Sweetgreen (NYSE: SG) has experienced a dramatic downturn in its financial performance over the past year, with results shifting from concerning to critical. After achieving strong growth in late 2024, the fast-casual salad chain’s business has since collapsed, causing its stock to plummet 85% from its peak 18 months ago.
The severity of Sweetgreen’s struggles was underscored by its first-quarter results. Comparable sales plummeted 12.8%, despite the company benefiting from a softer comparison to a prior quarter impacted by the LA wildfires in Southern California. Overall revenue decreased 2.9% to $161.5 million, falling short of the estimated $163.6 million. As a company often viewed as a growth stock, Sweetgreen is witnessing double-digit declines in same-store sales and falling revenue, even as it expands its store count. Average unit volume, representing annual sales per store, dropped from $2.91 million in the year-ago quarter to $2.57 million, indicating a significant loss of customers.
The company’s bottom-line performance mirrored these difficulties. Restaurant-level profit margin contracted from 17.9% to 10%, and its generally accepted accounting principles (GAAP) operating loss widened from $28.5 million to $34.3 million. While Sweetgreen reported a net profit, this was primarily due to a gain from the sale of Spyce, a business including the Infinite Kitchen technology, though Sweetgreen retained usage rights. Despite these alarming figures and the absence of any major external economic shock, Sweetgreen’s stock surprisingly rose 2% following the news, as management offered optimistic signals about a potential business turnaround.
Despite the bleak first-quarter figures, management’s updated guidance suggests that the most challenging period of its operational restructuring may be concluding. Sweetgreen projects a full-year same-store sales decline of 2% to 4%, effectively forecasting flat comparable sales for the remaining quarters after the initial 12.8% drop. The company anticipates that the negative impact from its transition from the Sweetpass+ subscription program to SG Rewards will lessen in the second quarter. Furthermore, management expressed optimism regarding its newly launched wraps, rolled out nationally last week following a February test phase. The first quarter also faced a tough comparison to the successful launch of Ripple Fries in the previous year.
The new wraps are priced lower than Sweetgreen’s traditional bowls, a strategic move given current consumer spending pressures and past criticism regarding the chain’s high prices and perceived lack of value. Management reported that the wraps “drove incremental traffic from new and returning guests, helped reengage lapsed customers, and showed strong repeat behavior.” Sweetgreen also observed an improvement in momentum in April, though comparable sales were still down 8%. For the second quarter, the company aims for comparable sales to decline by approximately 4%.
Sweetgreen has maintained its full-year guidance from its fourth-quarter report. While a projected decline of 2% to 4% in same-store sales is not ideal, the company anticipates its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will improve to a profit of $1 million to $6 million, a significant turnaround from a loss in 2025. Achieving this guidance would indicate that the business is at least progressing in the right direction, offering some positive news for investors. With the stock having fallen significantly, there is substantial upside potential if Sweetgreen can successfully execute a turnaround.
It will take a few more quarters to fully assess the impact of the new wraps, but if comparable sales return to positive territory before the year’s end, the stock could see a considerable rally.
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