A new loyalty program and Garlic Ranch Pita Chips helped Cava report yet another industry-busting quarter on Tuesday, with traffic up nearly 13%.
While most publicly traded restaurant companies struggle to hang onto their fans in a discount-flooded competitive landscape, Cava seems to be coasting along without coupons or meal deals to lure in diners.
For the Oct. 6-ended third quarter, same-store sales increased 18.1%, including a 12.9% increase in traffic, along with 5.2% from menu pricing and product mix.
That’s lapping a 14.1% increase in same-store sales in the third quarter last year, for a two-year increase of more than 32%.
The results exceeded Wall Street analysts expectations, sending the stock price up 15% in after-market trading.
“Mediterranean is meeting the moment,” said Cava Group Inc. CEO Brett Schulman during the earnings call on Tuesday.
He credited the strong results to a confluence of factors: the strength of a category-defining brand, the unique value proposition and good unit-level execution.
While other restaurant chains are leaning on technology and becoming “increasingly transactional,” Cava is focusing on “heart, health and humanity”—an oft-repeated phrase in Cava world.
Restaurants are being softened by pillows, plants and other comforts in an initiative called Project Soul, for example. And workers are empowered to hit the “Love Button” to give out free meals where they see the need to boost someone’s spirits.
“Our business is built on the idea of welcoming everyone to our table, and we are focused on creating the authentic human connections consumers are hungry for,” he said.
(A case in point, Washington, D.C.-based Cava fed both the Dodgers and the Yankees during the World Series, he said.)
During the quarter, Cava rolled out its long-awaited new loyalty program, which allows for more personalized marketing and gives guests a choice of how they want to use rewards. So far, loyalty sales as a percentage of revenue increased 200 basis points, Schulman said.
The loyalty program was rolled out in conjunction with the launch of the chain’s first flavored iteration of its fan-favorite pita chips. The new Garlic Ranch Pita Chips drove incremental attachments, and Cava is planning more flavors down the road, as well as beverage and dessert innovations.
Also rolling out earlier than expected during the quarter was Cava’s new labor scheduling model, which ensures the right staffing is in the right place at the right times.
In lower-volume restaurants, for example, the model has added labor, resulting in modest increases in sales and improvement in guest scores, said CFO Tricia Tolivar.
But mostly the labor technology has helped improve both speed and service, she said.
Cava’s average unit volume ticked up to $2.8 million, from $2.6 million a year ago, and margins also grew to 25.6%, compared with 25.1% a year ago.
The chain opened 11 restaurants during the quarter for a total of 352.
Net income was $18 million for the quarter, compared with $6.8 million a year ago, on revenues that increased 39% to $241.5 million.
Cava also raised its full-year guidance for the year (again). Now the company projects it will open 56 to 58 units this year (up from earlier projection of 54 to 57).
The company started 2024 year with projected increases of between 4.5% to 6.5%, and then in the second quarter upped that to 8.5% to 9.5%.
Now same-store sales are now expected to increase in double digits for the year, between 12% and 13%.
Tolivar noted that earlier guidance included considerations of potential headwinds from both macroeconomic challenges and election-related volatility.
With the election behind us, the updated guidance takes those headwinds out of consideration, she said.
UPDATE: This article has been updated to correct a reference to Cava's headquarters.
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