Sweetgreen Inc (NYSE:SG) Stock Plummets After Q3 Earnings and Revenue Miss Estimates

Sweetgreen Inc - Class A (NYSE:SG) reported financial results for the third quarter of fiscal year 2025 that fell short of analyst expectations, triggering a significant negative reaction in after-hours trading. The company's performance was marked by declining sales at established locations and widening losses, reflecting ongoing challenges in the current macroeconomic environment.

Earnings and Revenue Performance Versus Estimates

The salad chain's third-quarter results disappointed on multiple key financial metrics compared to Wall Street forecasts. Revenue came in at $172.4 million, essentially flat compared to the $173.4 million reported in the same period last year but notably below analyst estimates of $185.4 million. This represents a revenue miss of approximately 7%.

The earnings picture proved even more challenging, with the company reporting a non-GAAP loss per share of $0.27, significantly wider than the estimated loss of $0.18 per share. On a GAAP basis, the loss was $0.31 per share.

Key financial performance indicators versus estimates:

• Actual Revenue: $172.4 million versus $185.4 million estimated
• Revenue Miss: ~$13.0 million (7.0%)
• Non-GAAP EPS: -$0.27 versus -$0.18 estimated
• EPS Miss: $0.09 per share

Market Reaction and Updated Guidance

Investors responded negatively to the earnings release, with the stock declining approximately 11.6% in after-market trading. This sharp decline reflects concerns about the company's ability to navigate current headwinds and return to growth.

Management provided updated guidance for the full 2025 fiscal year that also fell below analyst expectations. The company now anticipates:

• Revenue between $682 million and $688 million
• Same-store sales decline of 8.5% to 7.7%
• Restaurant-level profit margin of 14.5% to 15%
• Adjusted EBITDA between $(13) million and $(10) million

The midpoint of the revenue guidance range, approximately $685 million, comes in roughly 2.5% below the analyst consensus estimate of $702 million for the full year. For the upcoming fourth quarter, analysts had been projecting revenue of $179.7 million.

Operational Challenges and Strategic Shifts

The earnings release highlighted several operational headwinds contributing to the disappointing results. Same-store sales declined 9.5%, a stark reversal from the 5.6% growth recorded in the same quarter last year. This decline was primarily driven by an 11.7% decrease in traffic and product mix, partially offset by a 2.2% benefit from menu price increases.

Management cited a slowdown in consumer spending and the transition from the former Sweetpass+ loyalty program to the new SG Rewards program as factors impacting traffic. Restaurant-level profit margin declined approximately 700 basis points to 13.1%, pressured by the negative same-store sales, higher protein costs, increased packaging costs related to tariffs, and elevated restaurant-level advertising spend.

On a strategic note, the company announced the sale of Spyce and a partnership with Wonder, describing this as the "next evolution of our Infinite Kitchen strategy." Company leadership emphasized that this move would allow Sweetgreen to maintain access to the Infinite Kitchen automation technology while scaling more efficiently and strengthening the balance sheet.

Financial Position and Cost Management

While operational metrics showed weakness, the company did demonstrate progress in managing general and administrative expenses, which decreased to $30.9 million (17.9% of revenue) from $36.8 million (21.2% of revenue) in the prior year period. This reduction was attributed to lower stock-based compensation and decreased management salary and bonus expenses.

The company ended the quarter with $130 million in cash and cash equivalents, down from $214.8 million at the end of December 2024, reflecting the ongoing cash requirements of operations and expansion initiatives.

For more detailed earnings information and future estimates, readers can review the earnings and estimates data for Sweetgreen.

Disclaimer: This article presents financial data and analysis for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security. Investors should conduct their own research and consult with financial advisors before making investment decisions.