Salad chain Sweetgreen reports narrowing losses as it aims for profitability
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Nicolas Jammet, chief concept officer and co-founder of Sweetgreen Inc., right, eats a salad during the company's initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Thursday, Nov. 18, 2021.
Michael Nagle | Bloomberg | Getty Images
Sweetgreen on Thursday reported a narrower-than-expected loss in its first quarter after slowing its expansion to focus on profitability.
The salad chain, which went public in November 2021, is aiming to turn a profit for the first time by 2024. Last quarter, it announced it would take a more conservative approach to entering new markets. It's also cutting support-center costs and simplifying its management structure.
Sweetgreen shares rose 7% in extended trading.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Loss per share: 30 cents vs. 35 cents expected
- Revenue: $125.1 million vs. $126 million expected
The salad chain reported a first-quarter net loss of $33.7 million, or 30 cents per share, narrowing its net loss of $49.7 million, or 45 cents per share, a year earlier.
Sweetgreen said its restaurant-level profit margins improved by 1% during the quarter.
Net sales climbed 22% year over year to $125.1 million, and same-store sales rose 5%, topping FactSet estimates of 4.9%. Quarterly traffic increased 2% while menu prices rose 3% compared with the year-ago period.
Sweetgreen CEO Jonathan Neman told CNBC that the chain's Chicken + Chipotle Pepper Bowl drew in new customers and generated buzz. The menu item was Sweetgreen's first warm bowl without any lettuce.
But some of the buzz might have come from Chipotle's lawsuit against Sweetgreen for alleged copyright infringement over the item's original name, Chipotle Chicken Burrito Bowl. The two fast-casual chains reached a tentative settlement that included renaming the bowl shortly after Chipotle filed the lawsuit.
Digital transactions accounted for 61% of sales, down slightly from a year earlier, when they made up two-thirds of its revenue. Neman said the decrease was the result of more in-person orders adding to Sweetgreen's overall sales.
The company opened nine net new restaurant locations during the quarter. It plans to open between 30 to 35 new locations in 2023, including two restaurants with automated kitchens using the technology from its Spyce acquisition. The first of those restaurants, which it calls Infinite Kitchens, opens Wednesday in Naperville, Illinois, outside of Chicago.
"We expect a higher margin profile and better unit economics with this," Neman said. "It's a pilot, so we're going to learn a lot from it very early, but overall I'm very excited to bring this to life."
Sweetgreen reiterated most of its 2023 forecast, which projects revenue between $575 million to $595 million and same-store sales growth of 2% to 6%.
However, it updated its outlook for adjusted earnings before interest, taxes, depreciation and amortization from a loss between $13 million to $15 million to a loss of $13 million to $3 million. The company said the update is due to a $6.9 million benefit from employee-retention tax credits.
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