Q4 2024 Earnings Summary
- Strong Restaurant-Level Margins and Unit Economics: CAVA's top quartile of restaurants deliver restaurant-level margins above 30%. This demonstrates the super powerful model and the company's focus on sustainable long-term success through strategic investments.
- Strategic Pricing Enhances Value Proposition and Drives Customer Growth: From 2019 to 2024, CAVA's aggregate price increases amounted to 15%, while CPI was almost 23%, meaning they underpriced inflation by 8 percentage points. This strategy has amplified their value proposition, attracting customers trading down from casual dining or trading up from fast food, leading to robust traffic growth.
- Strong New Store Performance and Brand Awareness Fueling Expansion: New stores are opening strong due to significant awareness and demand, with people "waiting for us to open". Average Unit Volumes (AUVs) have grown from $2.6 million to $2.9 million, with increases across all regions. This underscores the proven portability of the brand and opportunities for continued expansion across the country.
- Deceleration in Same-Restaurant Sales Growth: CAVA is projecting same-restaurant sales growth of 6% to 8% for 2025, a significant slowdown from the 13.4% growth achieved in 2024, indicating potential challenges in maintaining prior growth momentum.
- Adjusted EBITDA Growth Below Long-Term Targets: The company's adjusted EBITDA growth guidance for 2025 (between $150 million and $157 million) implies a growth rate of 19% to 24%, which is below their long-term algorithm of mid- to high-20% growth and may be below consensus expectations, suggesting slower profitability improvements.
- Increased G&A Expenses Limiting Near-Term Leverage: CAVA expects G&A expenses to continue growing as they make "appropriate investments" ahead of needs to drive long-term growth, which may limit near-term operating leverage and impact short-term earnings.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +28% (Q4 2024: $227.4M vs Q4 2023: $177.17M) | Revenue increased by 28% YoY driven by sustained improvements in net new restaurant openings and same-restaurant sales—a theme already evident in Q3 where a 49.5% increase in revenue (Q3 2023) was largely powered by 95 new openings and 14.1% same-restaurant sales growth. The moderated YoY increase in Q4 indicates continued operational momentum with a slightly different seasonal dynamic. |
Operating Income | From a loss of $1.58M in Q4 2023 to a profit of $3,953K in Q4 2024 | The turnaround from loss to profit is attributable to improved restaurant-level margins, cost efficiencies, and operating leverage that were also noted in prior Q3 periods (with improved restaurant-level profit margins and lower relative occupancy and pre-opening costs) compared to earlier periods. |
Net Income | +3700% (Q4 2024: $78,619K vs Q4 2023: $2,049K) | A dramatic rise in net income stems from substantial revenue growth, improved operating income, and tighter cost management. Similar to the Q3 improvements—where net income swung from a loss to $6.8M—these factors now scale in Q4 2024, resulting in a giant percentage increase versus prior challenging figures. |
EPS – Basic/Diluted | From losses (Basic: –$0.04, Diluted: –$0.03 in Q4 2023) to Basic: $0.69 and Diluted: $0.66 in Q4 2024 | The recovery in EPS is a direct consequence of the improved net income and operational efficiencies observed in the period. Building on the Q3 turnaround where EPS reversed from negative to marginally positive due to increased net income and a larger share base, the Q4 changes reflect continued margin improvements and reduced cost intensity compared to previous losses. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Net New Restaurant Openings | FY 2025 | no prior guidance | 62 to 66 net new openings | no prior guidance |
Same-Restaurant Sales Growth | FY 2025 | no prior guidance | 6% to 8% | no prior guidance |
Restaurant-Level Profit Margin | FY 2025 | no prior guidance | 24.8% to 25.2% | no prior guidance |
Preopening Costs | FY 2025 | no prior guidance | $14 million to $15 million | no prior guidance |
Adjusted EBITDA (including preopening costs) | FY 2025 | no prior guidance | $150 million to $157 million | no prior guidance |
Effective Tax Rate | FY 2025 | no prior guidance | 15% to 20% | no prior guidance |
Stock-Based Compensation | FY 2025 | no prior guidance | $20 million to $22 million | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Same-restaurant Sales Growth | In Q1 2024, same-restaurant sales grew modestly (2.3%) with guidance for mid- to high single‐digit growth (acknowledging traffic headwinds). In Q2 2024, growth reached 14.4% driven by traffic (9.5%) and menu mix (4.9%), with deceleration concerns noted due to external uncertainties. Q3 2024 saw robust growth at 18.1% on the back of strong traffic (12.9%) and mix improvements, with no explicit deceleration worries. | In Q4 2024, the guidance is more moderate – targeting 6% to 8% same-restaurant sales growth for full‐year 2025 and a robust 3‑year stack – with a modest 1.7% price increase (instead of further hikes), emphasizing sustainable, normalized growth. | Moderation: Transition from high single-digit peaks in Q3 to a more sustainable, moderate guidance in Q4, reflecting a shift toward long‑term normalized growth rather than short-term acceleration. |
New Restaurant Openings | Q1 2024 highlighted aggressive expansion (14 net new restaurants, with strategic entries into diverse markets). Q2 2024 reported 18 new openings with emphasis on broad geographic expansion and leadership development via their Academy GM network. Q3 2024 continued with 11 new openings, noting a balanced pipeline with a focus on established and emerging markets and addressing execution risks. | Q4 2024 announced 15 net new restaurants and expansion into new markets such as South Florida, Detroit, and Indianapolis along with a continued balanced portfolio approach, backed by investments in team member experience and technology to mitigate execution and leadership risks. | Consistent Growth with Enhanced Execution: Expansion remains a key focus, with Q4 refining its strategy by emphasizing balanced geographic growth and strengthening leadership to mitigate operational risks. |
Restaurant-Level Margins and Unit Economics vs. Costs | In Q1 2024, margins were around 25.2% with strong unit economics even as labor investments raised cost percentages slightly. Q2 2024 reported a margin of 26.5% in the context of a powerful AUV engine, offsetting rising labor (at 25.2%–25.4% of revenue) and higher G&A expenses. Q3 2024 highlighted margins around 25.6% despite a modest increase in labor and G&A costs, showcasing effective sales leverage. | In Q4 2024, margins were reported at 22.4% (a 50 basis point improvement YoY) and unit economics remained strong amid rising labor and packaging costs. The company has taken a measured approach by implementing a modest 1.7% price increase while focusing on operational scalability. | Steady Focus on Efficiency: Despite some fluctuations in reported margins, the emphasis on leveraging sales to offset rising labor and G&A costs remains consistent, reflecting disciplined operational execution. |
Strategic Pricing Under Inflation | Q1 2024 emphasized taking less than a 3% price increase with a focus on everyday value, while Q2 2024 reiterated limited price adjustments (a 12% increase since 2019 vs. higher competitor hikes) to maintain affordability. There was no mention in Q3 2024. | Q4 2024 continued the conservative pricing strategy with a 1.7% menu price adjustment, positioning it well below expected CPI and reinforcing its value proposition through quality and convenience. | Stable and Refined: The consistent conservative pricing under inflation is enhanced in Q4 by a clearly articulated strategy, reaffirming a commitment to value without aggressive price hikes. |
Robust Brand Awareness and Traffic Growth | Q1 2024 noted robust performance across all income strata and rising digital engagement (e.g. viral content). Q2 2024 reported 9.5% traffic growth driven by broad demographic appeal and a strong brand value proposition. Q3 2024 highlighted an 8 percentage point increase in brand awareness and significant traffic gains (12.9%), particularly among younger demographics. | In Q4 2024, CAVA reported a 15.6% increase in traffic, with significant emphasis on the brand’s enhanced awareness via social media and marketing efforts, and a strong performance across varied demographic groups. | Continued Strength: The brand’s broad appeal and traffic growth remain robust, with incremental improvements in Q4 that underscore its diversified demographic resonance and market presence. |
New Menu Innovations and Sustainability | Q1 2024 introduced the grilled steak as a new menu item to fill a perceived gap. Q2 2024 emphasized that the steak launch far surpassed expectations with extensive social media support, while also noting the need to manage its cost impact. Q3 2024 reiterated the innovation pipeline (including Garlic Ranch pita chips) and mentioned initiatives to enhance operational sustainability alongside innovation efforts. | Q4 2024’s discussion continued to spotlight the success of the steak launch along with limited‑time offerings (garlic ranch chips) – though at the expense of higher food, beverage, and packaging costs – and an increased focus on using new technologies to drive operational sustainability. | Balanced Innovation: Menu innovation remains a key growth driver, now coupled with emerging concerns over cost sustainability, prompting greater focus on operational efficiencies and technological integrations in Q4. |
Upcoming Loyalty Program Rollout | Q1 2024 mentioned transitioning to a bankable points model and a planned company‑wide rollout by end‑2024. Q2 2024 detailed a national rollout ahead of schedule with promising pilot results, and Q3 2024 reported a more-than‑200 basis point increase in loyalty sales percentage following an early launch. | In Q4 2024, the loyalty program is further enhanced with plans to introduce tiered status levels and non‑food reward options, leveraging first‑party data for tailored communications, resulting in increased engagement and higher redemption rates. | Evolving Engagement: The loyalty program has evolved from planning and early testing to a more sophisticated and data‑driven system, reflecting growing customer engagement and deepening brand connections. |
Macroeconomic and Political Uncertainty | Q2 2024 discussions highlighted caution due to macroeconomic uncertainty and an upcoming election which were built into guidance. Q3 2024 noted that previously embedded uncertainties had been removed from current guidance. Q1 2024 did not mention this topic. | In Q4 2024, while the guidance acknowledges a fluid macroeconomic and policy environment, there is less detailed focus on uncertainties, reflecting a belief in the underlying business strength. | Waning Concern: Initial concerns over macroeconomic and political headwinds have steadily decreased, as evidenced by their reduced emphasis and removal in later guidance, suggesting improved confidence in future performance. |
Operational Risks from Accelerated Unit Growth | Q1 2024 did not discuss operational risks. Q2 2024 addressed potential risks by stressing the importance of leadership development via the Academy GM network and cautioning against overextension. Q3 2024 reiterated the focus on a strong GM pipeline to support 17% unit growth and balanced expansion. | In Q4 2024, there is no explicit discussion of operational risks; instead, the focus is on investments in infrastructure and leadership improvements that imply ongoing mitigation of such risks. | Implicit Mitigation: While earlier calls emphasized operational caution, Q4 sees these risks as largely managed through strengthened internal systems, reflecting maturation in execution and operational discipline. |
Adjusted EBITDA Growth Below Long‑Term Expectations | Q1 and Q2 2024 reported strong adjusted EBITDA improvements (with increases of $16.6 million in Q1 and $12.7 million in Q2 versus prior year) without discussion of long‑term gaps. Q3 2024 focused on a significant EBITDA increase (69.2% YoY) without referencing long‑term expectations. | Q4 2024 saw management note that 2025’s guidance for Adjusted EBITDA growth (19%–24%) is below the long‑term algorithm (mid‑ to high‑20s), attributing the short‑term moderation to the need to “anniversary” 2024’s outsized performance and ongoing investments. | Emerging Caution: A new concern emerges in Q4, as near‑term EBITDA growth is forecasted to be lower than long‑term norms due to strategic investments, even though the overall model remains strong and focused on sustainable long‑term success. |
Real Estate Competition and Urban Market Challenges | Q1 2024 provided insights on urban market challenges—citing slower post‑pandemic urban recovery, a reliance on residential traffic, and a selective competitive approach to avoid bidding wars against larger competitors. Q2 and Q3 2024 did not touch on this topic. | Q4 2024 does not mention real estate competition or urban market challenges. | Disappearing Focus: Previously a noted concern in Q1, attention to real estate and urban market challenges has faded in subsequent periods, suggesting a strategic shift toward suburban expansion or successful mitigation of earlier issues. |
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Margin Outlook
Q: Can you discuss factors affecting margins this year?
A: Tricia explained that while the addition of steak to the menu, which wasn't offered until June last year, impacts food costs in the first and second quarters, overall food inflation is in the low single digits. With a 1.7% menu price increase, they don't anticipate significant movements in cost of goods sold outside the steak impact. Labor investments will continue to ensure competitiveness, but no outsized investments are planned. They expect continued leverage on occupancy costs as sales grow and will invest appropriately in infrastructure to handle high volumes. -
Same-Store Sales Guidance
Q: What are the drivers behind your same-store sales guidance?
A: Tricia noted that for a normalized view, they consider the three-year stack, anticipating it to be in the high 30s. For 2025, they expect higher sales in Q1, then moderating over the year to achieve 6% to 8% same-restaurant sales growth. With a 1.7% price increase and no further increases planned in 2025, growth will be driven by robust traffic and modest mix impact. -
2025 EBITDA Growth vs. Long-Term Outlook
Q: Why does 2025 EBITDA growth guidance differ from long-term targets?
A: Tricia explained that while 2025 EBITDA growth is expected to be 19% to 24%, slightly below their long-term algorithm of mid- to high-20s, this is due to lapping the outsized growth of 2024 and making investments for long-term success. They remain confident in their long-term targets, noting that their top quartile restaurants deliver margins above 30%. -
New Unit Economics
Q: How are new units performing compared to targets?
A: Tricia stated that the 2024 class is performing very strongly, with the Q4 cohort exceeding 2023 average weekly sales levels. They are confident in delivering $2.3 million in year 1, growing 10% to $2.5 million, and then 8% growth in subsequent years. This strong performance supports expansion into new markets like South Florida, Detroit, and Indianapolis. -
AUV Growth Across Regions
Q: Can you update on AUVs across different regions?
A: Tricia reported that AUVs have grown from $2.6 million to $2.9 million, with significant increases across all regions—Northeast, Mid-Atlantic, Southeast, Southwest, and West. Every region has delivered year-over-year and quarter-over-quarter AUV increases, underscoring confidence in the brand's portability. -
G&A Expenses and Leverage
Q: How should we think about G&A growth and leverage?
A: Tricia explained that excluding stock-based compensation, G&A is growing at a lesser rate than revenue and unit growth, and they will see leverage over time. They are making prudent investments ahead of needs to drive long-term growth, similar to their approach with restaurant-level margins and investing in team members and guests. -
Value Proposition Amidst Pricing Dynamics
Q: How do you view your value proposition amid industry pricing?
A: Brett highlighted that from the end of 2019 to the end of 2024, their price increases totaled 15%, underpricing inflation, which was almost 23%, by 8 points. Traditional fast food increased prices by upwards of the mid-30% range. With a 1.7% menu price increase in 2025, they continue to offer strong value. Other factors include quality ingredients, relevance of Mediterranean cuisine, and 64% of guests valuing human interaction. -
Loyalty Program Impact
Q: What is the impact of the loyalty program on frequency?
A: Brett noted they have not quantified frequency specifically but have increased revenue through the loyalty program by 230 basis points (2.3%) since launch. Over half of reward redemptions are from the entry-level reward, engaging lower-frequency users. They successfully promoted the Garlic Ranch Pita Chips with a limited-time offer, making it the highest redeemed item ever. Plans include adding tiered status levels and nonfood rewards. -
KDS Rollout and Kiosk Potential
Q: Will you expand KDS and consider kiosks in stores?
A: Brett confirmed expanding the Kitchen Display System (KDS) from 25 units to 250 units, improving productivity, order accuracy, and customer experience. They can now provide dynamic order status updates via text. However, they do not plan to introduce kiosks, believing in human interaction and encouraging use of their app for a digital experience. -
Catering Sales Channel Expansion
Q: What are the priorities for catering, and when might it expand?
A: Tricia stated they are excited about catering but will proceed carefully through their stage-gate process. They plan to expand testing to a major metro market, assessing production support models in concert with regular restaurants. A national launch is not planned for this year or early 2026, but they will roll out when confident in readiness. -
Operational Improvements for Speed
Q: How big is the traffic opportunity by improving speed of service?
A: Brett acknowledged opportunities at high-volume restaurants but has not quantified it specifically. Implementing a new labor deployment scheduling model has led to incremental improvements in speed and service scores without sacrificing customer experience. They aim to optimize further without compromising first-time guest experiences. -
Menu Innovation
Q: What can we expect regarding menu innovation this year?
A: Brett indicated they plan to have at least one "tentpole" moment annually, potentially with a new protein and seasonal items. They collaborated with Gaby Thomas on new items like spicy selections highlighting avocado. They also see potential in flavor innovations for pita chips, with more to come through their stage-gate testing process. -
Organizational Investment for Growth Readiness
Q: Which areas need disproportionate investment for growth readiness?
A: Brett feels the organization is well-positioned, having invested ahead in infrastructure, manufacturing, technology, and people. Key hires have been made in development, technology, and marketing, and no specific area requires outsized investment. They are preparing for long-term growth over the next decade. -
New Store Productivity and Market Strategy
Q: How are you ensuring high productivity and returns in new stores?
A: Brett explained they use a balanced portfolio approach with robust analytics to thoughtfully populate markets. Significant awareness tailwinds since the IPO and effective social media have people eager for new openings. They engage communities through traditional activities and have success across diverse geographies and formats.