CAVA Q1 Earnings Call: Misses Revenue Expectations, Focuses on Loyalty and Store Expansion

Mediterranean fast-casual restaurant chain CAVA (NYSE:CAVA) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 28.1% year on year to $331.8 million. Its GAAP profit of $0.22 per share increased from $0.12 in the same quarter last year.

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StockStory’s Take

CAVA’s first quarter results, as described by CEO Brett Schulman, were driven by continued guest traffic growth—with 7.5% traffic driving 10.8% same-store sales growth—new store openings, and increased engagement from the revamped loyalty program, which saw sales through the program rise 340 basis points as a percentage of total revenue since relaunch and total membership approaching 8 million. Management emphasized that operational initiatives—such as the Project Soul restaurant design upgrades and labor deployment models—have improved both guest experience and labor productivity. Notably, the company’s marketing efforts, including National Pita Day and the launch of seasonal menu items like Hot Harissa Pita Chips, contributed to higher app traffic and rewards participation. Management also highlighted the positive impact of menu innovation, particularly in premium proteins, on same-store sales and restaurant-level margin, while noting food inflation related to steak contributed to pressures on food, beverage, and packaging costs.

Looking ahead, CAVA’s outlook is underpinned by planned expansion into new markets, ongoing loyalty program enhancements, and a focus on operational efficiency. CFO Tricia Tolivar noted that the company expects to maintain its restaurant-level margins despite macroeconomic uncertainty and input cost pressures. Management believes new initiatives—such as the tiered loyalty structure and the broader rollout of the Kitchen Display System—will further drive guest engagement and throughput. Tolivar stated, “Our guidance reflects both the evolving macroeconomic landscape and the strength we’re seeing in our business,” while cautioning that the company remains vigilant about supply chain risks and consumer sentiment.

Key Insights from Management’s Remarks

Management attributed quarterly performance to menu and loyalty innovation, disciplined cost control, and continued new restaurant openings, while noting that rising steak costs contributed to margin pressures. However, margin improvements were also seen from operational leverage and the strength of new store openings.

• Loyalty program engagement: The revamped loyalty program drove increased guest participation, particularly among lower and mid-frequency users due to lowered entry reward hurdles, with membership approaching 8 million and revenue contribution rising by 340 basis points since relaunch. Management plans to test a tiered structure later this year to enhance benefits for frequent guests.
• Menu innovation and limited-time offers: New product launches, such as Hot Harissa Pita Chips and chef-curated seasonal bowls, contributed to guest engagement and sales mix. Management noted strong initial results from chicken shawarma tests in Dallas and Florida and plans to introduce new proteins later in the year.
• Operational initiatives: The Project Soul redesign, which contributed to CAVA's recognition by Fast Company as a Most Innovative Company, and deployment of a new labor scheduling model improved both guest experience and in-store productivity by allowing more even guest flow and freeing team members for guest-facing roles.
• Technology investments: The Kitchen Display System (KDS), now in 42 restaurants and targeted for 250 by year-end, improved order accuracy and throughput. Early AI-driven kitchen tools are assisting staff in real-time food prep and grill management.
• Geographic and format consistency: Management reported consistent restaurant performance across regions and formats, with no notable geographic weakness, no region having an average unit volume below $2.6 million, and new market entries in Indiana and Florida performing above expectations.

Drivers of Future Performance

CAVA’s management expects growth to be driven by continued restaurant expansion, enhanced digital engagement, and disciplined cost management, while monitoring for consumer and inflationary headwinds.

• Restaurant expansion and new markets: The company plans 64 to 68 net new restaurant openings this year, with management highlighting strong early results in new regions such as Indiana and Florida. This expansion remains a key driver for both revenue and brand presence.
• Digital and loyalty ecosystem: Ongoing enhancements to the loyalty program, including a tiered structure, are expected to deepen guest engagement and drive frequency. Management views digital ordering and personalized offers as important levers for sales growth.
• Margin discipline amid input cost risk: Despite higher steak costs and broader inflationary pressures, management expects to maintain restaurant-level margins by leveraging supply chain contracts, controlling menu pricing, and investing in operational efficiency and team member compensation.

Catalysts in Upcoming Quarters

In the coming quarters, key areas to watch will be (1) the pace and performance of new restaurant openings in both emerging and established markets, (2) guest response to the enhanced loyalty program and further digital engagement initiatives, and (3) the impact of ongoing menu innovation, particularly upcoming protein launches, on guest traffic and sales mix. The ability to sustain restaurant-level margins amid input cost fluctuations will also be a key area of focus.

CAVA currently trades at a forward P/E ratio of 133×. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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