Cava jumps after raising annual sales forecast again on demand for steak, pita chips

Restaurant Brands International

13/11/2024 12:40

Nov 13 (Reuters) - Restaurant chain Cava's  CAVA.N 
stock soared nearly 17% to $169.40 in premarket trading on
Wednesday, after it exceeded third-quarter earnings estimates on
strong demand for its Mediterranean fare such as pita chips and
grilled steak.
    Fast-casual restaurants like Cava, Shake Shack  SHAK.N  and
Sweetgreen  SG.N , which offer salad bowls and cheeseburgers as
well as dining space, have grown in popularity this year as
customers traded up from fast-food chains amid runaway prices.
    Cava has witnessed a 28.4% growth in traffic this year till
September, while McDonald's  MCD.N  and Restaurant Brands-owned
Burger King  QSR.TO  saw customer visits decline 0.4% and 0.9%,
respectively, according to data from Placer.ai.
    "Cava also continues to benefit from the consumer preference
shift from quick service to fast casual as middle income
consumers increasingly view fast casual as a better value for
money," TD Cowen analyst Andrew Charles said in a note.
    The chain raised its annual forecasts for the third time in
2024 when it reported third-quarter results after market close
on Tuesday. Its stock has more than tripled in value this year. 
    The company's percentage of sales contribution from a
revamped loyalty program jumped 200 basis points in the reported
quarter. It has also invested in improving its in-restaurant
channels, which make up roughly 65% of the total guest count.
    Its same-restaurant sales rose 18.1%, driven by a 12.9%
increase from guest traffic and a 5.2% increase from menu prices
and product mix.
    "CAVA is at a clear tipping point as the leader of
fast-casual Mediterranean," CEO Brett Schulman said in a
post-earnings call.
    After expanding into Chicago, Cava plans to enter South
Florida early next year and also expand its Midwest presence,
with at least two additional new markets in 2025, Schulman said.
    At least four brokerages raised their price targets on the
stock following the results.
    Cava's forward price-to-earnings ratio for the next 12
months, a common benchmark to value stocks, was 283.86, compared
with 117.80 for Shake Shack and -83.07 for Sweetgreen.

 (Reporting by Savyata Mishra in Bengaluru; Editing by Pooja
Desai)
 ((Savyata.Mishra@thomsonreuters.com;))