8-K: Sweetgreen Q3 Losses Widen Amid Sales Decline

Sweetgreen reported a wider net loss of $36.1 million in the third quarter of 2025, with revenue slightly decreasing by 0.6% and same-store sales falling by 9.5%.

Summary

• Total revenue for the third fiscal quarter of 2025 was $172.4 million, a 0.6% decrease compared to $173.4 million in the prior year period.
• Same-Store Sales Change was a negative 9.5%, a significant decline from a positive 5.6% in the third quarter of 2024.
• Net loss widened to $(36.1) million, or (21.0)% of revenue, compared to $(20.8) million, or (12.0)% of revenue, in the prior year period.
• Loss from operations increased to $(36.3) million, or (21.0)% of revenue, from $(21.2) million, or (12.2)% of revenue, in the prior year period.
• Restaurant-Level Profit decreased to $22.5 million, with a margin of 13.1%, down from $34.9 million and 20.1% in the third quarter of 2024.
• Adjusted EBITDA was $(4.4) million, a decrease from $6.8 million in the prior year period, resulting in an Adjusted EBITDA Margin of (2.5)%.
• The company opened 6 Net New Restaurants in Q3 2025, compared to 5 in Q3 2024.
• Total Digital Revenue Percentage increased to 61.8% from 55.1%, and Owned Digital Revenue Percentage increased to 35.3% from 29.2% in the prior year period.
• The company updated its fiscal year 2025 guidance, expecting revenue ranging from $682 million to $688 million, Same-Store Sales Change of (8.5)% to (7.7)%, and Adjusted EBITDA between $(13) million to $(10) million.

Sentiment

Score: 3

Explanation: The company reported significant declines across key financial metrics including revenue, same-store sales, net loss, and Adjusted EBITDA, indicating a challenging operational environment. While management highlights strategic initiatives like the Infinite Kitchen and digital growth, the immediate financial performance is substantially worse than the prior year and the updated guidance for FY2025 remains negative for same-store sales and Adjusted EBITDA.

Positives

• Increased Net New Restaurant Openings to 6 in Q3 2025 from 5 in Q3 2024.
• Total Digital Revenue Percentage increased to 61.8% from 55.1% in the prior year, indicating strong digital channel adoption.
• Owned Digital Revenue Percentage increased to 35.3% from 29.2% in the prior year, partly due to the new SG Rewards loyalty program.
• General and administrative expense decreased by $5.9 million, primarily due to lower stock-based compensation and management salary/bonus.
• The strategic decision to sell Spyce and partner with Wonder for the Infinite Kitchen platform is expected to scale more efficiently, lower operating costs, and strengthen the balance sheet.

Negatives

• Total revenue decreased by 0.6% to $172.4 million in Q3 2025.
• Same-Store Sales Change was a negative 9.5%, a significant decline from a positive 5.6% in the prior year, primarily due to an 11.7% decrease in traffic and product mix.
• Average Unit Volume (AUV) decreased to $2.8 million from $2.9 million in the prior year period.
• Net loss widened to $(36.1) million from $(20.8) million in the prior year period.
• Loss from operations increased to $(36.3) million from $(21.2) million in the prior year period.
• Restaurant-Level Profit decreased to $22.5 million from $34.9 million, with margin declining by 700 basis points to 13.1%.
• Adjusted EBITDA turned negative at $(4.4) million, down from a positive $6.8 million in the prior year period.
• The decline in traffic and product mix was attributed to a slowdown in consumer spending and the discontinuation of the former Sweetpass+ loyalty program and transition to SG Rewards.
• Higher protein costs (chicken and tofu), a one-time write-off of discontinued materials, higher packaging costs (tariffs/duties), and increased restaurant-level advertising spend negatively impacted Restaurant-Level Profit Margin.
• Increased impairment and closure costs related to four restaurant locations contributed to the wider net loss.
• Increased loss on disposal of property and equipment related to specialized kitchen equipment also contributed to the wider net loss.

Risks

• Ability to compete effectively in the market.
• Uncertainties regarding changes in economic conditions and geopolitical events, and the customer behavior trends they drive.
• Challenges in opening new restaurants, effectively identifying and securing appropriate sites, and expanding into new markets.
• Impact of severe weather conditions or natural disasters on restaurant sales and results of operations.
• Uncertainty regarding the profitability of new restaurants and the impact of any such openings on sales at existing restaurants.
• Difficulties in building, deploying, and maintaining the proprietary Infinite Kitchen technology in a timely and cost-effective manner.
• Ability to preserve the value of the brand, and concerns related to food safety and foodborne illness.
• Effect on the business of increases in labor costs, labor shortages, and difficulties in hiring, training, rewarding, and retaining a qualified workforce.
• Potential impact of pandemics or disease outbreaks.
• Challenges in achieving profitability in the future.
• Ability to identify, complete, and integrate acquisitions.
• Effect on the business of governmental regulation, including any future regulations that impose taxes, tariffs, or duties on food products, supplies, or changes in employment laws.
• Expenses and potential management distraction associated with litigation.
• Potential privacy and cybersecurity incidents, and the effect on the business of restrictions and costs imposed by privacy, data protection, and data security laws, regulations, and industry standards.
• Ability to enforce rights in intellectual property.

Future Outlook

The company updated its fiscal year 2025 guidance, projecting 37 Net New Restaurant Openings (18 featuring the Infinite Kitchen), revenue between $682 million and $688 million, a Same-Store Sales Change of (8.5)% to (7.7)%, a Restaurant-Level Profit Margin of 14.5% to 15%, and Adjusted EBITDA between $(13) million to $(10) million. For fiscal year 2026, the company expects 15-20 Net New Restaurant Openings, with about half featuring Infinite Kitchen units. Management expresses confidence in returning to sustained, profitable growth through operational excellence, menu innovation, and disciplined growth, leveraging the Infinite Kitchen strategy to scale efficiently, lower operating costs, and strengthen the balance sheet.

Management Comments

• "Amid a challenging macro backdrop, our priorities remain clear: delivering operational excellence, accelerating menu innovation, and driving disciplined growth. We are focused on the process of building a strong foundation, and I am extremely confident that our leadership team and focused strategy will lead Sweetgreen back to sustained, profitable growth." Jonathan Neman, Co-Founder and Chief Executive Officer.
• "Our strategic decision to sell Spyce and partner with Wonder marks the next evolution of our Infinite Kitchen strategy. The Infinite Kitchen is one of the worlds most advanced food automation technologies, elevating both the guest and team member experience. As part of our partnership, we will maintain access to the Infinite Kitchen platform, allowing us to scale more efficiently, lower operating costs, and strengthen our balance sheet." Jonathan Neman, Co-Founder and Chief Executive Officer.

Industry Context

The filing highlights a "challenging macro backdrop" and a "slowdown in consumer spending," which aligns with broader trends observed in the restaurant and retail sectors where discretionary spending is under pressure. The company's focus on digital revenue growth (Total Digital Revenue Percentage at 61.8%) and automation through the "Infinite Kitchen" strategy reflects an industry-wide push towards efficiency, technology adoption, and enhanced customer experience to combat rising labor and ingredient costs and changing consumer habits. The decline in same-store sales and widening losses suggest Sweetgreen is facing more significant headwinds than some competitors, or is particularly sensitive to the current economic environment.

Stakeholder Impact

• Shareholders: Negative impact due to widening losses, declining same-store sales, and negative Adjusted EBITDA, potentially leading to share price pressure.
• Employees: Potential for increased efficiency and improved experience with Infinite Kitchen technology, but also potential for restructuring charges and workforce adjustments as seen with the reduction in force at the Sweetgreen Support Center.
• Customers: Transition from Sweetpass+ to SG Rewards loyalty program may have caused some disruption, but the company aims to improve customer traffic and frequency through product investment and loyalty program benefits.
• Suppliers: Higher protein and packaging costs indicate pressure on the supply chain, potentially impacting supplier relationships or requiring cost negotiations.
• Creditors: Widening losses and negative EBITDA could raise concerns about the company's ability to service debt, though no specific debt issues were highlighted.

Next Steps

• Host a conference call on November 6, 2025, at 2:00 p.m. Pacific Time to discuss financial results and outlook.
• Continue implementing the Infinite Kitchen strategy, with 18 units planned for FY2025 and about half of 15-20 new openings in FY2026 featuring this technology.
• Focus on delivering operational excellence, accelerating menu innovation, and driving disciplined growth.

Key Dates

Recommendation

The company's Q3 2025 results show significant deterioration across all key financial metrics, including a revenue decrease, a substantial negative same-store sales change of 9.5%, and a widening net loss and negative Adjusted EBITDA. The updated fiscal year 2025 guidance continues to project negative same-store sales and Adjusted EBITDA. While strategic initiatives like the Infinite Kitchen are underway, their positive impact is not yet reflected in the financials, and the macroeconomic headwinds are clearly impacting performance. The current trajectory suggests continued financial challenges, making the stock a "sell" for investors seeking positive near-term performance or stability.

Keywords

Sweetgreen, SG, Q3 2025, Financial Results, Earnings, Restaurant Industry, Fast Casual, Healthy Food, Same-Store Sales, Net Loss, Adjusted EBITDA, Infinite Kitchen, Digital Revenue, Restaurant-Level Profit, SEC Filing