Sweetgreen’s Q2 2026 Call: Wraps Underperformance vs. Mix Drag, Headwind Duration in Question

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $192.7 million, up 4% year-over-year
• Operating Margin: Restaurant-level profit margin of 13.1%, compared with 18.9% in the prior year

Guidance:

• Full-year comparable restaurant sales expected to decline between 8% and 7%.
• Restaurant-level profit margin expected to range from 10.5% to 11%.
• Adjusted EBITDA expected to range from a loss of $27 million to $23 million.
• Cyclospora outbreak impact assumed at 600-700 basis points to Q3 comparable sales, with partial recovery in Q4 at low end of range.

Business Commentary:

Revenue and Comparable Sales Performance:

• Sweetgreen Inc. reported revenue of $192.7 million for the second quarter of 2026, with comparable restaurant sales declining by 6.2%.
• The decline in comparable sales was driven by a 2% decline in transactions and a 4.2% decline in product mix, despite a 4% year-over-year increase in total revenue.
• The product mix headwind was primarily due to targeted promotional activity, the introduction of wraps at a more accessible price point, and comparisons against higher side attachments from the previous year.

Impact of Public Health Matters:

• The company's outlook was affected by a Cyclospora outbreak, which is estimated to have impacted July comparable sales by 600 basis points.
• Sweetgreen attributed this impact to heightened consumer concern related to the outbreak, which disrupted momentum in sales.

Operational and Menu Innovation Efforts:

• Sweetgreen introduced wraps, which contributed to a significant lift in comparable sales, with an almost 20% incidence and an increase in customer frequency.
• The wrap menu items were introduced at a more accessible entry price, aiming to resonate with younger consumers and increase transaction frequency.

Loyalty Program and Customer Engagement:

• The SG Rewards loyalty program reached its one-year anniversary, with early results showing positive engagement, particularly with new redemption options.
• The program's enhancements, such as making points easier to use, were aimed at increasing customer choice and accessible rewards, which are resonating with members.

Guidance and Financial Outlook:

• Sweetgreen updated its full-year guidance to reflect the impact of the Cyclospora outbreak, expecting comparable restaurant sales to decline between 8% and 7%.
• The company's adjusted EBITDA is projected to range from a loss of $27 million to $23 million, factoring in the disruption's impact on sales and margins.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges 'challenging operating environment' and 'not satisfied with where we are today,' but cites 'encouraging signs' and 'progress' with sequential improvement, flat June transactions, and confidence in transformation plan. Outbreak impact is noted but recovery is expected.

Q&A:

• Question from Aisling (Bank of America): On wraps, how are you thinking about the tradeoff between incremental traffic/ repeat behavior vs. check headwind from lower price point?
  Response: Wraps are successful with ~20% incidence, higher frequency, and highest return rate; they are resonating with younger consumers and are positioned to drive new customer acquisitions.

• Question from Margaret May (Wolf Research): On the Create Your Own pricing test, where does it stand and how does it align with wraps' positive momentum?
  Response: Test launched in Indianapolis, scaled to DC DMV, and expanded to Southern California; customer feedback is positive with enhanced value perception, with full rollout planned by year-end if results remain encouraging.

• Question from Sharon Zach (William Blair): What was full-price transaction growth in June, given promotional activity, and outlook for profitable growth?
  Response: Promotions represented ~200 basis points of mix drag; momentum continued into July with positive comps and transactions before Cyclospora hit, with focus shifting to new customer acquisition and targeted loyalty promotions.

• Question from Brian Mullen (Piper Sandler): What is the thinking on store growth next year with new development officer?
  Response: Store openings to continue at a conservative pace, similar or slower than this year, focused on high-quality sites and perfecting prototype and economics for future acceleration.

• Question from Rahul Crow (JP Morgan): How are you planning to retell the brand story to attract new customers and drive wider awareness?
  Response: Diversifying menu with wraps and plates relaunch, shifting media mix to top-of-funnel, leveraging big moments and local marketing, and rebuilding brand team to tell stories and acquire new customers.

• Question from Brian Bittner (Oppenheimer Company): What were biggest drivers of underlying comp shortfall vs. plan in Q2 and greatest opportunity to improve sales outside of outbreak issues?
  Response: Shortfall driven by mix shift and check drag from wraps; opportunity lies in attracting new customers top-of-funnel and increasing attachment/frequency from wraps.

• Question from John Tower (Citi): What did wraps miss in testing, and will you increase promotions in H2 to meet guidance?
  Response: Wraps tested well in large markets but underperformed in higher-brand-awareness markets like New York; focus is on new customer acquisition. Promotions are being weaned off, with disciplined and targeted use planned.

• Question from Steve McManus (BNP Paribas): On RAPS, how much of comp lift gap is cannibalization vs. lower check, and what's net comp contribution? Also, margin and labor profile for wraps vs. salad bowl?
  Response: Gap is primarily due to lower check, not cannibalization. Wraps are priced margin-neutral to other items.

• Question from Kelly Merrill (Morgan Stanley): How long will mix drag persist and when will it moderate, and is it a new normal?
  Response: Mix drag expected to moderate to low single digits in H2 as Ripple Fry impact is lapped and promotions are reduced; not a new normal, with efforts ongoing to lift check through attachments and innovation.

Contradiction Point 1

Primary Driver of Q2 Comp Shortfall

Contradiction on whether the shortfall was due to wraps' underperformance or a mix/check drag.

Brian Bittner (Oppenheimer Company) - Brian Bittner (Oppenheimer Company)

2026Q2: The shortfall versus plan was primarily due to a mix shift and check drag from wraps, which had very high incidence. - Jamie McConnell & Jonathan Neiman(CFO & CEO)

What were the main factors causing the Q2 comp plan shortfall compared to expectations, and where is the largest sales improvement opportunity outside of Cyclospora/jalapeno issues? - John Tower (Citi)

2026Q2: The shortfall was due to wraps not performing as incrementally in the live market as they did in tests. - Jamie McConnell(CFO)

Contradiction Point 2

Expected Duration of the Mix Headwind

Contradiction on whether the mix headwind is expected to moderate or persist at a high level.

Kelly Merrill (Morgan Stanley) - Kelly Merrill (Morgan Stanley)

2026Q2: The mix headwind is already moderating, with expectations for it to be in the low single digits in the second half of the year. - Jamie McConnell & Jonathan Neiman(CFO & CEO)

How long will the mix drag persist, what factors are included in the back-half guidance, and is this the new normal for mix? - Brian Bittner (Oppenheimer Company)

2026Q2: The gap was partly due to a mix shift and check drag from wraps, despite their high incidence. - Jonathan Neiman(CEO)

Contradiction Point 3

Performance and Strategic Focus on Wraps

Contradiction on wraps' primary benefit and their impact on key metrics.

Aisling (Bank of America) - Aisling (Bank of America)

2026Q2: Wraps are resonating with younger consumers... helping reposition Sweetgreen as a more affordable option. The goal is to leverage wraps to drive new customer acquisitions. - Jonathan Neiman(CEO)

How are wraps impacting mix pressure, specifically in terms of driving incremental traffic and repeat behavior versus creating check headwinds? - Mike Tamas (Oppenheimer and Company)

2026Q1: Wraps incrementality: Encouraging, with high return rates and strong customer delight on quality/price. - Jonathan Neman(CEO)

Contradiction Point 4

Outlook on Promotional Activity

Contradiction on the company's reliance on and strategy for promotions.

Sharon Zach (William Blair) - Sharon Zach (William Blair)

2026Q2: The company has weaned off promotional activity... seeing positive comps and transactions in the first 10 days of July without promotions. The focus is shifting... to drive growth profitably. - Jamie McConnell(CFO) & Jonathan Neiman(CEO)

What was the non-discounted transaction growth in June, and how do you plan to return to profitable growth? - Carrie Merrill (Morgan Stanley)

2026Q1: Move away from heavy promo/discounting; testing new pricing architecture in late June. - Jonathan Neman(CEO)

Contradiction Point 5

Guidance for Store Growth

Contradiction on the pace and strategic rationale for new store openings.

Brian Mullen (Piper Sandler) - Brian Mullen (Piper Sandler)

2026Q2: Store openings will continue at a conservative pace, similar to or slower than 2026... This is a 'slow down to speed up' phase. - Jonathan Neiman(CEO)

What are the plans for store growth next year under the new Chief Development Officer? - Brian Mullan (Piper Sandler)

2026Q1: Disciplined, high-ROIC approach; no acceleration until flywheel improves (comps up, operations solid). Expect tempered development year. - Jonathan Neman(CEO)