Cava Stock Sinks 22% After Q2 Earnings; Here’s Why

Cava Group, the fast-casual Mediterranean restaurant chain, saw its stock fall nearly 22% in after-hours trading on August 12, according to Google Finance. The fall came after the company in its Q2 FY25 earnings report showed how there is a steep drop in same-store sales growth along with a trimmed full-year forecast. 

Cava, which was once celebrated as one of the fastest-growing names in the restaurant industry, is now facing the challenge of a tougher economy, changing customer habits, and stronger competition. These results have flagged concerns on whether Cava can maintain its rapid growth which had led to a huge increase in its market value last year.

Let’s break down with this blog on key numbers, what went wrong, and what comes next. 

Key Numbers From CAVA’s Earnings Report

Source: Cava’s Form 8-K

What’s Troubling Cava?

• Same-store sales collapse: Growth has slowed sharply to just 2.1%, which is well below the expectations of around 6%. This is a huge drop from Q1’s 10.8% and Q2 last year’s 14.4%. 
• Revised full-year outlook: Management has cut its 2025 same-store sales guidance from 6-8% to just 4-6%. CEO Brett Schulman pointed to economic uncertainty, saying consumers are “navigating a fog”. 
• Revenue miss: While revenue grew 20.3% YoY, it still came in below analyst expectations of around $285 million at $278.2 million. 
• Flattening traffic: The small same-store sales growth was driven mainly by pricing and menu mix adjustments and not an increase in foot traffic. 

These challenges together are putting Cava’s growth story under pressure. A high valuation multiples mean the company must consistently deliver on both expansion and same-store performance. This combination of slowing momentum, weak expectations, and a revenue shortfall has investors concerned that Cava’s growth trajectory could be entering a more mature and less explosive phase.

Are Cava’s Peers Facing Similar Concerns?

Source: Cava, Chipotle, Sweetgreen Earnings Call

Bright Spots With Cava

• Strong unit-level profits: Restaurant-level profit margin held at 26.3% which points toward a resilient ongoing operations unit by unit.
• Continued expansion: Cava has opened 16 restaurants this quarter which brings its total to 398, and they have raised the target for 2025 to 68-70 from the prior range of 64-68.
• Digital momentum: 37.3% of revenue came from digital orders, underscoring growing scalability and operational leverage.
• Solid adjusted EBITDA: The company confirmed full-year adjusted EBITDA guidance of $152-159 million.

Why Are Investors Selling Cava Stock?

Cava's valuation is already among the highest in the sector at a P/E ratio of over 140x forward earnings which is far above its competitors like Chipotle or Sweetgreen. As same-store sales momentum is slowing and the guidance was lowered, the investors are questioning whether Cava can grow quickly enough to justify its heavy market valuation.

The revised full-year guidance for same-store sales growth which is now reduced, has increased these concerns, as sustaining premium valuations would require both expansion and steady growth in existing locations.

By late 2024, the company’s market value had grown to nearly three times its IPO level, but it has since dropped by about 45%. 

What to Watch in the Months Ahead for Cava

• Can same-store traffic rebound: Q3 performance and whether foot traffic picks up will be the key to restoring growth credibility.
• Execution of new openings: Hitting 68-70 new stores successfully would reaffirm expansion strategy, scale and would provide some relief to rising investor concerns.
• Cost control vs inflation: As costs rise, maintaining profit margins without increasing the prices would be the key.
• Digital channel growth: Continued gains in digital orders could offset concerts of less in in-store traffic.
• Consumer sentiment clarity: The “fog” around the macro door must clear for discretionary dining to improve.

Cava delivered double-digit revenue growth and maintained strong unit-level economics in Q2. But the steep slowdown in same-store sales, paired with guided caution spooked investors and triggered a sharp sell-off. The next few quarters will test whether Cava can rekindle traffic and reestablish the growth momentum that once made it a fast-casual favorite.

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