Cava Group Inc. (NYSE: CAVA), the popular Mediterranean fast-casual restaurant chain, faced a significant stock sell-off after releasing its second-quarter (Q2) 2025 earnings report. Despite meeting or beating certain key financial metrics, the company disappointed on crucial investor-focused indicators, including same-store sales and future guidance. As a result, shares fell sharply, erasing billions in market capitalization.
In response to the market reaction, CEO Brett Schulman addressed the downturn directly, providing context on what went wrong, what is being done to address it, and why leadership remains confident in the company’s long-term trajectory.
Q2 2025 Financial Overview
Below is a summary of Cava stock performance in Q2 2025:
| Metric | Q2 2025 Result | Commentary |
|---|---|---|
| Revenue | $278.2 million | Up 20.3% year-over-year; missed estimates |
| Adjusted EPS | $0.16 per share | Beat estimates of $0.14 |
| Same‑Store Sales Growth (SSS) | 2.1% | Below 6%+ investor expectations |
| Net Income | $18.4 million | Slight decline from Q2 2024 |
| Restaurant Profit Margin | 26.3% | Margins held steady |
| New Restaurants Opened | 16 | Now operating nearly 400 stores |
| Digital Revenue Mix | 37.3% | Strong contribution from digital sales |
While the topline and EPS growth might seem encouraging at first glance, Wall Street was disappointed by the deceleration in same-store sales and the company’s downward revision of full-year projections.
Market Reaction: Why Did the Stock Drop?
Cava stock fell by as much as 22% in after-hours trading following the earnings release. The decline was fueled by a few key issues:
- Same-Store Sales Growth Miss: A 2.1% increase in same-store sales fell well below analyst expectations of 5–6%. This metric is critical because it reflects the health of existing locations, as opposed to growth driven by new store openings.
- Lowered Full-Year Guidance: Cava reduced its same-store sales growth guidance for the remainder of 2025. This marks the first guidance cut since the company’s IPO in 2023.
- Revenue Miss Despite EPS Beat: Although earnings per share beat expectations, total revenue fell short. Investors saw this as a signal that traffic and spending may be softening.
- Macroeconomic Concerns: Broader consumer behavior changes, influenced by inflation and economic uncertainty, appear to be affecting discretionary spending, especially on fast-casual dining.
- Valuation Concerns: Cava’s stock had traded at a premium compared to competitors. Any sign of deceleration in growth can trigger outsized market reactions, which is exactly what occurred.
CEO Brett Schulman Addresses the Results
In the earnings call, CEO Brett Schulman provided candid commentary on the challenges the company faced during the quarter.
Economic “Fog” and Consumer Behavior
Schulman referred to a “fog” in consumer behavior, pointing out that customers appeared more cautious with their spending. This was particularly visible in June and early July, where foot traffic was softer than expected. Although there was some recovery late in the quarter, it wasn’t enough to offset the impact of the earlier weakness.
Difficult Year-Over-Year Comparisons
Q2 2024 had been an unusually strong quarter for Cava stock, due in large part to the rollout of its grilled steak menu item and the excitement that followed. That created a difficult comparison base for Q2 2025, especially with no similarly impactful new product launches this year.
Schulman acknowledged that while the introduction of new products and limited-time offers still plays a role in driving traffic, timing and consumer sentiment impacted their performance this quarter.
Continued Expansion and Unit Economics
Despite the setbacks, the company raised its new store opening target for the year from 64–68 to 68–70. The CEO emphasized that newly opened locations are performing exceptionally well, with average unit volumes exceeding $3 million.
This is a strong signal that Cava stock business model remains scalable and profitable over the long term. Strong unit-level economics are a core pillar of the company’s growth strategy.
Margin Management and Profitability
One bright spot in the report was that restaurant-level profit margins held steady at around 26.3%, a testament to disciplined cost control and operational execution. Cava stock also grew its adjusted EBITDA by more than 20% year-over-year.
This level of profitability suggests that Cava stock operations are still fundamentally sound, even as top-line growth encounters short-term volatility.
Updated Guidance and Key Focus Areas
Following the Q2 results, Cava provided updated guidance and outlined key areas of focus for the remainder of 2025:
Revised Same-Store Sales Growth
- The company now expects full-year same-store sales growth of 3% to 4%, down from previous projections in the 5% to 7% range.
- This reflects macroeconomic caution as well as the tapering impact of 2024’s successful product launches.
New Store Openings
- Cava stock now expects to open 68 to 70 restaurants by the end of the year, up from earlier guidance of 64 to 68.
- New locations are averaging high unit volumes and quick ramp-ups, confirming the efficiency of the expansion plan.
Capital Expenditures and Pre-Opening Costs
- Pre-opening costs are expected to range between $15.5 million and $16.5 million, which is in line with expectations given the accelerated opening schedule.
- Capital efficiency remains a priority to ensure high return on investment per unit.
Digital and Off-Premises Growth
- The digital channel made up 37.3% of total sales, demonstrating continued traction among mobile and delivery-first customers.
- Loyalty program enhancements and app upgrades are expected to drive even more growth from digital in coming quarters.
Strategic Perspective: Short-Term Volatility, Long-Term Growth
Despite the share price volatility, the underlying narrative for Cava remains one of long-term opportunity. The current challenges are largely cyclical and tied to external market forces, rather than fundamental weaknesses in the business model.
Cava continues to position itself as the category leader in Mediterranean fast-casual dining, a niche that is increasingly resonating with health-conscious consumers. The chain’s ability to deliver high unit volumes, digital growth, and profitability puts it in a strong position compared to many early-stage restaurant chains.
Key Strengths Still in Play
- Strong Brand Positioning: Cava appeals to health-minded and ingredient-conscious consumers. This demographic is likely to drive consistent demand over time.
- Scalable Operating Model: Store-level economics continue to support rapid expansion, with new units delivering strong performance from day one.
- Balanced Growth Strategy: The company is focusing on both top-line expansion through store openings and margin enhancement through operational efficiencies.
- Loyal Customer Base: Despite short-term traffic softness, Cava has built a loyal customer base that actively engages through digital platforms.
Risks Moving Forward
While the long-term outlook remains optimistic, investors should be aware of key risks:
- Macroeconomic Pressures: Ongoing inflation, interest rate uncertainty, and labor costs could continue to impact consumer spending.
- Execution Risk: Rapid expansion always carries the risk of inconsistent performance across locations.
- High Market Expectations: Cava’s premium valuation places pressure on the company to consistently beat expectations, which can be difficult in uncertain environments.
What Investors Should Watch Next
- Q3 and Holiday Season Trends: Will traffic and sales recover as seasonal promotions and new menu items are rolled out?
- Digital Channel Growth: How much of the customer base can be shifted toward high-margin digital orders?
- Margin Management: Can restaurant-level margins remain above 25% amid rising costs?
- New Store Performance: Sustained high average unit volumes for new openings will validate the expansion model.
- Customer Traffic Trends: Foot traffic recovery will be a key indicator of whether the lowered guidance was a one-time recalibration or a signal of broader issues.
Conclusion
Cava’s Q2 2025 results delivered a mixed message. On one hand, the company remains profitable, continues to expand rapidly, and has a strong digital presence. On the other hand, slowing same-store sales and a reduced growth outlook have raised short-term concerns for investors.
CEO Brett Schulman has been transparent about the challenges and confident about the solutions. His reaffirmation of long-term goals, including the aim to operate over 1,000 locations by 2032, indicates that the leadership team remains focused on scaling responsibly and profitably.
While the recent stock price drop may reflect investor disappointment, it also creates a moment of reflection: is this a short-term stumble in a promising growth story, or a sign of decelerating momentum? The next few quarters will provide the answer.
