Sweetgreen, Inc. Q1 FY2025 earnings call

Sweetgreen is redefining fast food with financial discipline, menu innovation, and operational efficiencies. Opened 5 new restaurants in Q1, with 2024 new restaurants tracking well. Infinite Kitchens and sweetlane formats performing well, with sweetlane in Schaumburg showing >20% comp sales growth. Launched Ripple Fries nationwide, driving same-store sales improvement. Collaborated with COTE Korean Steakhouse for a new menu launch. Launched reimagined loyalty program SG Rewards, adding 20,000 new digital customers weekly. AI-powered workforce management system live in most restaurants, improving schedule management and reducing absentee rates. Hired Jason Cochran as new COO to drive operational excellence.

Total revenue for the first quarter was $166.3 million, up from $157.9 million in Q1 2024. Same-store sales declined 3.1%, with a 3.4% benefit from menu price increases and a -6.5% from traffic and mix. Average unit volume was $2.9 million. Five new restaurants were opened, ending Q1 with 251 restaurants. Restaurant level profit margin was 17.9%, up from 18.1% year-over-year. Food, beverage, and packaging costs were 26.5% of revenue, a 100+ basis point improvement. Labor and related expenses were 28.9% of revenue, in line with prior year. Occupancy and related expenses were 9.4% of revenue, slightly higher. Operating support center costs were 16.7% of revenue, down from 17.1%. Net loss was $25 million, better than prior year's $26.1 million loss. Adjusted EBITDA was $300,000.

Fiscal year 2025 outlook: at least 40 net new restaurant openings, revenue $740M-$760M, same-store sales flat, restaurant level margin ~19.5%, adjusted EBITDA ~$30M. 20 of 40 restaurants to feature Infinite Kitchen. 30 of 40 new restaurants to open in second half of 2025. No price increases planned for remainder of 2025.

Tariffs impacting supply chain, restaurant build-out costs, and Infinite Kitchens. Consumer slowdown affecting traffic and frequency in key markets. Operational inconsistencies in some locations affecting service, speed, and portioning.

Q: Clarification on tariff impact on build-out costs.

A: Tariffs expected to have ~10% impact on $1.5M build-out costs for NRO, ~$100k impact on $500k Infinite Kitchen.

Q: Mid to lower priced items.

A: Plan to use seasonal menus and loyalty program to introduce mid to lower priced items, leveraging personalized CRM.

Q: Geography impact.

A: Core markets affected by absence of seasonal menus, loyalty program transition, and operational opportunities on digital make lines.

Q: Fries launch and mix.

A: Encouraged by Fries launch, which is most attached side, driving comp and ticket.

Q: Marketplace sales growth.

A: Strength due to product travel well, optimized marketplace relationships, and loyalty program.

Q: April sales trends and 2Q outlook.

A: April softness due to external environment, second quarter challenging, but summer/fall seasonals and loyalty program to drive back half.

Q: Infinite Kitchens and tariffs.

A: Tariffs won't change IK deployment strategy as returns remain accretive.

Q: COO transition and operations.

A: Jason Cochran to focus on tightening standards, digital make lines, and internal promotions.

Q: Advertising and marketing spend.

A: Leveraging AI in advertising and marketing, testing pilots for cost per acquisition and retention.