Cava cites prudence in keeping forecast unchanged after quarterly beat

By Neil J Kanatt

Aug 11 (Reuters) - ‌Cava Group ​on Tuesday ​said it was being prudent in reiterating its annual forecast after beating Wall Street expectations for second-quarter sales and core profit ‌on strong demand for its affordable Mediterranean food, sending shares ⁠up about 12% in extended trading.

The restaurant chain, known for its customizable offerings, said a ‌multistate cyclosporiasis outbreak, which made consumers ‌wary of eating out, in July impacted sales, even though it did not use ingredients linked to the outbreak.

"As we exited (the second quarter), the ​broader concerns around leafy greens and produce consumption did impact our sales, which we have seen begin to rebound," CEO Brett Schulman told ⁠Reuters, adding that Cava was not impacted by the recent salmonella outbreak.

For the quarter ended July 12, same-restaurant ​sales rose 9%, topping analysts' estimates of 7.6%, according to data compiled by LSEG. Guest traffic grew 5.3%.

Quarterly adjusted EBITDA ​rose 30% to $54.7 million, topping estimates of $52.1 ‌million.

The cyclosporiasis outbreak caused same-restaurant sales to moderate to a flat-to-positive growth rate in early July, with performance improving weekly ⁠until it recovered to mid-single-digit growth, CFO Tricia Tolivar said in a post-earnings call.

"Lower-income cohorts are generating the highest same-restaurant sales results," Tolivar said, adding that the company's ⁠strategy of minimizing price increases continues to support demand.

The company's upbeat results come even as ​major U.S. fast-food chains struggle to attract price-conscious diners despite discounts. Cava recently rolled out new items such as harissa barbecue pita chips and pomegranate-glazed salmon.

The chain reiterated its ‌fiscal 2026 forecast for same-restaurant sales growth of 4.5% to 6.5% and adjusted EBITDA of $181 million to $191 million, citing ‌uncertainty around food safety issues, a "fluid" macroeconomic and geopolitical backdrop, and lingering inflation.

"Nothing in ⁠what we're seeing in our ‌trends today that would ​suggest we would land at the lower end of the range," Tolivar said.

(Reporting by Neil J Kanatt in Bengaluru; Editing by ‌Diti Pujara)

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