Sweetgreen Inc - Class A (NYSE:SG) reported financial results for its fourth quarter and fiscal year 2025 that fell short of Wall Street's expectations, leading to a negative after-hours market reaction. The company's performance highlighted significant challenges in customer traffic and profitability, even as it continues to expand its physical footprint.
Earnings and Revenue Miss
The salad chain's quarterly results failed to meet analyst projections on both the top and bottom lines.
- Revenue: Reported at $155.2 million, a 3.5% decrease year-over-year and below the analyst consensus estimate of approximately $163.6 million.
- Earnings Per Share (EPS): Reported a GAAP net loss of $0.42 per share, which was 28.2% wider than the estimated loss of $0.336 per share.
For the full fiscal year 2025, total revenue was essentially flat, increasing a mere 0.4% to $679.5 million. This stagnation occurred despite the company opening 35 net new restaurants during the year.
Key Takeaways from the Press Release
The earnings report painted a picture of a business facing considerable operational headwinds. Management did not shy away from the difficulties, with CEO Jonathan Neman stating, "Our 2025 results fell short of our expectations."
The core issues are clear:
- Severe Same-Store Sales Decline: Comparable sales, a critical metric for retail and restaurant health, dropped 11.5% in Q4 and 7.9% for the full year. This was primarily driven by a 13.3% decrease in traffic, which the company attributed to a "more selective consumer environment" and disruptions from transitioning its loyalty program.
- Widening Losses: Profitability metrics deteriorated significantly. The loss from operations margin worsened to (31.0)% in Q4 from (19.5)% a year ago. Restaurant-level profit margin fell nearly 700 basis points to 10.4%, pressured by the sales decline, higher ingredient costs, and increased packaging expenses from tariffs.
- Digital Shift as a Silver Lining: One positive trend was the growth in digital engagement. Total digital revenue rose to 65.1% of sales, and revenue from the company's owned digital channels (like its app and loyalty program) increased to 38.0%. This indicates a shift in how customers are ordering, even if they are visiting less frequently.
Market Reaction and Forward Outlook
The market's immediate response was negative, with the stock trading down in the after-hours session following the report. This reaction reflects disappointment not only in the missed quarterly numbers but also in the company's outlook for the year ahead.
Sweetgreen provided guidance for fiscal 2026 that suggests a prolonged recovery rather than a sharp rebound:
- Same-store sales are projected to decline between 2.0% and 4.0%.
- Restaurant-level profit margin is forecast between 14.2% and 14.7%.
- Adjusted EBITDA is anticipated to be between $1.0 million and $6.0 million.
This outlook appears cautious compared to the broader analyst expectations for the year. The company also announced a strategic pivot, the "Sweet Growth Transformation Plan," focused on five areas: operational excellence, menu innovation, personalized digital experience, brand relevance, and disciplined investment. A key initiative is the testing of a new wraps platform, with a potential national expansion in mid-2026.
Strategic Moves and Financial Position
In a notable post-quarter event, Sweetgreen completed the sale of its Spyce automation technology unit to Wonder for $186.4 million. The company stated it will continue to use the "Infinite Kitchen" technology in its restaurants via new agreements. This sale provides a cash infusion, which is notable as the company's cash and equivalents fell to $89.2 million at year-end from $214.8 million a year prior, while its accumulated deficit widened to over $1 billion.
For a detailed breakdown of future quarterly and annual analyst estimates, you can review more earnings and estimate data for Sweetgreen (NYSE:SG).
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