Cava Group stock flies to another record high, defying a challenging year for restaurant chains

Cava Group, Inc. (NYSE: CAVA) appears poised to lead the fast-casual restaurant sector in 2024, with its stock up an impressive 255% year to date. Following a robust third-quarter earnings report and a premarket surge of 17%, Cava’s stock is on track to hit an all-time high as markets open today.

Q3 report highlights

• Earnings: Cava reported $0.15 per share, exceeding a Zacks consensus estimate of $0.11, marking a 36.36% earnings surprise.
• Revenue: $243.82 million in revenue, surpassing the $233.59 million consensus estimate, showing a 39% increase year-over-year.
• Restaurant Openings: Cava added 11 new locations, bringing its total to 352 restaurants, a 21.4% year-over-year increase.
• Same-Restaurant Sales Growth: Up 18.1%, driven by a 12.9% increase in guest traffic.
• Profitability: Restaurant-level profit grew by 41.9% to $61.8 million, with a restaurant-level profit margin of 25.6%.
• Average Unit Volume (AUV): Increased to $2.8 million from $2.6 million in the prior year.
• Net Income: Jumped to $18.0 million, up from $6.8 million in the same quarter last year.
• Digital Revenue: 35.8% of total sales, reflecting strong digital engagement.
• Cash Flow: Generated $43.9 million in operating cash flow and $23.4 million in free cash flow.
• Adjusted EBITDA: Increased to $33.5 million, up from $19.8 million in Q3 2023.

How the competition stacks up

Year-to-date, Cava’s stock growth of 255% edges out Sweetgreen, which is up 242% as of the close of the market day on Tuesday. Both brands are capitalizing on the growing demand for health-conscious dining.

Cava’s profitability and digital engagement, which now accounts for 35.8% of its sales, have helped secure its lead. In contrast, major competitors like Chipotle Mexican Grill and Wingstop have each seen more modest stock growth of around 34%. The latter has been focusing heavily on its physical footprint, with plans to open 138 locations in 2024, as Fast Company previously reported.

Cava's stock growth is far outperforming its counterparts in the world of fast food, including McDonald's. The burger giant and other quick-service restaurants have faced challenges with customer traffic this year as rising menu prices have turned off many price-conscious consumers. As of yesterday, McDonald's stock was essentially flat year to date.