10-Q: Sweetgreen Reports Q1 2025 Results: Revenue Up, But Same-Store Sales Decline

Sweetgreen's Q1 2025 shows revenue growth driven by new restaurant openings, offset by a decline in same-store sales and increased operating costs.

Summary

• Sweetgreen, Inc. reported its financial results for the first quarter of 2025, ended March 30, 2025.
• Revenue increased by 5.4% to $166.3 million, primarily driven by 30 net new restaurant openings since Q1 2024.
• However, same-store sales decreased by 3.1%, reflecting a 6.5% decrease in traffic and product mix, partially offset by a 3.4% benefit from menu price increases.
• The company opened 5 net new restaurants during the quarter, bringing the total to 251 restaurants.
• The average unit volume (AUV) was $2.907 million, slightly up from $2.889 million in the prior year.
• The total digital revenue percentage was 59.9%, and the owned digital revenue percentage was 31.9%.
• The company reported a net loss of $25.0 million, or $0.21 per share, compared to a net loss of $26.1 million, or $0.23 per share, in Q1 2024.
• Restaurant-level profit was $29.7 million, with a margin of 17.9%.
• Adjusted EBITDA was $0.3 million, with a margin of 0.2%.
• The company expects to open at least 40 new restaurants in fiscal year 2025 and add at least 20 new Infinite Kitchen units.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While revenue increased, same-store sales declined, and the company is still operating at a loss. The outlook is cautiously optimistic, with plans for expansion and innovation, but challenges remain.

Positives

• Revenue increased by 5.4% year-over-year.
• Net loss improved slightly compared to the same period last year.
• The company is expanding its restaurant footprint with new openings.
• The company is innovating with the Infinite Kitchen concept.
• The company expects tariff impacts to decline to roughly 40 basis points in the second half of the year.

Negatives

• Same-store sales decreased by 3.1%, indicating a decline in customer traffic.
• The company is still operating at a net loss.
• The company projects a tariff impact from its food, beverage and packaging supply chain of approximately 75 basis points for the second quarter.
• The company foresees a potential increase of up to 10% on the $1.4-$1.5 million average unit cost for new restaurant development.

Risks

• Macroeconomic conditions and inflation could impact consumer spending and the company's ability to offset cost increases.
• Supply chain disruptions and tariffs could increase costs for food, beverage, and packaging.
• Fluctuations in return-to-office trends and inclement weather could impact customer traffic.
• The company's reliance on third-party delivery services could negatively impact margins.
• The company's ability to achieve profitability in the future is uncertain.

Future Outlook

The company expects to open at least 40 new restaurants in fiscal year 2025 and add at least 20 new Infinite Kitchen units. The company also anticipates an increase in Owned Digital sales with the introduction of its new loyalty program in the second quarter of 2025.

Industry Context

Sweetgreen operates in the fast-casual restaurant industry, which is highly competitive. The company faces competition from other fast-casual chains, as well as traditional fast-food restaurants and grocery stores. The company's focus on healthy food and technology, such as the Infinite Kitchen, differentiates it from some competitors.

Comparison to Industry Standards

• Comparing Sweetgreen's performance to industry peers like Chipotle, Panera Bread, and Shake Shack reveals some key differences.
• Chipotle, for example, often boasts higher same-store sales growth, reflecting its strong brand loyalty and operational efficiency.
• Panera Bread, with its diverse menu and loyalty program, provides a benchmark for customer retention strategies.
• Shake Shack, known for its premium burgers and shakes, offers insights into balancing quality and scalability.
• Sweetgreen's AUV of $2.907 million is competitive but needs to be considered in the context of its specific market positioning and store footprint.
• The company's digital revenue percentage of 59.9% is in line with industry trends, but there is room for improvement in owned digital channels to enhance profitability.

Management Changes

Legal Proceedings

• The Company is subject to various claims, lawsuits, governmental investigations, and administrative proceedings that arise in the ordinary course of business.

Related Party Transactions

• The Company's founders and Chief Financial Officer each hold indirect minority passive interests in Luzzatto Opportunity Fund II, LLC, an entity which holds indirect equity interests in Welcome to the Dairy, LLC, which is the owner of the properties leased by the Company for the Company's principal corporate headquarters.
• For the thirteen weeks ended March 30, 2025 and March 31, 2024, total payments to Welcome to the Dairy, LLC, totaled $1.5 million and $1.0 million, respectively.

Stakeholder Impact

• Shareholders: The company's performance impacts shareholder value, with revenue growth offset by declining same-store sales and continued losses.
• Employees: Changes in management and potential restructuring could impact employees.
• Customers: Menu price increases and changes in service channels could affect customer experience.
• Suppliers: Supply chain disruptions and tariffs could impact supplier relationships.
• Creditors: The company's liquidity and capital resources are important for meeting its obligations.

Next Steps

• The company plans to open at least 40 new restaurants in fiscal year 2025.
• The company plans to add at least 20 new Infinite Kitchen units in fiscal year 2025.
• The company will continue to monitor macroeconomic conditions and adjust its strategies accordingly.
• The company will focus on improving same-store sales and profitability.

Key Dates

Keywords

Sweetgreen, restaurant, financial results, revenue, same-store sales, net loss, Infinite Kitchen, expansion, tariffs, Q1 2025