Cava stock on a tear as fast-casual players continue to outperform the industry
Fast-casual chains continue to outpace the wider food industry in growth as value conscious diners demand affordable prices and experiences.
Mediterranean chain Cava (CAVA) beat Wall Street estimates Tuesday afternoon, with same-store sales jumping 18.1%, compared to 12.39% expected. The stock vaulted over $172 per share — an all-time high — on Wednesday, before giving up the gains and closing around $147. Shares of Cava are up 261% in 2024.
“That value proposition [is] really beyond price,” CEO Brett Schulman told Yahoo Finance. Schulman pointed to Cava’s investment in digital and in-store experiences, people’s shifting preferences for healthier food, and the company’s efforts to keep the average bowl in the $13 to $15 range as factors in its success.
TD Cowen analyst Andrew Charles wrote in a client note that Cava’s price increase, of roughly 15% compared to 2019, “significantly trails” the 25% to 30% hikes by most fast-casual peers. In the quarter, the chain’s foot traffic was up 10.3% year over year, while its steak option contributed to order prices increasing by 7.9%.
Fellow fast-casual player and burger chain Shake Shack (SHAK) posted same-store sales growth of 4.4% in its latest quarter, while salad chain Sweetgreen (SG) saw a 6% jump.
As the cost of dining rises, fast food players have been struggling to compete on value. In its latest quarter, McDonald’s (MCD) same-store sales grew 0.3% year over year in the US.
Restaurant Brands International’s (QSR) US business clocked same-store sales declines across the board, with Burger King down 1.5%, Popeyes down 0.8%, and Firehouse Subs down 3.7%
Yum Brands’ (YUM) three brands posted a mixed bag in the US: Taco Bell’s same-store sales increased 4%, while KFC business saw its sales drop 7% and Pizza Hut saw a 1% decline.
Charles said Cava “continues to benefit from the consumer preference shift from quick service to fast casual as middle-income consumers increasingly view fast casual as a better value for money.”
“CAVA is at a clear tipping point as the leader of fast-casual Mediterranean,” William Blair analyst Sharon Zackfia wrote in a note.
In Q3, Shake Shack beat Wall Street’s estimates with its same-store sales, led by an increase in foot traffic, up 30 basis points year over year, while the average check jumped 4%.
“We’ve actually seen growth amongst all cohorts … we’re one of the few brands whose value perception has actually improved over the last year,” Shake Shack CEO Rob Lynch told Yahoo Finance.
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