Why Sweetgreen sales, stock are falling
Fast-casual salad chain Sweetgreen is struggling as its traffic and sales continue to decline, reporting losses of millions each quarter.
Its earnings worsened in the third quarter of this year as same-store sales fell 9.5%, due in part to an 11.7% decline in foot traffic.
Sweetgreen revolutionizes quick service Since launching in 2007, the industry has proven that healthy food can be accessible and convenient. But the company still hasn’t figured out how to make a profit and investors are turning away; The share price has fallen more than 80% this year.
“I think investors are nervous about everything right now, including Sweetgreen,” said Sharon Zackfia, head of consumer equity research at William Blair. “But they have clearly underperformed that broad benchmark, and it’s up to them to turn the ship around and get same-store sales to a place where investors start paying attention again.”
Sweetgreen focused on automation after acquiring Boston restaurant company Spyce, which developed robotic kitchen and conveyor belt technology, in 2021.
According to Zackfia, as of this month, approximately 10% of Sweetgreen stores are equipped with an automated system that Sweetgreen calls “Endless Kitchens.”. He intended to fully automate all of his stores but abandoned this vision.
Salads emerged from the new Infinite Kitchen robot system at Sweetgreen during a test run in Chicago.
Chicago Tribune | Tribune News Service | Getty Images
While Sweetgreen will continue to use automated technology, it announced during its third-quarter earnings release that it would sell Spyce to virtual cafeteria company Wonder for $186.4 million. Sweetgreen co-founder and CEO Jonathan Neman said on the earnings call that the move will allow it to “unlock greater scale, reduce operating costs and become stronger.” [its] the financial foundation of the future.”
He added that technology remains “central to Sweetgreen’s future” but that the sale represents a major shift in strategy.
The chain hopes to grow to 1,000 locations by 2030, from about 266 locations currently. He has no debt and plenty of cash, thanks to the $100 million he received from the Wonder in the Spyce deal.
But as Neman said during the company’s second-quarter earnings call, only a third of Sweetgreen locations are “consistently operating at or above standard.”
“It’s definitely a problem and a problem if two-thirds of your units are doing this,” said Joe Pawlak, chief executive of Technomic. “On the other hand, it means there are lots of opportunities to improve.”
But whether investors will be willing to wait is another question.
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