• Revenue: Fourth quarter 2024 revenue grew 36.8% year over year to $225.1 million.
• Same-Restaurant Sales Growth: Increased by 21.2%, driven by a 15.6% increase in traffic.
• Net New Restaurant Openings: 15 net new restaurants opened in Q4, ending the year with 367 locations.
• Adjusted EBITDA: $25.1 million, a 60% increase over Q4 2023.
• Net Income: $78.6 million for Q4 2024.
• Adjusted Net Income: $6.5 million, a 216% increase over Q4 2023.
• Annual Revenue Growth: Full year 2024 revenue increased by 35%.
• Annual Same-Restaurant Sales Growth: 13.4% for the full year 2024.
• Annual Net New Restaurant Openings: 58 net new restaurants for the full year 2024.
• Annual Adjusted EBITDA: $126.2 million, a 71% increase over 2023.
• Annual Net Income: $130.3 million for the full year 2024.
• Annual Adjusted Net Income: $50.2 million, a 278% increase over 2023.
• Free Cash Flow: $52.9 million generated during 2024.
• Average Unit Volume (AUV): Increased from $2.6 million at the end of 2023 to $2.9 million at the end of 2024.
• Restaurant Level Profit Margin: Increased by 50 basis points to 22.4% of revenue in Q4 2024.
• Cash on Hand: $366.1 million at the end of Q4 2024.

• Warning! GuruFocus has detected 8 Warning Signs with EMCHF.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cava Group Inc (NYSE:CAVA) reported a 36.8% increase in revenue for Q4 2024, excluding the 53rd week in 2023.
• The company achieved a 21.2% same-restaurant sales growth, driven by a 15.6% increase in traffic.
• Cava Group Inc (NYSE:CAVA) opened 15 net new restaurants in Q4, ending the year with 367 locations, marking an 18.8% increase year over year.
• Adjusted EBITDA for Q4 2024 was $25.1 million, a 60% increase over the same period in 2023.
• The company reported a net income of $78.6 million and adjusted net income of $6.5 million, a 216% increase over Q4 2023.

Negative Points

• Food, beverage, and packaging costs increased by 110 basis points due to the national rollout of steak.
• Labor and related costs decreased by only 50 basis points, reflecting wage investments that were not offset by menu price increases.
• Cava Group Inc (NYSE:CAVA) anticipates a 100 basis point impact on food costs due to the steak launch, expected to roll off by summer 2025.
• The company expects stock-based compensation to increase to between $20 million and $22 million in 2025.
• Cava Group Inc (NYSE:CAVA) plans to make continued investments in team member wages, which may impact margins.

Q & A Highlights

Q: Could you discuss the factors affecting margins this year, particularly regarding food costs and team member investments? A: Tricia Tolivar, CFO, explained that the introduction of steak in June 2024 will impact food costs in the first half of 2025. Outside of steak, food inflation is in the low single digits. A 1.7% menu price increase is expected to offset some costs. Labor investments will continue, but no outsized investments are planned. The company will ensure competitiveness in wages to remain an employer of choice.

Q: Can you elaborate on the focus on speed without compromising service, and what traffic opportunity does this represent? A: Brett Schulman, CEO, noted that high-volume restaurants often have long lines, which can deter customers. The new labor deployment model has improved speed and service scores. While the exact traffic opportunity isn't quantified, the company is focused on optimizing speed without sacrificing customer experience.

Q: Could you provide insights into the loyalty program's impact on customer frequency and engagement? A: Brett Schulman highlighted a 230 basis point increase in revenue through the loyalty program since its launch. Over half of reward redemptions come from entry-level options, engaging lower-frequency users. The program has successfully driven trial and engagement, exemplified by the high redemption rate for new menu items like Garlic Ranch Pita Chips.

Q: What are the expectations for new unit economics, and how do they compare to previous classes? A: Tricia Tolivar stated that the 2024 class is performing well, with average unit volumes expected to increase to $2.3 million in year one and $2.5 million in year two. The company is confident in its ability to deliver strong performance and sees opportunities for expansion in new markets like South Florida and Detroit.

Q: How is CAVA approaching menu innovation and leveraging digital marketing for new offerings? A: Brett Schulman mentioned plans for at least one major menu innovation annually, such as a new protein, along with seasonal offerings. The company uses digital marketing and collaborations, like with Olympic sprinter Gabby Thomas, to enhance messaging and drive engagement with new menu items.

Q: What are the priorities for the catering sales channel, and is there potential for expansion in 2026? A: Tricia Tolivar indicated that while demand for catering is strong, the company is focused on refining packaging and technology. A major metro market test is planned for 2025 to assess production support and prepare for a potential national launch in the future.

Q: Can you discuss the impact of the new Kitchen Display System (KDS) on operations and customer experience? A: Brett Schulman explained that the KDS has improved productivity, order accuracy, and customer satisfaction. It allows for dynamic order status updates, enhancing the guest experience. The system will be expanded to 250 locations by year-end.

Q: How does CAVA plan to maintain its value proposition amid competitive pricing in the industry? A: Brett Schulman emphasized that CAVA has underpriced inflation and competitors, enhancing its value proposition. The company focuses on quality ingredients, Mediterranean cuisine relevance, and a multichannel format to attract customers trading down from casual dining or up from fast food.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.