10-K: Sweetgreen Reports Widening Losses, Sales Decline in 2025

Sweetgreen, Inc. reported a significant increase in net losses and a decline in same-store sales for fiscal year 2025, alongside a strategic sale of its Infinite Kitchen technology.

Summary

• Sweetgreen, Inc. reported a net loss of $134.1 million for fiscal year 2025, a 48.3% increase from the $90.4 million net loss in fiscal year 2024.
• Revenue increased marginally by 0.4% to $679.5 million in fiscal year 2025, up from $676.8 million in fiscal year 2024, primarily driven by new restaurant openings.
• Same-Store Sales Change declined by 7.9% in fiscal year 2025, a significant reversal from the 6.2% growth in fiscal year 2024, attributed to a 10.4% decrease in traffic.
• Average Unit Volume (AUV) decreased by 8.4% to $2.677 million in fiscal year 2025 from $2.924 million in fiscal year 2024.
• The company opened 35 Net New Restaurants in fiscal year 2025, bringing the total to 281 restaurants in 24 states and Washington, D.C.
• Total Digital Revenue Percentage increased to 61.8% in fiscal year 2025 from 56.4% in fiscal year 2024, with Owned Digital Revenue Percentage rising to 34.6% from 30.4%.
• Operating cash flow shifted from a positive $43.4 million in fiscal year 2024 to a negative $12.7 million in fiscal year 2025.
• Cash and cash equivalents decreased significantly to $89.2 million as of December 28, 2025, from $214.8 million at the end of fiscal year 2024.
• Sweetgreen sold its Spyce business unit, including the Infinite Kitchen technology, to Wonder Group, Inc. for $186.4 million ($100 million cash, $86.4 million in Wonder Series C preferred stock) on December 29, 2025.
• The company expects approximately 15 Net New Restaurant Openings in fiscal year 2026, with about half featuring Infinite Kitchen units.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as highly negative due to significant financial deterioration, including widening losses, declining core sales metrics, and negative operating cash flow, despite a slight revenue increase from new openings and a strategic asset sale.

Positives

• Revenue saw a slight increase of 0.4% in fiscal year 2025, primarily driven by the opening of 35 new restaurants.
• Digital channels continue to grow, with Total Digital Revenue Percentage increasing to 61.8% and Owned Digital Revenue Percentage rising to 34.6% in fiscal year 2025.
• General and administrative expenses decreased by 4.4% in fiscal year 2025, mainly due to lower bonus expense and stock-based compensation.
• The sale of the Spyce business unit to Wonder Group, Inc. for $186.4 million (including $100 million in cash) provides a significant liquidity injection post-fiscal year end.
• The company maintains a commitment to its 'Sweet Growth Transformation Plan' focused on operational excellence, food quality, personalized experience, brand relevance, and disciplined profitable investment.

Negatives

• Net loss widened significantly by 48.3% to $134.1 million in fiscal year 2025, indicating deteriorating profitability.
• Same-Store Sales Change declined by 7.9% in fiscal year 2025, reflecting a 10.4% decrease in customer traffic.
• Average Unit Volume (AUV) decreased by 8.4% in fiscal year 2025, suggesting lower sales productivity per restaurant.
• Food, beverage, and packaging costs increased as a percentage of revenue (28.5% in 2025 vs. 27.4% in 2024) due to higher protein costs, increased ingredient usage/waste, tariffs, and a one-time write-off.
• Labor and related expenses increased as a percentage of revenue (28.9% in 2025 vs. 27.9% in 2024) due to lower sales volume deleverage and wage inflation, including California's $20.00/hour minimum wage increase.
• Occupancy and other restaurant operating costs also increased as a percentage of revenue, driven by lower sales volume deleverage.
• Impairment and closure costs surged by 444% to $12.1 million in fiscal year 2025, primarily from impairment charges on 12 restaurants and closure costs for three stores.
• Pre-opening costs increased by 63% to $10.8 million, reflecting the acceleration of new restaurant growth in 2025, which may pressure near-term profitability.
• Cash and cash equivalents decreased by over 58% from $214.8 million to $89.2 million year-over-year.
• Net cash used in operating activities was $12.7 million in fiscal year 2025, a significant decline from $43.4 million provided by operating activities in fiscal year 2024.

Risks

• Operating in a highly competitive industry with many competitors having greater resources and market presence.
• Adverse effects on customer behavior and discretionary spending due to changes in economic conditions, macroeconomic and geopolitical events, and public health developments (e.g., inflation, high interest rates, recessionary cycles, remote work trends).
• Negative impact on restaurant sales and operations from severe weather conditions and natural disasters, potentially exacerbated by climate change.
• Future growth is highly dependent on the ability to open new restaurants, which is subject to unpredictable factors like supply chain challenges, construction delays, and permitting issues.
• New restaurants may not be profitable and could negatively impact sales at existing locations (cannibalization).
• Brand value and customer recognition are susceptible to negative publicity, food safety concerns, and operational issues.
• Continued significant net losses are expected, and profitability may not be achieved.
• Reliance on Wonder Group, Inc. for the supply, commissioning, support, and maintenance of Infinite Kitchen technology, with potential adverse effects if Wonder fails to fulfill obligations or if technology costs increase.
• Challenges in hiring, training, rewarding, and retaining a qualified workforce, leading to staffing shortages, higher labor costs, or unionization efforts.
• Fluctuations in food and supply costs, disruptions in availability, and changes in U.S. international trade policies (tariffs) could adversely affect profitability.
• Difficulty in persuading customers of the benefits of paying higher prices for quality food, especially in price-sensitive markets or during economic downturns.
• Geographic concentration of restaurants in large urban areas makes the business susceptible to regional economic, social, weather, and regulatory conditions.
• Acquisitions could be difficult to integrate, divert management attention, dilute stockholder value, and adversely affect results.
• Extensive governmental regulation (food safety, labor, ADA, zoning) may increase costs and lead to litigation or penalties.
• Litigation, including class actions and PAGA claims related to employment matters, food safety, and ADA compliance, could distract management and incur significant expenses.
• Cybersecurity threats, data privacy breaches, and non-compliance with evolving data privacy and security laws (e.g., CCPA, My Health My Data Act) could lead to reputational harm, operational disruption, and legal liabilities.
• Inability to adequately protect or enforce intellectual property rights, harming brand value and competitive position.
• Reliance on third-party vendors for IT systems, delivery services, and payment processing, exposing the company to risks of service disruptions or failures.
• Challenges in effectively managing growth, scaling technology, and adapting infrastructure.
• Volatility of Class A common stock price due to various factors, including financial performance, competition, and market conditions.
• Dual-class stock structure concentrates voting control with founders, potentially misaligning with other stockholders' interests.
• Reliance on internal tools for performance metrics, with potential for inaccuracies.
• Future sales of Class A common stock by existing holders could depress the market price.
• No dividends expected for the foreseeable future, requiring stockholders to rely on stock price appreciation for returns.
• Anti-takeover provisions and exclusive forum provisions in charter documents could limit stockholder influence.
• Increasing use of artificial intelligence (AI) may result in errors, loss of sensitive information, compliance obligations, cybersecurity incidents, and legal liability.
• Dependence on internet, mobile, and other infrastructure not under company control.

Future Outlook

Sweetgreen expects net losses to continue in the foreseeable future. The company anticipates full-year Same-Store Sales Change for fiscal year 2026 to be between (4.0)% to (2.0)%. Approximately 15 Net New Restaurant Openings are planned for fiscal year 2026, with about half featuring Infinite Kitchen units. Management expects the cost of Infinite Kitchen units to modestly increase due to tariffs and the supply agreement with Wonder. Margins on Native Delivery, Outpost and Catering, and Marketplace Channels are expected to improve over time as the company achieves greater scale. Sweetgreen continues to evaluate its organizational structure and may implement additional changes to lower administrative headcount in future periods.

Management Comments

• "We have been impacted by a decrease in consumer spending during fiscal year 2025, which we expect to continue at least in the near term."
• "As we focus on discipline with respect to costs and allocation of capital in connection with the Sweet Growth Transformation Plan, we will be opening fewer restaurants in the near term."
• "Management remains committed to mitigating the impact of tariff costs across our supply chain, restaurant build-outs and equipment through ongoing sourcing and cost-optimization strategies that we and our suppliers have implemented."

Industry Context

StockSavvy.ai notes that Sweetgreen's performance in fiscal year 2025 reflects broader challenges in the fast-casual dining sector, particularly the impact of elevated inflation and higher interest rates on consumer discretionary spending. The decline in same-store sales and AUV, coupled with increased operating costs, indicates that consumers are either opting for lower-cost alternatives or reducing their frequency of dining out. The continued prevalence of remote and hybrid work models also disproportionately affects urban-centric brands like Sweetgreen, shifting sales mix towards higher-cost digital channels. The strategic sale of the Infinite Kitchen technology to Wonder Group, Inc. could be a move to de-risk internal R&D while still leveraging automation, but it introduces reliance on a third party for a key operational differentiator.

Comparison to Industry Standards

• Sweetgreen's negative Same-Store Sales Change of 7.9% in fiscal year 2025 contrasts sharply with many established fast-casual competitors like Chipotle Mexican Grill, which typically report positive comparable sales growth, even in challenging economic environments, often driven by menu innovation and strong digital platforms.
• The significant increase in net loss and negative operating cash flow for Sweetgreen indicates a weaker financial position compared to more mature and profitable fast-casual chains that have demonstrated consistent positive cash generation and net income.
• The planned reduction to approximately 15 new restaurant openings in fiscal year 2026, down from 35 in 2025, suggests a more cautious expansion strategy compared to aggressive growth seen in some successful emerging restaurant concepts or even established players like Shake Shack, which continue to target higher unit growth.
• Sweetgreen's reliance on third-party delivery services for a significant portion of its digital sales, and the associated higher costs, is a common industry trend, but the company's struggle to improve margins in these channels suggests it may be lagging behind peers who have optimized their digital fulfillment and loyalty programs more effectively to offset these fees.

Management Changes

Corporate Governance

Legal Proceedings

• Subject to various claims, lawsuits, governmental investigations, and administrative proceedings in the ordinary course of business, including those related to workplace and employment matters (e.g., off-the-clock work, meal/rest breaks, predictive scheduling, discrimination, wrongful termination, employee misclassification).
• Currently a party to class actions and Private Attorney General Act (PAGA) litigations.
• Customers have filed complaints and lawsuits alleging illness or injury suffered at or after visits to restaurants, as well as issues relating to food quality and operations.
• Currently engaged in ADA-related litigation and has settled past lawsuits related to alleged ADA non-compliance, requiring accommodations to websites, smartphone applications, and physical restaurant locations.
• Under investigation by the New York City Department of Consumer and Worker Protection for fair workweek violations at one New York City location.
• Previously faced a lawsuit from Chipotle in fiscal year 2023 regarding the use of the word 'Chipotle' in a menu item name, which was subsequently settled.

Related Party Transactions

• Total payments of $5.0 million were made in fiscal year 2025 to Welcome to the Dairy, LLC, an entity that owns the properties leased by Sweetgreen for its principal corporate headquarters. Sweetgreen's founders and former Chief Financial Officer each hold an indirect minority passive interest in Luzzatto Opportunity Fund II, LLC, which holds indirect equity interests in Welcome to the Dairy, LLC.

Stakeholder Impact

• **Shareholders**: Experience significant dilution risk from potential future capital raises and continued net losses. The dual-class stock structure concentrates voting power with founders, limiting influence for other shareholders. Stock price volatility is a noted risk.
• **Employees**: Subject to workforce reductions and organizational restructurings, which can impact morale and institutional knowledge. Wage inflation and labor shortages increase costs, potentially affecting compensation strategies. Changes in executive roles, including a co-founder stepping down from operational duties, could impact leadership stability.
• **Customers**: May face higher menu prices due to increased operating costs, potentially affecting loyalty and demand. The transition from Sweetpass+ to SG Rewards loyalty program created near-term headwinds. Operational challenges and food safety concerns could impact customer experience and trust.
• **Suppliers**: Face potential renegotiation of contracts due to inflation and supply chain risks, leading to increased costs. Disruptions from extreme weather or disease outbreaks can affect availability and quality of ingredients.
• **Creditors**: The company's declining cash balance and negative operating cash flow could increase perceived credit risk, potentially affecting future financing terms.

Next Steps

• Open approximately 15 Net New Restaurants in fiscal year 2026, with about half featuring Infinite Kitchen units.
• Continue to deploy additional Infinite Kitchen units in new and existing restaurants through the supply agreement with Wonder Group, Inc.
• Monitor and mitigate the impact of tariff costs across the supply chain, restaurant build-outs, and equipment.
• Continue to evaluate organizational structure and potentially implement additional changes to lower administrative headcount.
• Nathaniel Ru will continue to serve as a member of the Board of Directors after his employment separation on January 1, 2026.

Key Dates

Recommendation

Sweetgreen's fiscal year 2025 results show significant financial deterioration, with a widening net loss, negative same-store sales, and a shift to negative operating cash flow. The outlook for 2026 includes continued negative comparable sales. While the sale of Spyce provides a cash infusion, the underlying business performance is weak, and the company faces substantial operational, competitive, and macroeconomic risks. The need for potential future capital raises and the extensive list of challenges suggest a difficult path to profitability, making the stock a high-risk investment with significant downside potential.

Keywords

Sweetgreen, Restaurant Industry, Fast Casual, SEC Filing, 10-K, Financial Performance, Net Loss, Same-Store Sales, Average Unit Volume, Digital Sales, Infinite Kitchen, Restaurant Automation, Food Service, Corporate Governance, Risk Factors, Labor Costs, Supply Chain, Cybersecurity, Stock Market, SG