Sweetgreen Shares Plunge Amid Downgraded Growth Forecasts
Sweetgreen’s stock plummeted by 23% following its second consecutive quarterly forecast cut for 2025. The salad chain attributed the downgraded outlook to several challenges, including troubles with its loyalty program, declining consumer sentiment, tariff impacts, and operational difficulties.
The company now projects its 2025 revenue to fall between $700 million and $715 million, a significant reduction from prior estimates of $740 million to $760 million made in May and $760 million to $780 million in February. Additionally, Sweetgreen anticipates same-store sales will drop between 4% to 6% for the year, contrasting sharply with its earlier expectation of single-digit growth.
Current projections also indicate that restaurant-level profit margins for 2025 could be 200 basis points lower than previously anticipated, reflecting a 40 basis-point impact due to tariffs. CEO Jonathan Neman didn’t hold back during a Thursday call with analysts, stating that the company encountered a “really, really rough quarter.”
Consumer Sentiment and Internal Challenges Weigh Heavily
Throughout the latest earnings report, Sweetgreen’s struggles were evident, marked by a loss of 20 cents per share, compared to the anticipated loss of 12 cents. Revenue was reported at $186 million, falling short of analyst expectations of $192 million. Most alarmingly, same-store sales dipped 7.6% during the quarter, starkly contrasted with a 9.3% increase in the same quarter the previous year.
During the earnings call, the loyalty program transition from Sweetgreen+ to SG Rewards was identified as a major hurdle, accounting for a 250 basis-point headwind. This change appears to have alienated a small segment of high-frequency customers, prompting Neman to assure investors that he believes this impact will be temporary.
Looking ahead, Sweetgreen is emphasizing operational improvements and higher customer satisfaction. Neman revealed that only one-third of its restaurants are currently performing at or above the standards set by the company. To address this, new COO Jason Cochran is leading “Project One Best Way,” aiming to enhance operational speed, food quality, and portion sizes.
Moreover, the broader economic climate is contributing to consumer hesitance, with CFO Mitch Reback noting that the pressures on consumer spending are lasting far longer than anticipated. As Neman pointed out, “It’s pretty obvious that the consumer is not in a great place overall.”