Casual salad chain Sweetgreen (NYSE:SG) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 5.1% year on year to $160.9 million. On the other hand, next quarter’s revenue guidance of $164.5 million was less impressive, coming in 7.7% below analysts’ estimates. Its GAAP loss of $0.25 per share was 16.4% below analysts’ consensus estimates.
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Sweetgreen (SG) Q4 CY2024 Highlights:
- Revenue: $160.9 million vs analyst estimates of $161.7 million (5.1% year-on-year growth, in line)
- EPS (GAAP): -$0.25 vs analyst expectations of -$0.21 (16.4% miss)
- Adjusted EBITDA: -$573,000 vs analyst estimates of -$532,410 (-0.4% margin, relatively in line)
- Management’s revenue guidance for the upcoming financial year 2025 is $770 million at the midpoint, missing analyst estimates by 2.4% and implying 13.8% growth (vs 16.4% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $35 million at the midpoint, below analyst estimates of $36.59 million
- Operating Margin: -19.5%, in line with the same quarter last year
- Same-Store Sales rose 4% year on year (6% in the same quarter last year)
- Market Capitalization: $2.59 billion
“Our 2024 results exceeded our initial expectations, thanks to the strength of our menu innovation, technology, and overall guest experience,” said Jonathan Neman, Co-Founder and CEO.
Company Overview
Founded in 2007 by three Georgetown University alum, Sweetgreen (NYSE:SG) is a casual quick service chain known for its healthy salads and bowls.
Modern Fast Food
Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.
With $676.8 million in revenue over the past 12 months, Sweetgreen is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the other hand, it can grow faster because it’s working from a smaller revenue base and has more white space to build new restaurants.
As you can see below, Sweetgreen’s 19.8% annualized revenue growth over the last five years (we compare to 2019 to normalize for COVID-19 impacts) was exceptional as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Sweetgreen grew its revenue by 5.1% year on year, and its $160.9 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 4.2% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 16.3% over the next 12 months, a deceleration versus the last five years. Despite the slowdown, this projection is healthy and indicates the market sees success for its menu offerings.
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Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.
Over the last two years, Sweetgreen opened new restaurants at a rapid clip by averaging 18.2% annual growth, among the fastest in the restaurant sector. This gives it a chance to scale into a mid-sized business over time.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Note that Sweetgreen reports its restaurant count intermittently, so some data points are missing in the chart below.
Same-Store Sales
A company's restaurant base only paints one part of the picture. When demand is high, it makes sense to open more. But when demand is low, it’s prudent to close some locations and use the money in other ways. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.
Sweetgreen has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 5.3%. This performance along with its meaningful buildout of new restaurants suggest it’s playing some aggressive offense.
In the latest quarter, Sweetgreen’s same-store sales rose 4% year on year. This growth was a deceleration from its historical levels, showing the business is still performing well but losing a bit of steam.
Key Takeaways from Sweetgreen’s Q4 Results
We struggled to find many positives in these results as its EPS missed while its revenue and EBITDA were in line The guidance wasn't great either as Its full-year revenue and EBITDA outlook fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 16.1% to $19.45 immediately after reporting.
Sweetgreen underperformed this quarter, but does that create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
