By Evie Liu
Mediterranean fast-casual chain Cava Group posted another strong quarter on Tuesday after the market closed, sending the stock higher in Wednesday trading.
First-quarter revenue rose 32.2% year over year to $434.4 million, beating Wall Street expectations of $418.5 million. The growth was partially driven by 92 new restaurant openings over the past year, with recent new market entries across many Midwest states.
Same-restaurant sales increased 9.7%, mostly thanks to improving guest traffic -- a sign the company is still attracting customers even as much of the restaurant industry struggles with weaker demand.
Adjusted earnings came at 20 cents a share, down from 22 cents a year ago but topping Wall Street expectations of 17 cents. The decrease was due to lower tax benefits associated with equity-based compensation as well as higher depreciation and amortization, the company said.
"Amid today's broader macroeconomic environment and geopolitical uncertainty, our first quarter results reflect our position as a clear industry leader and our ability to meet the moment for the modern consumer," said CEO Brett Schulman in a statement.
" Cava continues to be an economically advantaged business model with high-potential for full national penetration as the company hasn't found a market that 'doesn't love Cava,'" wrote J.P. Morgan analyst John Ivankoe in a Wednesday note.
The analyst sees several factors that could help Cava's same-store sales growth for the rest of fiscal 2026. These include the launch of a new salmon menu in April, upcoming seasonal menu promotions, continued benefits from the tiered loyalty program launched in October, and room to increase marketing spending, which is low compared with peers. Stores opened in 2024 are also now helping sales growth instead of weighing on comparisons.
Sarang Vora, an analyst at Telsey Group, wrote on Wednesday that he is encouraged by Cava's strong performance from new restaurants in cities such as Cincinnati, St. Louis, and Columbus, noting that the company gained market share across different age groups, income levels, regions, and age groups.
"Notably, lower-income cohorts outperformed the broader trend, highlighting the strength of Cava's value and loyalty," he wrote.
Cava continues to generate strong sales at each restaurant, with average unit volumes of about $3 million. The company aims to grow to more than 1,000 locations by 2032, up from 459 restaurants in the first quarter of 2026. Vora believes that goal could be raised further if performance stays strong.
The company has raised its guidance for fiscal 2026 given the momentum in the first quarter. Management now expects to open 75 to 77 net new restaurants during 2026 and anticipates same-restaurant sales to grow 4.5% to 6.5%, up from the previous estimates of 3% to 5% growth.
While pre-opening costs are expected to be higher than previously expected, adjusted earnings before interest, taxes, depreciation and amortization are now expected to come in between $181 and $191 million, up from the previous guidance of $176 million to $184 million.
Morgan Stanley analyst Brian Harbour noted that while Cava's margin improvement seems modest, that's because the company continues to reinvest in the business and employees, and refrain from price hikes rather than fully passing inflation costs onto customers. Harbour thinks these are all "prudent moves."
Following the earnings report, shares jumped nearly 8% on Tuesday in after-hours trading and are trading 6% higher on Wednesday. Shares have gained 29% year to date, reversing the downtrend in 2025 when investors were concerned that the chain's rapid growth might come to a plateau.
Investors will remain focused on whether Cava can sustain its growth as the chain expands deeper into new markets.
Write to Evie Liu at evie.liu@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 20, 2026 11:50 ET (15:50 GMT)
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