8-K: Sweetgreen Q1 2026 Earnings: Revenue Down, Digital Sales Up

Sweetgreen reported a 2.9% decrease in Q1 2026 revenue to $161.5 million, with same-store sales down 12.8%, but saw significant growth in digital revenue and a substantial net income increase due to asset disposal.

Summary

• Total revenue for the first quarter of fiscal year 2026 decreased by 2.9% to $161.5 million compared to the prior year.
• Same-Store Sales Change was a negative 12.8%, a significant drop from the prior year's 3.1% decrease.
• Total Digital Revenue Percentage increased to 67.2% from 59.9%, and Owned Digital Revenue Percentage rose to 38.9% from 31.9%.
• Loss from operations widened to $34.3 million from $28.5 million, with the margin worsening to (21.3)% from (17.2)%.
• Restaurant-Level Profit decreased to $16.2 million (10.0% margin) from $29.7 million (17.9% margin).
• Net income was $125.8 million, a significant turnaround from a net loss of $25.0 million, largely due to a $160.6 million gain on disposal from the Spyce sale.
• Adjusted EBITDA was a loss of $8.1 million, compared to a slight positive of $0.3 million in the prior year.
• The company opened 4 net new restaurants, down from 5 in the prior year.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a negative sentiment due to significant declines in key operational metrics like same-store sales and restaurant-level profit, despite a positive net income driven by a one-time event.

Positives

• Total Digital Revenue Percentage increased to 67.2% from 59.9%, indicating a strong shift towards digital ordering channels.
• Owned Digital Revenue Percentage also saw a substantial increase, rising to 38.9% from 31.9%.
• Net income turned positive at $125.8 million, a significant improvement from a net loss of $25.0 million in the prior year, primarily driven by the gain on disposal of the Spyce business.
• General and administrative expenses decreased to $29.3 million (18.1% of revenue) from $38.3 million (23.1% of revenue), partly due to lower stock-based compensation and management salary expenses.
• The nationwide launch of Wraps is highlighted as a significant menu expansion that drove guest acquisition and retention in market tests, contributing to momentum in April.

Negatives

• Total revenue decreased by 2.9% to $161.5 million.
• Same-Store Sales Change was a significant negative 12.8%, driven by an 11.2% decrease in traffic and a 2.3% decrease in product mix.
• Loss from operations increased to $34.3 million, with the margin worsening to (21.3)%.
• Restaurant-Level Profit margin decreased by approximately 800 basis points to 10.0% from 17.9%.
• Adjusted EBITDA was $(8.1) million, a decrease from $0.3 million in the prior year.
• 4 Net New Restaurant Openings were recorded, a decrease from 5 in the prior year.

Risks

• Adverse impacts of weather in the current year period compared to the prior year benefit from the launch of Ripple Fries.
• Increased promotional activity and the transition from the former Sweetpass+ program to SG Rewards impacted product mix.
• Higher overall ingredient usage, investments in chicken and tofu portions, and increased promotional activity through the loyalty program contributed to lower Restaurant-Level Profit Margin.
• Potential for new risks and uncertainties to emerge that could impact forward-looking statements.
• Ability to compete effectively in the market.
• Uncertainties regarding changes in economic conditions and geopolitical events and their impact on customer behavior.
• Impact of severe weather conditions or natural disasters on restaurant sales and results of operations.
• Risks associated with the timely and cost-effective deployment of the Infinite Kitchen automation technology.

Future Outlook

For fiscal year 2026, Sweetgreen anticipates approximately 13 Net New Restaurant Openings (about half with Infinite Kitchen), Same-Store Sales Change between (4.0)% to (2.0)%, Restaurant-Level Profit Margin of 14.2% to 14.7%, and Adjusted EBITDA between $1.0 million to $6.0 million.

Management Comments

• "While first quarter results were softer than anticipated, we remain in the early innings of a transformation that is reshaping the foundation of our business. We are building a more consistent guest experience and seeing improved execution across our restaurants, every day."
• "Yesterday's nationwide launch of Wraps is our most significant menu expansion in years. It is a positive signal of what's ahead: during our market test, it drove guest acquisition and strong retention rates and, combined with improved execution across our restaurants, contributed to momentum in April. We are building with intention and conviction for long-term growth."

Industry Context

StockSavvy.ai notes that Sweetgreen's Q1 2026 results reflect broader industry challenges in the fast-casual dining sector, including traffic declines and increased promotional activity, while also highlighting the company's strategic pivot towards digital channels and menu innovation as key differentiators.

Comparison to Industry Standards

• Industry-wide, many fast-casual restaurants are experiencing traffic softness and increased competition, leading to pressure on same-store sales. Sweetgreen's (12.8)% decline is steeper than some peers but reflects specific factors like weather and promotional shifts.
• The significant increase in digital revenue (67.2%) aligns with a broader industry trend of accelerated digital adoption, with companies like Chipotle and Starbucks also reporting strong digital sales contributions.
• The focus on operational efficiency and cost management, as indicated by the decrease in G&A expenses, is a common strategy for restaurant chains navigating inflationary pressures and seeking to improve profitability.

Stakeholder Impact

• Shareholders: The significant net income gain from asset disposal may mask underlying operational weaknesses, potentially impacting investor confidence in core business performance. The negative same-store sales and Adjusted EBITDA are concerning.
• Employees: Continued focus on improved execution and the launch of new menu items like Wraps could create opportunities and a more stable work environment, but operational challenges may lead to increased pressure.
• Customers: The introduction of Wraps and focus on digital channels aim to enhance customer experience and acquisition. However, traffic declines suggest potential dissatisfaction or competitive pressures affecting customer visits.
• Suppliers: Potential for reduced ingredient orders due to lower sales volume, though investments in specific ingredients like chicken and tofu might offset this in certain areas.

Next Steps

• Continue executing the Sweet Growth Transformation Plan.
• Focus on building a more consistent guest experience and improving execution across restaurants.
• Leverage the nationwide launch of Wraps to drive guest acquisition and retention.
• Continue to build with intention and conviction for long-term growth.
• Open approximately 13 Net New Restaurants in fiscal year 2026, with about half featuring the Infinite Kitchen.

Key Dates

Recommendation

While the net income was positive due to a one-time gain, the core operational metrics such as same-store sales and Adjusted EBITDA are significantly worse than the prior year. The company is in a transformation phase, and while digital growth is positive, the overall decline in traffic and profitability warrants a cautious 'hold' until sustained operational improvements are demonstrated.

Keywords

Sweetgreen, Q1 2026 Earnings, Restaurant Revenue, Same-Store Sales, Digital Revenue, Adjusted EBITDA, Loss from Operations, Restaurant-Level Profit