Cava Group, the Mediterranean fast-casual restaurant chain headquartered in Washington, D.C., experienced a significant setback in its stock performance following the release of its second-quarter 2025 earnings. The company reported revenue of $278.2 million, which represented a 20.3% increase compared to the same period in the previous year but fell short of analysts' expectations of $286.6 million. This miss, coupled with a downward revision in its full-year guidance, led to a sharp decline in share prices, dropping more than 20% in after-hours trading on August 12, 2025.
Despite the revenue shortfall, Cava managed to beat earnings per share estimates, posting $0.16 against the consensus of $0.13. Net income for the quarter stood at $18.4 million, slightly down from $19.7 million in the prior year's quarter. The company's adjusted EBITDA reached $42.1 million, marking a 22.6% rise year-over-year, highlighting some operational efficiencies amid broader challenges.
Cava's restaurant-level profit margin was a robust 26.3%, reflecting strong cost management at the unit level. Digital channels contributed significantly, accounting for 37.3% of total revenue, underscoring the growing importance of online ordering and delivery in the fast-casual sector.
Challenges in same-store sales and consumer behavior
One of the most alarming aspects for investors was the deceleration in same-store sales growth, which came in at just 2.1% for the quarter. This figure starkly contrasted with analyst projections of around 6.1% and represented a notable slowdown from Cava's historical average of 13.8% over the past two years. The growth was primarily driven by menu price adjustments and shifts in product mix, rather than an increase in customer traffic, which remained essentially flat.
This trend mirrors broader pressures in the restaurant industry, where consumers are increasingly cautious due to economic uncertainties. Many are opting for home-cooked meals amid rising grocery prices and inflation concerns. Industry data indicates that about 75% of restaurant orders now stem from drive-thru, takeout, or pickup, signaling a shift away from dine-in experiences.
Competitors in the fast-casual "bowl market" are facing similar headwinds. For instance, Chipotle Mexican Grill reported a 4% decline in same-store sales, while Sweetgreen saw a 7.6% drop. These chains are contending with customer fatigue over elevated prices and perceptions of reduced portion sizes, prompting some to seek more affordable alternatives.
Revised guidance and CEO insights
In response to these challenges, Cava revised its full-year same-store sales growth forecast downward to 4-6%, from the previous range of 6-8%. This marks the first such reduction since the company's initial public offering in June 2023, eroding investor confidence built on prior consistent outperformance. However, the company upheld other key projections, including adjusted EBITDA of $152 million to $159 million and restaurant-level profit margins of 24.8% to 25.2%.
CEO Brett Schulman addressed the issues during the earnings call, attributing the softness to a "fog" over the economy influenced by ongoing policy discussions, including tariffs. He noted that consumer sentiment fluctuates with news cycles, creating an unpredictable environment. Schulman emphasized that while the fog has varied in intensity, it has impacted discretionary spending across the sector.
Despite the near-term hurdles, Schulman expressed optimism about Cava's long-term trajectory, pointing to the brand's unique positioning in the health-focused Mediterranean cuisine space.
Expansion plans and strategic investments
Undeterred by the current slowdown, Cava continued its aggressive expansion, opening 16 new locations in the quarter and bringing its total to 398 restaurants across the United States. The company remains committed to its growth targets, planning to launch 64-70 new outlets in 2025 and aiming for 1,000 locations by 2032. This expansion is supported by strong average unit volumes, which averaged $2.9 million in the prior fiscal year.
In a forward-looking move, Cava announced its participation in a $25 million Series B funding round for Hyphen, a startup specializing in restaurant automation for portioning plates and bowls. Chipotle led the round, with Cava joining as a strategic investor. This investment aligns with industry trends toward technology integration to improve efficiency and combat labor costs.
Broader industry context and future outlook
The fast-casual segment has been under strain throughout 2025, with several chains reporting traffic declines amid economic headwinds. Earlier in the year, Cava's first-quarter results showed more resilience, with same-store sales growth of 10.8% and traffic up 7.5%, despite weather challenges. However, the second quarter's performance indicates a deepening consumer pullback, potentially exacerbated by inflation and geopolitical uncertainties affecting supply chains.
Analysts have mixed views on the stock's recovery potential. Some see the dip as a buying opportunity for long-term investors, given Cava's strong brand and expansion pipeline. Others caution that persistent economic fog could prolong the recovery, with revenue estimates for the full year slightly revised downward.
Looking ahead, Cava's ability to navigate these pressures will depend on menu innovation, pricing strategies, and leveraging digital channels. The company's focus on healthful, flavorful offerings positions it well in the growing health and wellness food category, but sustaining traffic growth will be crucial.
As the restaurant industry adapts to a more frugal consumer base, Cava's strategic moves could help it emerge stronger, though the immediate outlook remains cautious.
