Mediterranean fast-casual restaurant chain CAVA (NYSE: CAVA) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 28.1% year on year to $331.8 million. Its GAAP profit of $0.22 per share was 64.5% above analysts’ consensus estimates.
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CAVA (CAVA) Q1 CY2025 Highlights:
- Revenue: $331.8 million vs analyst estimates of $327.7 million (28.1% year-on-year growth, 1.2% beat)
- EPS (GAAP): $0.22 vs analyst estimates of $0.13 (64.5% beat)
- Adjusted EBITDA: $44.85 million vs analyst estimates of $43.85 million (13.5% margin, 2.3% beat)
- EBITDA guidance for the full year is $155.5 million at the midpoint, below analyst estimates of $159.7 million
- Operating Margin: 4.7%, up from 3.6% in the same quarter last year
- Free Cash Flow Margin: 0.8%, similar to the same quarter last year
- Locations: 382 at quarter end, up from 334 in the same quarter last year
- Same-Store Sales rose 10.8% year on year (2.3% in the same quarter last year)
- Market Capitalization: $11.51 billion
"In spite of economic uncertainty and challenging weather, CAVA’s first quarter results demonstrate the continued strength of our category-defining brand,” said Brett Schulman, Co-Founder and CEO.
Company Overview
Starting from a single Washington, D.C. location, CAVA (NYSE: CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $1.04 billion in revenue over the past 12 months, CAVA is a mid-sized restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.
As you can see below, CAVA’s 25.7% annualized revenue growth over the last three years (we compare to 2019 to normalize for COVID-19 impacts) was incredible as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, CAVA reported robust year-on-year revenue growth of 28.1%, and its $331.8 million of revenue topped Wall Street estimates by 1.2%.
Looking ahead, sell-side analysts expect revenue to grow 21.2% over the next 12 months, a deceleration versus the last three years. Still, this projection is healthy and suggests the market sees success for its menu offerings.
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Restaurant Performance
Number of Restaurants
CAVA operated 382 locations in the latest quarter. It has opened new restaurants at a rapid clip over the last two years, averaging 15.5% annual growth, much faster than the broader restaurant sector. This gives it a chance to become a large, scaled 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.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.
CAVA 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 13.8%. This performance along with its meaningful buildout of new restaurants suggest it’s playing some aggressive offense.
In the latest quarter, CAVA’s same-store sales rose 10.8% 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 CAVA’s Q1 Results
We were impressed by how significantly CAVA blew past analysts’ EPS expectations this quarter. We were also happy its revenue and EPS narrowly outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed. Overall, this print had some positives. The market seemed to be hoping for more, and the stock traded down 2.5% to $96.73 immediately following the results.
Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
