By Evie Liu

Cava, the fast-casual Mediterranean restaurant chain, may be a tariff-era winner, but the stock market hasn't noticed.

While rising prices and worry among consumers about the economic outlook have left many restaurants struggling to attract customers, Cava posted strong growth in first-quarter earnings and sales. Both came in higher than Wall Street expected.

But the results weren't good enough for investors. The stock tumbled 4% in the after-the-bell trading on Thursday following the earnings report.

In its fiscal first quarter, ended on April 20, Cava's revenue increased by 28% from a year ago to $328.5 million, while the consensus call among analysts surveyed by FactSet was for $327 million. Diluted earnings per share came at 22 cents, 10 cents higher than a year earlier and far above the 14 cents that were expected.

The company opened 15 restaurants during the quarter, while sales at restaurants open at least 12 months increased 10.8% from a year ago, partially because visits by customers rose 7.5%. Average sales per restaurant increased to $2.9 million from $2.6 million a year earlier.

While Cava stock was down about 12% as of the close on Thursday as investors worry that a weakening economy could affect spending, CFO Tricia Tolivar is upbeat about the outlook.

"We've been underpricing inflation significantly for a very long time and it creates a tremendous value for consumers," Tolivar told Barron's. A bowl at Cava starts at $11, she said: "You can compare that to others in the space and really see that it's not much more expensive, if at all, to a fast food meal, which has increased significantly over the past few years."

From the end of 2019 to the end of 2024, Cava's prices went up only 15%, according to Tolivar, while the consumer price index increased 23% and the cost of fast food increased by more than 30%. "We really want to make sure that we're focused on driving value for our guests and giving them a reason to come when they have to make hard choices," she said.

Tolivar expects Cava to see limited impact from the tariffs since the majority of its ingredients are sourced domestically. "We're fairly insulated from individual ingredient impacts on our overall cost structure," she said, noting that the chain doesn't expect any additional price increases for the remainder of 2025.

For the full fiscal year of 2025, management expects to open 64 to 68 new restaurants, slightly up from the previously disclosed plan of 62 to 66 stores. Same-restaurant sales are expected to grow 6% to 8% from fiscal 2024. The company is launching new flavors of its popular pita chips and working on new technologies to help improve efficiency, according to Tolivar.

In the long term, the CFO believes Cava has a "tremendous white space opportunity." The chain now operates in 26 states and the District of Columbia, most recently entering markets including South Florida and Indianapolis. It plans to open restaurants in Detroit and Pittsburgh later this year.

"In spite of economic uncertainty and challenging weather, CAVA's first quarter results demonstrate the continued strength of our category-defining brand," said CEO Brett Schulman in a statement.

Write to Evie Liu at evie.liu@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 15, 2025 17:24 ET (21:24 GMT)

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