CAVA's Pricing Discipline Takes Center Stage: Can It Preserve Margins?

CAVA Group, Inc. CAVA is showing restraint in its pricing strategy, implementing a modest 1.7% menu price increase at the start of 2025. This comes at a time when inflationary pressures — especially in food costs — continue to weigh on restaurant margins across the industry.

In the first quarter of fiscal 2025, CAVA reported food, beverage and packaging costs at 29.3% of revenues, up 110 basis points year over year. The increase was primarily attributed to input costs associated with the launch of grilled steak in the second quarter of fiscal 2024. The company maintains its expectation that approximately a 100 basis-point year-over-year impact from steak on food, beverage and packaging costs will subside by June.

While margins remain under scrutiny, CAVA is proactively managing its supply chain. The company has limited exposure to potential tariff-related disruptions, given that most ingredients are either domestically sourced or secured under existing contracts. Additionally, it has implemented mitigation tactics to minimize any residual impact, maintaining a vigilant stance as trade policies evolve.

CAVA has reinforced its long-term value proposition — a blend of bold flavor and health-conscious offerings — to drive growth. Between 2019 and 2024, the company raised menu prices by roughly 15%, well below the 23% increase in the Consumer Price Index (CPI) and lower than the approximate 30% hike reported across the broader fast-food segment.

Despite near-term cost headwinds, CAVA remains confident in its ability to protect restaurant-level margins through operational efficiency and strong sales leverage. With no additional price increases planned for the remainder of the year, the company is optimistic about its ability to protect margins and sustain growth momentum in a challenging economic environment.

Comparisons With Peers

Shake Shack Inc. SHAK is navigating margin pressures with pricing discipline. The company exited first-quarter fiscal 2025 with in-Shack menu prices up 2% year over year. Instead of leaning on aggressive pricing, Shake Shack is investing in operational efficiency and supply chain productivity to fuel profitability. In the fiscal first quarter, restaurant-level profit margins improved 120 basis points year over year. Despite beef inflation and weather-related traffic headwinds, Shake Shack sees modest price actions as a lever to preserve value perception and drive long-term brand equity.

Cracker Barrel Old Country Store, Inc. CBRL is taking a more price-forward stance. In the third quarter of fiscal 2025, the company executed a 4.9% menu price increase — combining a 1.5% carryover with 3.4% new pricing — to help offset cost pressures and support average check growth. Cracker Barrel’s menu strategy includes a barbell approach, adding both value-oriented and premium items like steak-and-shrimp combos to attract a wider guest base. Management plans to maintain pricing around the 5% range annually, reflecting ongoing inflation and investment in its multi-year transformation. While traffic remains under pressure, Cracker Barrel views pricing and product mix as essential tools for margin recovery.

The Zacks Rundown for CAVA Stock

CAVA’s shares have lost 16.6% in the past three months compared with the industry’s fall of 2.3%.

CAVA Three-Month Price Performance

From a valuation standpoint, CAVA trades at a forward price-to-sales ratio of 6.60X, significantly higher than the industry’s 4.00X.

The Zacks Consensus Estimate for CAVA’s 2025 and 2026 earnings implies a year-over-year uptick of 38.1% and 17.7%, respectively. The estimate for 2025 has been northbound in the past 60 days.

CAVA stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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