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SI

Sweetgreen, Inc. (SG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 underwhelmed on comps and profitability: revenue $172.4M (-0.6% y/y), same‑store sales -9.5% (traffic/mix -11.7% offset by +2.2% pricing), restaurant-level margin compressed to 13.1% (from 20.1%), and GAAP EPS of -$0.31; management cited macro softness, loyalty transition, protein portion investment, tariffs, and one‑time write‑offs as drivers .
  • Guidance cut materially: FY25 revenue trimmed to $682–$688M (from $700–$715M), SSS to -(8.5)% to -(7.7)% (from -(6)% to -(4)%), restaurant-level margin to 14.5%–15% (from ~17.5%), and Adjusted EBITDA to -$13M to -$10M (from +$10M to +$15M) .
  • Strategic move: SG will sell Spyce/Infinite Kitchen development to Wonder for $186.4M (≈$100M cash + ≈$86.4M Wonder preferreds), retain access via supply/license, and expects ≈$8M annualized G&A savings; management frames this as liquidity and focus benefit without losing IK advantages .
  • Operations reset underway (Project One Best Way) with throughput, food quality/portioning, value communication, and loyalty/CRM as key levers; dinner softness and pressure on 25–35 cohort persist, especially in Northeast and LA (≈60% of comp base) .
  • Near‑term stock catalysts: depth of guide cut and margin reset, Spyce sale/IK partnership economics, Q4 new unit cadence (17 openings incl. first Sweetlane+IK), and traction on marketing/value/loyalty initiatives .

What Went Well and What Went Wrong

  • What Went Well

    • Strategic refocus with monetization of Spyce: $186.4M transaction adds ≈$100M liquidity, retains IK via cost+5% supply/license, and reduces G&A by ≈$8M annual run‑rate .
    • Operational discipline building: share of restaurants meeting standards improved from ≈33% to ≈60%; throughput initiatives and scan‑to‑pay rolling out to lift speed and data capture .
    • Digital engagement: Total Digital 61.8% (Owned 35.3%) vs 55.1%/29.2% y/y; loyalty sign‑ups ≈20K/week with rising usage after scan‑to‑pay; plan to lean into targeted CRM/promo .

  • What Went Wrong

    • Comp and traffic deterioration: SSS -9.5% driven by -11.7% traffic/mix; macro slowdown amplified by loyalty program transition away from Sweetpass+ .
    • Margin compression: restaurant-level margin fell 700 bps y/y to 13.1% due to sales deleverage, 140 bps protein portioning investment, ≈50 bps tariffs on packaging/menu items, and a ≈60 bps one‑time write‑off .
    • FY25 outlook reset: revenue, comps, margins, and Adj. EBITDA all cut; unit growth slowed in 2026 to 15–20 net openings (≈half IK) to preserve cash and focus on returns .

Financial Results

Results vs S&P Global consensus (S&P metrics/definitions)

MetricQ3 2025 EstimateQ3 2025 Actual
Revenue ($M)$177.8*$172.4*
Primary EPS ($)-$0.176*-$0.180*

Values marked with * retrieved from S&P Global.

Quarterly performance vs prior periods (company-reported)

MetricQ3 2024Q2 2025Q3 2025
Revenue ($M)$173.4 $185.6 $172.4
Net loss per share (GAAP)-$0.18 -$0.20 -$0.31
Loss from operations margin-12.2% -14.2% -21.0%
Restaurant-Level Profit Margin20.1% 18.9% 13.1%
Adjusted EBITDA ($M)$6.8 $6.4 -$4.4

KPI trends

KPIQ3 2024Q2 2025Q3 2025
Same‑Store Sales Change+5.6% -7.6% -9.5%
AUV ($M)$2.907 $2.831 $2.769
Total Digital Revenue %55.1% 60.8% 61.8%
Owned Digital Revenue %29.2% 33.4% 35.3%
Net New Restaurant Openings (qtr)5 9 6

Context and drivers

  • SSS decline reflects traffic/mix (-11.7%) partially offset by +2.2% pricing; impacts concentrated in Northeast and LA (≈60% of comp base) and 25–35 age cohort .
  • Food/bev/packaging rose to 30.7% of revenue (+320 bps y/y), driven by protein portion increases (≈140 bps), tariffs (≈50 bps), and a one‑time materials write‑off (≈60 bps) .

Guidance Changes

MetricPeriodPrevious Guidance (Aug 7)Current Guidance (Nov 6)Change
Net New Restaurant OpeningsFY25≥40 (≈20 IK) 37 (18 IK) Lowered
RevenueFY25$700M–$715M $682M–$688M Lowered
Same‑Store Sales ChangeFY25-(6)% to -(4)% -(8.5)% to -(7.7)% Lowered
Restaurant-Level Profit MarginFY25≈17.5% 14.5%–15% Lowered
Adjusted EBITDAFY25$10M–$15M -$13M to -$10M Lowered
Net New OpeningsFY26 prelim—15–20 (≈½ IK) New/Slower

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Infinite Kitchen strategyStrong unit economics; tariff exposure manageable; 2025 plan for 20 IKs; IK capex ~$450–$550K; labor savings and higher AUVs .Sell Spyce to Wonder for $186.4M; retain IK via supply/license at cost+5%; expect ≈$100M cash and ≈$8M G&A savings; IK continues central to rollout .Shift to asset‑light/partnered IK scaling.
Loyalty/CRM & digitalSG Rewards launched in April; ~20K new members/week; deferred rev headwind near term, tailwind later; scan‑to‑pay coming .Six‑month mark; scan‑to‑pay rolling; 20K activations/week; plan targeted promos and potential tiers; Owned Digital mix up .Building data/usage; leverage for value.
Pricing/value architectureConsidering more mid/lower price points; Monday LTOs; protein portion increase to reinforce value .Reviewing menu/pricing architecture (entry price points, menu boards); broader protein/value messaging; steak bowls/plates launching .Reframing value proposition.
Operations/throughputNew COO; Project One Best Way; focus on throughput, standards, people; turnover improving .~60% stores at standards; new scorecards; throughput initiative; discontinuing RippleFries to reduce complexity .Execution discipline improving; simplifying ops.
Macro/trafficApril softness; tariff noise; urban Northeast & LA pressured; young consumer soft .Dinner softer than lunch; 25–35 cohort down ~15%; Northeast/LA -800 bps vs fleet; sequential comp step‑downs Aug/Sep .Persistent macro headwinds.
Tariffs/costsPackaging tariffs ~75 bps in Q2, reducing to ~40 bps in H2’25; buildout +~10% later in 2025 .≈50 bps Q3 impact on packaging/menu items; plan offsets in 2026 .Cost pressure still present.
Development/real estate2025: ≥40 openings; relocations in NYC; Sweetlane proof points .Q4: 17 opens incl. first Sweetlane+IK; 2026 net 15–20; targeted closures and relocations .Slowing to prioritize returns.

Management Commentary

  • “Amid a challenging macro backdrop, our priorities remain clear: delivering operational excellence, accelerating menu innovation, and driving disciplined growth.” — CEO Jonathan Neman .
  • “Our strategic decision to sell Spyce and partner with Wonder marks the next evolution of our Infinite Kitchen strategy…allowing us to scale more efficiently, lower operating costs, and strengthen our balance sheet.” — CEO .
  • “Third‑quarter food, beverage, and packaging costs were 30.7%…The benefit from pricing was more than offset by higher protein costs…≈140 bps…tariffs and duties ≈50 bps…one‑time 60 bps write‑off of discontinued materials.” — CFO Jamie McConnell .
  • “We are updating 2025 guidance: revenue $682–$688M…restaurant-level margin 14.5%–15%…Adjusted EBITDA -$13M to -$10M.” — CFO .
  • “Infinite Kitchen restaurants continue to realize approximately 700 bps of labor savings and nearly 100 bps of COGS improvement versus similar stores.” — CEO .

Q&A Highlights

  • Menu/pricing architecture: management aims to add clearer entry price points, refine menu boards, and amplify value messaging (larger protein portions, sourcing standards); protein campaign underway .
  • Trend cadence: sequential comp step‑downs ~200 bps in Aug and Sep; Oct flat to Sep; dinner weaker; 25–35 cohort down ~15%; Northeast/LA ≈ -800 bps vs fleet .
  • IK partnership economics: supply/license at cost+5%, similar install/service costs; expect ≈$100M cash proceeds, ≈$8M G&A savings post‑close .
  • 2026 development: planning net 15–20 (≈½ IK); potential modest upside if comps/ops improve; identified two closures; lease diligence ongoing .
  • Loyalty: continued ~20K weekly activations; scan‑to‑pay increasing in‑store loyalty usage; evaluating tiers and richer benefits; targeted discounts planned .

Estimates Context

  • Revenue missed S&P Global consensus: $172.4M actual vs $177.8M est (−$5.4M) for Q3 2025*.
  • S&P “Primary EPS” near‑inline: -$0.18 actual vs -$0.176 est for Q3 2025*.
  • Note: Company‑reported GAAP net loss per share was -$0.31; differing definitions vs S&P Primary EPS may apply .
    Values marked with * retrieved from S&P Global.

Where estimates may need to adjust:

  • FY25 guide implies weaker H2 revenue/margins vs prior expectations; consensus likely to move down for revenue, SSS, and EBITDA following the cut .
  • Protein portion offsets expected to materialize in 2026 suggest margin rebuild timeline shifts right; 2026 EBITDA trajectories likely lower than prior consensus absent faster traffic recovery .

Key Takeaways for Investors

  • Narrative reset: broad FY25 guide cut and margin reset, with a focus on operational fixes, value communication, and loyalty/CRM to arrest traffic declines .
  • Liquidity/discipline: Spyce sale bolsters cash ($100M), trims G&A ($8M), and keeps IK scaling with cost+ economics—de‑risking investment while preserving throughput/margin benefits .
  • Cost pressures quantified: tariffs (~50 bps), protein portioning (~140 bps), and one‑time write‑offs (~60 bps) weighed on COGS; management targets offsets beginning in 2026 .
  • Development moderates: 2026 net 15–20 openings (≈½ IK) to prioritize returns and cash flow; Q4 still heavy with 17 openings as 2025 pipeline completes .
  • Watch demand signals: dinner/daypart softness and 25–35 cohort pressure (down ~15%) remain; Northeast/LA headwinds (-800 bps vs fleet) key to comp trajectory .
  • Execution markers into Q4/Q1: throughput scorecard adoption, scan‑to‑pay penetration, value/portioning campaign, and menu architecture tests (steak bowls/plates) .
  • Potential upside lever: loyalty/CRM personalization and targeted promos could convert to comp tailwinds as Sweetpass+ overhang fades and program matures .

Additional source details cited throughout:

  • Q3 2025 press release/8‑K financials and guidance .
  • Q3 2025 earnings call transcript (prepared remarks and Q&A) .
  • Spyce sale press release .
  • Prior quarters for trend and prior guidance: Q2 2025 PR ; Q1 2025 PR/call – –.