despite launching higher-cost grilled steak items and investing in wages, Cava maintained a healthy restaurant-level profit margin of 25.1%, nearly flat versus the prior year’s 25.2%. While some food and labor costs crept higher, they were partially offset by top-line leverage and prudent operational management.

CFO Tricia Tolivar told CNBC the company is benefiting from a shift in consumer behavior: customers are trading down from full-service restaurants and up from traditional fast food, landing squarely in Cava’s bowl- and pita-based value sweet spot. Premium add-ons, such as house-made juices and pita chips, also contributed to an increase in check averages.

Guidance Updated but SSS Outlook Held Steady

Management modestly raised its full-year 2025 outlook. Adjusted EBITDA is now expected to come in between $152 million and $159 million, up from the previous range of $150 million to $157 million. The target for net new restaurant openings was also increased slightly to 64–68 from 62–66. Pre-opening cost expectations were nudged up by $0.5 million on each end of the prior range to $14.5 million to $15.5 million.

However, the company held firm on its same-restaurant sales growth forecast of 6% to 8% for the year, a move that appeared to disappoint investors hoping for an upward revision after the Q1 outperformance. Management previously indicated that growth could moderate in the back half of the year as comparisons normalize and macroeconomic uncertainty persists.

Stock Reaction: Strong Results, Tepid Response

Despite the fundamental strength, CAVA shares dropped as much as 5.5% in extended trading. The stock is now down roughly 12% year-to-date, underperforming broader restaurant peers like Chipotle. Analysts suggested the muted investor reaction stemmed less from Q1 execution and more from a cautious tone on the full-year same-store sales trajectory and broader market jitters tied to consumer spending.

Jefferies analysts, however, maintained a "Buy" rating on the stock and a $125 price target, noting that Cava's ability to consistently outperform on unit economics and traffic growth positions it well to hit the high end of its long-term growth algorithm. They raised their 2025 same-store sales estimate to 7.6% from 6.5%.

Tariff Exposure: Limited Near-Term Impact

Unlike many in the foodservice sector, Cava appears to be largely insulated from the Trump administration’s recent tariff actions. Tolivar emphasized that most ingredients are sourced domestically and that there are no plans for additional menu price increases in 2025. “We’re fairly insulated from individual ingredient impacts on our overall cost structure,” she said, highlighting the brand’s relative pricing advantage as fast food chains continue to raise prices aggressively.

Still a Category Leader with Long-Term Upside

Cava’s first-quarter results reinforced its standing as a top-tier growth name in the fast-casual space. With high-single-digit traffic growth, stable margins, and improving returns on new units, the chain continues to gain market share at a time when much of the restaurant industry is struggling. While the market may have reacted cautiously to the reiterated sales forecast and broader economic risks, long-term investors may see the current pullback as a compelling entry point.

Cava’s brand momentum, robust digital presence, and efficient store expansion plan suggest there’s ample runway ahead as Mediterranean cuisine evolves from a niche to a mainstream category in the U.S. Whether the market fully appreciates that yet remains an open question.