Thank God for Potbelly.
The fast-casual sandwich chain’s same-store sales rose 3.6% last quarter, its best performance in two years. It also led the fast-casual sector.
Wait, what?
That’s right. The Chicago-based sandwich chain outperformed far-more-ballyhooed chains like Chipotle, Wingstop, Shake Shack and Cava. Each of those chains have, per my colleague Lisa Jennings, expressed concern about the state of the economy and their customer base while rationalizing same-store sales slowdowns.
The latest evidence came this week when Cava, the Hot New Restaurant Thing on Wall Street, reported—gasp!—a mere 2.1% same-store sales increase in the second quarter. The result came in lower than expected and the company lowered its guidance for the year.
The stock has been predictably hammered. It’s down 24% so far this morning, suddenly making this a tough year on the market for the fast-casual chain.
The consumer, CEO Brett Schulman said, is “less firm-footed, less ebullient than they were last year,” as Lisa reported.
Such comments on fast-casual earnings calls have become commonplace of late. Michael Skipworth, CEO of Wingstop, noted that “we hear concerns about elevated prices, future job prospects and general anxiety about the future” after his chain reported its first same-store sales decline in three years.
Shake Shack executives kept touting its improving overall traffic and sales over the summer, to no avail. Its stock was hammered after it reported a 1.8% same-store sales increase coupled with a 1% traffic decline.
Sweetgreen reported a 7.1% same-store sales decline that is tied with, of all chains, Jack in the Box for the worst performance of the quarter, at least so far, and CEO Jonathan Neman cited the “subdued industry backdrop” as one reason. But it is also cutting staff and ditching Ripple Fries after just a few months, much to the chagrin of my Ripple Fries-loving coworkers. (I, for one, refuse to get fries from a salad chain.)
Incidentally, Restaurant Brands International CEO Patrick Doyle on his company’s earnings call last week noted that two privately-held chicken chains he would not name (cough cough Chick-fil-A and Raising Cane’s cough cough) were feeling same-store sales pressure, too.
One guy who might feel a bit of vindication is Scott Boatwright, the CEO of Chipotle, whose chain opened this round of earnings with a 4% same-store sales decline that forced him to tell analysts that this wasn’t a Chipotle problem. “Believe me,” he said, per Jennings’ report, “we’ve unpacked this thing 10 ways to understand, is this a self-inflicted problem, or is this just more a macro problem?”
There certainly may be concerns for some of these chains in the short-term. Chipotle, for one, has faced a social media backlash over its portion sizes that may be creating headaches for current employees.
Some of these chains are also comparing against an extraordinary year. That was certainly the case with Wingstop, which in 2024 was reporting same-store sales results that, on a two-year basis, is the strongest we’ve ever seen.
Cava, coming off a highly successful IPO, was in relatively similar, stratospheric territory last year. And its problem, in fact, may be more related to the way it sets expectations, rather than any real deep concern about a slowdown in its business.
On a two-year basis, Cava’s same-store sales were up 16.5%, compared with a 13.1% two-year number in the first quarter, which is an acceleration of 340 basis points. Both are down from the 32.6% two-year number in the fourth quarter. It is having a slower year, for sure. But no restaurant chain can maintain that kind of sales result.
And this is indeed a tough year. Consumer confidence took a big hit in March. And though things seem to have stabilized, there are concerns about the job market, Hispanic consumers and the now ever-present questions about the potential impact of tariffs on the economy.
Fast-casual chains are just not immune to those issues. Well, except Potbelly.