The restaurant chain says it has also benefited from 'premium proteins' like pomegranate-glazed salmon
Cava reported second-quarter results on Tuesday.
Cava Group says some diners have switched up their orders to avoid lettuce, but the fast-casual chain has still been able to sport sales growth despite a summer of food-safety scares impacting the restaurant industry writ large.
"We did see a shift into more grain bases, into items like pitas, and other items that they felt more comfortable with given the broader industry issues," CEO Brett Schulman told MarketWatch.
Schulman noted that none of Cava's ingredients had been associated with or sourced from farms affected by the recent food-safety issues, and that no public-health departments have reached out to the company in connection with those incidents.
The food-safety issues have included the nation's largest-ever cyclospora outbreak, which was linked to shredded iceberg lettuce. More recently, a salmonella outbreak has been linked to jalapenos. Produce giant Taylor Farms has issued recalls in connection with both cases. Schulman said Cava had not seen any immediate impact from the fears surrounding jalapenos.
Schulman made the remarks in conjunction with the chain's second-quarter earnings Tuesday, which topped Wall Street's expectations. The company also maintained its same-store sales outlook, in contrast to rival Sweetgreen $(SG)$, which cut its forecast on the metric.
Shares surged 12% after hours on Tuesday.
Among Cava's rivals, the impact of the outbreaks has been mixed. Fast-casual salad chain Sweetgreen last week said it recalled some jalapenos as a precautionary measure and called out "reduced consumer demand for fresh prepared foods." Chipotle Mexican Grill $(CMG)$ said fears of the cyclospora outbreak had weighed on traffic, but it still raised its sales forecast for the year. Yum Brands (YUM), which owns Taco Bell, said it was bringing back customers thanks to $1 deals on lettuce-free items.
Analysts have downplayed the long-term financial impact of the outbreaks on the restaurant industry. The food-safety scare has arrived as chains throw more discounts at consumers who are scrutinizing their budgets more carefully due to higher costs of living. Health officials continue to investigate the source of the outbreaks.
Cava on Tuesday kept its full-year outlook for same-store sales growth of 4.5% to 6.5%. Cava expects to have about 75 to 77 more restaurants by the end of that period. Those openings will arrive as Cava tries to add more greenery, warmer lighting and softer seats to its locations, in an effort to bring in more consumers.
For Cava's second quarter - which ended on July 12, just as concerns about the outbreak were growing - revenue jumped 31.3% year over year to $365.4 million, above FactSet estimates for $360 million. Same-store sales rose 9%, above estimates for a 7.1% gain. Foot traffic rose 5.3%.
Schulman said he had been seeing "a consistent trade into premium proteins," like pomegranate-glazed salmon or grilled steak, regardless of income bracket.
Cava earned 19 cents a share during the quarter, a penny above estimates.
Restaurant-level margins during the quarter fell slightly, to 25.7%, due to costs related to the addition of pomegranate-glazed salmon to the menu in April and more orders from third-party food deliverers, which can charge hefty fees for service.
Shares of Cava are up 3.2% so far this year. The stock was trading Tuesday at around $60, off highs of more than $150 reached in 2024.
-Bill Peters