The Mediterranean fast-casual chain posted blowout second-quarter results.
Shares of Cava Group (CAVA 16.07%) were soaring today after the fast-casual restaurant chain delivered another strong earnings report with impressive growth on the top and bottom lines.
As of 9:51 a.m. ET, Cava stock was up 14.1% on the news.
Image source: Cava.
Cava shines again
Cava said that comparable sales surged 14.4% in the period, driven by 9.5% traffic growth.
That drove revenue up 35.2% to $231.4 million, which was ahead of estimates of $219.5 million.
Cava continues to expand its footprint as well: It added 18 restaurants to bring its grand total to 341, up 22% from a year ago.
The company also showed off strong margin improvement as its restaurant-level profit margin improved to 26.5% from 26.1% in the quarter a year ago. Margins benefited from leverage from higher sales. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) nearly tripled, from $12.7 million to $34.3 million, and generally accepted accounting principles (GAAP) net income tripled to $19.7 million, or $0.17 a share, which beat the consensus of $0.12.
CEO Brett Schulman said, “Our results in the second quarter continued to demonstrate the strength of our category-defining brand and our unique and compelling value proposition.” He also talked up the addition of grilled steak to the menu, saying, “Grilled steak is significantly outperforming our expectations and giving guests another reason to visit Cava and come back more often.”
Can Cava keep gaining?
Cava also hiked its full-year guidance substantially. It now sees comparable sales growth of 8.5%-9.5%, up from a prior range of 4.5%-6.5%, as well as an increase in restaurant-level profit margin and adjusted EBITDA.
The numbers show that Cava is executing at a high level with average unit volumes and restaurant-level profit margins that rival Chipotle‘s.
The stock is expensive, but Cava has proven it deserves a premium. While its valuation presents some risk, the restaurant stock continues to look like a long-term winner.
Jeremy Bowman has positions in Chipotle Mexican Grill. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends Cava Group and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.