Sweetgreen, Inc. Q4 FY2024 earnings call

• Sweetgreen redefined fast food through superior sourcing, culinary excellence, innovative technology, and a hospitable experience. In 2024, they expanded the menu, opened 25 new restaurants, and ended the year with 12 Infinite Kitchens. - They improved sourcing and culinary practices, achieved the lowest turnover levels in company history, and saw sales grow over 15% to $676.8 million, with restaurant level margin expanding over 200 basis points to 19.6% and adjusted EBITDA at $18.7 million. - Strategic pillars for 2025 include revolutionizing fast food through menu and technology innovation, strengthening guest connection and operational excellence, and strategically expanding the footprint. - Introduced grass-fed steak, deployed Infinite Kitchens, expanded into new markets, and launched Ripple Fries. - Revamped loyalty program SG Rewards launching in April 2025, with points-based system for redeeming free items and exclusive offers. - Implemented AI-powered workforce management system to optimize scheduling and efficiency, and focused on team member development with clear career paths and low turnover.

In the fourth quarter of 2024, total revenue was $160.9 million, up from $153 million in the fourth quarter of 2023. Same-store sales for the fourth quarter grew 4%, consisting of a 4% benefit from menu price increases and flat traffic and mix. For the fiscal year 2024, same-store sales grew 6% (4% from menu price increases and 2% from traffic and mix). The restaurant level profit margin for the quarter was 17.4% (up from 16.2% the prior year), and for the fiscal year, it was 19.6% (expanding over 200 basis points year-over-year). Food, beverage, and packaging costs were 27% of revenue in the quarter, a 100 basis point improvement from the prior year. Labor and related expenses were 29% of revenue in the fourth quarter, favorable compared to the prior year. Operating support center costs in the fourth quarter were 16.3% of revenue, down from 16.7% the prior year. Adjusted EBITDA for the fourth quarter was a loss of $600,000, a $1.2 million improvement from the fourth quarter of 2023. For the fiscal year 2024, adjusted EBITDA was $18.7 million, the first full year of positive adjusted EBITDA in the company's history.

For fiscal year 2025, Sweetgreen anticipates at least 40 net new restaurant openings, revenue between $760 million and $780 million, same-store sales growth between 1% and 3%, restaurant-level margins between 19.8% and 20.5%, and adjusted EBITDA between $32 million and $38 million. In the first quarter of 2025, they expect five net new restaurant openings, revenue between $163 million and $166 million, same-store sales decline between 5% and 3%, restaurant level margin between 16.4% and 16.8%, and adjusted EBITDA loss between $3 million and $1 million. Marketing support for launches will begin in Q2 and run through the rest of the year.

• External challenges such as wildfires in Southern California and extreme weather impacted Q1 2025 performance, particularly in the Los Angeles market which represents nearly 15% of revenue. - Dependence on menu innovation, marketing, and loyalty program launches to drive comps and overcome near-term headwinds.

Q: Please speak specifically to what you’re doing from a media and marketing perspective and how it will impact the P&L?

A: A lot of changes in marketing. Shifting more dollars towards marketing with each launch getting more support, full funnel approach from top of funnel out of home to social, and more investments in social media and owned content. Most of the increase in marketing support will begin in Q2 and run through the balance of the year.

Q: Could you provide more texture around how 2025 is going to unfold, especially regarding weather impact and sales build?

A: In Q1 2025, external factors like wildfires, holiday week shift, and weather affected the business. The business has improved sequentially from January to February, and Q2, Q3, and Q4 are expected to continue strengthening as we get further away from these events. 700 basis points of the negative comp in early 2025 is attributable to these external factors.

Q: How are you planning to approach brand positioning from a value standpoint and communicating it effectively?

A: Feel good about price value, will continue to improve through loyalty program and introducing more menu items in mid-tiers. Seasonal menu and brand positioning around eating with the season will resonate with consumers. Combination of new menu items, price, and loyalty will make them competitive.

Q: What are the learnings from Ripple Fries test and about the loyalty app in those stores?

A: Ripple Fries had high attach rate and was incremental. Feedback was amazing. Not commenting on attach rate specifically, but it was the highest attach side tested. Loyalty app testing details not specified beyond the positive aspects of the product.