Good morning. Mediterranean restaurant chain Cava is attracting diners of all income levels with the help of a new menu item: grilled steak. Sales are soaring for the topping, which customers can add to their salads or pitas alongside the usual assortment such as roasted corn, feta cheese, and red pepper hummus.
The premium grilled steak option, introduced in June with a buzzy social media and PR campaign, “resonated even more with the consumers than we were experiencing in tests,” CFO Tricia Tolivar told me before the company reported its Q2 2024 earnings on Thursday.
In Q2, Cava’s store traffic increased 9.5% year over year while its same-store sales rose 14.4%, the company reported on Thursday after market close. Quarterly revenue rose 35% to $231.4 million, up from the $219.5 million analysts had expected. Earnings per share came in at $0.17, beating expectations by four cents. Quarterly net income almost reached $20 million, compared to $14.8 million expected and up from $6.5 million last year.
Cava raised its fiscal full-year 2024 guidance for same restaurant sales growth to between 8.5% and 9.5% from 4.5% to 6.5%.
Few restaurant stocks have come close to keeping pace with Cava since it went public at $22 per share in June 2023, Fortune reported. Shares nearly doubled on the first day of trading and have soared nearly 140% more since, trading above the $100 mark before the latest earnings. In after-hours trading on Thursday, shares jumped more than 9% to $111.40.
“At Cava, we have not seen a lot of challenges in consumer spending, so our guests have been very resilient,” Tolivar said. The company is seeing double-digit same restaurant sales growth across all income levels, from customers who earn at least $100,000 annually to customers who earn $50,000 or less.
The top 10% of Cava restaurants based on sales include locations across all income strata. “There’s all different regions of the country represented as well as urban and suburban classifications and various formats including freestanding and in-line locations," Tolivar said.
In January, Cava raised prices by nearly 3% on average to offset inflation for the ingredients it uses. “We're not anticipating any additional price increases in 2024, and we're evaluating 2025 over time,” Tolivar said.
Cava opened 18 net new restaurants in Q2, bringing the total to 341, which are primarily across the East Coast, the Southwest, and Southern California. Tolivar and Cava CEO Brett Schulman work with the real estate team on selecting new locations across the country. When opening new restaurants, the company typically allocates about 10% to 20% to existing markets and 20% to 30% in entirely new markets. The rest of the restaurants are designated to growth and emerging markets, areas where the company specifically takes into account the surrounding population of a city or town where a new restaurant would go. For example, smaller populated areas are considered “emerging.”
Cava now plans to open 54 to 57 restaurants this year, up from 50 to 54 in previous guidance, with the goal of 1,000 restaurants total by 2032. And grilled steak, which Tolivar now says is her favorite, is seemingly a mainstay on the menu.
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna
