Weaker second-quarter sales and a Cyclospora-related health scare hit Sweetgreen demand and reduced guidance.

  • Sweetgreen posted Q2 revenue of $192.7 million, up 3.8% year over year, but missed analyst expectations. 
  • Sweetgreen now expects sales at existing restaurants to fall between 7% and 8% this year.
  • CFO Jamie McConnell said traffic improved before outbreak concerns hurt July sales.

Sweetgreen (SG) stock tanked 15% overnight after the salad chain slashed its full-year outlook, citing weaker customer traffic tied to broad consumer concerns over a Cyclospora outbreak, despite saying it does not use the implicated iceberg lettuce. The company also reported second-quarter (Q2) revenue that missed estimates and comparable sales that fell 6.2%. 

Sweetgreen Reports Weak Quarter 

Sweetgreen reported Q2 revenue of $192.7 million, a 3.8% increase. The company posted a net loss of $26.3 million compared with a $23.2 million loss last year, while adjusted EBITDA declined to a near break-even loss of $0.2 million from a $6.4 million profit. It reported a loss of $0.22 per share. 

Both revenue and EPS missed analysts’ consensus estimates of $194.52 million and a loss of $0.15 per share, according to Fiscal IA data. Sweetgreen now expects same-store sales to decline between 7% and 8% for the year. The company sees restaurant-level profit margins between 10.5% and 11% and anticipates adjusted EBITDA losses ranging from $23 million to $27 million. 

Sweetgreen stock is on track for its worst day in a year if the overnight levels hold. 

Wraps Boost Sweetgreen Traffic Before Outbreak Headwinds 

During the company's Q2 earnings call, Jonathan Neman, co-founder and CEO, said protecting customers and employees remains the company's highest priority. 

“The cyclospora outbreak has been attributed to iceberg lettuce, which we do not use anywhere on our menu. We continue to monitor the situation closely and have no indication from our suppliers or public health authorities that sweetgreen is connected to that outbreak,” said Neman, adding, “The impact of this outbreak, including a range of recovery assumptions, is reflected in our updated outlook. 

He also discussed a separate jalapeño recall, saying Sweetgreen quickly removed and threw away the affected products as a safety measure. Jalapeños are used in only two of the company’s 15 dressings and make up a very small part of sales.

CFO Jamie McConnell said customer visits improved from large declines earlier in the year to almost flat levels by June after Sweetgreen launched its wraps nationwide and improved operations. However, concerns about the Cyclospora outbreak in July slowed that progress and reduced comparable sales by about 6%. 

SG Stock: Retail Stance 

On Stocktwits, retail sentiment around the stock changed to ‘bearish’ from ‘neutral’ territory the previous day. 

A user said, “I already thought SG was a bad business model, then all the salad diseases hit. I have always ordered my sandwiches with "no lettuce" and will continue to do so.” 

Another user said, “literally the only thing they can do is a completely new menu revamp.”

SG stock has slumped 13% year-to-date. 

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