Earnings call transcript: Sweetgreen Q2 2025 sees stock dip after earnings miss

Sweetgreen Inc. reported its financial results for the second quarter of 2025, revealing a larger-than-expected loss and a revenue shortfall that sent its stock tumbling in premarket trading. The company posted an earnings per share (EPS) of -$0.20, missing the forecasted -$0.09 EPS by a significant margin. Revenue came in at $185.6 million, falling short of the expected $193.43 million. This performance led to a 24.72% drop in Sweetgreen’s stock price during premarket hours. According to InvestingPro data, the stock has already declined over 60% year-to-date and currently trades near its 52-week low of $11.84. The company’s current market capitalization stands at $1.49 billion, with analysis suggesting the stock may be overvalued at current levels.

Key Takeaways

• Sweetgreen’s EPS of -$0.20 was significantly below the forecasted -$0.09.
• Revenue was $185.6 million, missing expectations of $193.43 million.
• The stock fell by 24.72% in premarket trading following the earnings release.
• Same-store sales declined by 7.6%.
• The company plans to open at least 40 new restaurants in 2025.

Company Performance

Sweetgreen reported a challenging second quarter, with a notable decline in same-store sales of 7.6% and a decrease in restaurant-level margins to 18.9% from 22.5% the previous year. Despite these setbacks, Sweetgreen continues to focus on expansion, targeting 1,000 domestic locations in the long term and enhancing delivery capabilities. InvestingPro analysis reveals the company maintains a healthy liquidity position with a current ratio of 1.97, while operating with a moderate debt-to-equity ratio of 0.76. These metrics are among dozens of financial indicators available in the comprehensive Pro Research Report, which provides deep-dive analysis of over 1,400 US stocks.

Financial Highlights

• Revenue: $185.6 million, a slight increase from $184.6 million in Q2 2024.
• Net Loss: $23.2 million, compared to a $14.5 million loss in the prior year.
• Adjusted EBITDA: $6.4 million, down from $12.4 million last year.
• Cash Balance: $168 million.

Earnings vs. Forecast

Sweetgreen’s actual EPS of -$0.20 missed the forecast of -$0.09 by 122.22%. Revenue also fell short of expectations, coming in at $185.6 million against a forecast of $193.43 million, representing a 4.05% miss. This marks a significant deviation from previous quarters, where the company had managed to meet or closely align with market expectations.

Market Reaction

Following the earnings announcement, Sweetgreen’s stock experienced a sharp decline, dropping 24.72% in premarket trading. This movement contrasts with the company’s 52-week high of $45.12 and 52-week low of $11.84, highlighting investor concerns over the earnings miss and revenue shortfall.

Outlook & Guidance

For the remainder of 2025, Sweetgreen projects revenue between $700 million and $715 million, with negative same-store sales expected to range from 4% to 6%. The company aims for a restaurant-level margin of approximately 17.5% and an adjusted EBITDA of $10 million to $15 million. Sweetgreen also plans to introduce at least 40 new restaurant openings this year. InvestingPro subscribers have access to additional insights, including 10 exclusive ProTips about Sweetgreen’s financial health and market position. The platform’s analysis indicates a Financial Health Score of 1.87 (rated as ’FAIR’), with particular strength in growth potential despite current profitability challenges.

Executive Commentary

CEO Jonathan Neiman expressed dissatisfaction with the current results, emphasizing a focus on operational excellence and quality food standards. CFO Mitch Reback highlighted the company’s long-term margin expansion goals, despite current challenges.

Risks and Challenges

• Urban market pressures, particularly in the Northeast.
• Consumer spending challenges, especially among white-collar workers.
• Operational inefficiencies, with only one-third of restaurants meeting standards.
• Ongoing same-store sales decline.
• Competitive pressures in the fast-casual dining sector.

Q&A

During the earnings call, analysts questioned the company’s loyalty program transition and strategic store relocations in New York City. Sweetgreen addressed its marketing strategy and menu innovation approach, outlining operational improvements and focus areas to drive future growth.

Full transcript - Sweetgreen Inc (SG) Q2 2025:

Lacey, Conference Operator: Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sweetgreen Inc. Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Please limit yourself to one question. Thank you.

I would now like to turn the conference over to Rebecca Nunu. You may begin.

Rebecca Nunu, Investor Relations, Sweetgreen: Thank you, and good afternoon, everyone. Speaking on today’s call will be Jonathan Neiman, Co Founder and Chief Executive Officer and Mitch Reback, Chief Financial Officer. Both will be available for questions during the Q and A session following the prepared remarks. Today’s call is being webcast live and recorded for replay. The earnings release is available on the Investor Relations section of Sweetgreen’s website at investor.sweetgreen.com.

I’d like to remind everyone that the information under the heading Forward Looking Statements included in our earnings release also applies to our comments made during the call. These forward looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward looking statements. We also direct you to our earnings release for additional information regarding our use of non GAAP financial measures, including reconciliations of non GAAP financial measures mentioned on the call with their corresponding GAAP measures. Our earnings release can be found on our investor website. And now I’ll turn the call over to Jonathan to kick things off.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Thank you, Rebecca, and good afternoon. For the past eighteen years, we have been building a generational brand, one that reimagines fast food to be healthy, craveable, and rooted in the highest standards of sourcing. The brand resonates broadly across geographies, demographics, and day parts, reinforcing our conviction in the significant white space ahead and our long term potential. For the second quarter, we reported sales of $185,600,000 and a same store sales decline of 7.6%. Restaurant level margin for the quarter was 18.9%, and we posted an adjusted EBITDA of $6,400,000 Let me be clear.

We are not satisfied with the results we’re reporting today. These results reflect the convergence of several external headwinds and internal actions, which were a more cautious consumer environment starting in April, lapping a tough comparison with last year’s successful stake launch and the transition of our new loyalty program at the beginning of the quarter. I want to take a moment to provide more context around these dynamics and the steps we’re taking in response. In the second quarter, we operated in a subdued industry backdrop, particularly in several of our largest urban markets. To address this, we’ve made thoughtful changes to enhance our value proposition, including increasing our chicken and tofu portioning by 25%, updating our chicken and salmon recipes to improve taste and quality, and addressing price perception through strategic LTO pricing, menu board architecture, and loyalty exclusive $13 menu bowl drops.

These initiatives are already driving an impact in the third quarter. Our summer menu, which launched July 7, is mixing at 15% of all entrees, and one in three customers who tried a seasonal entree returned within two weeks. We’ve also seen a meaningful uptick in guest satisfaction with a 30% improvement in feedback related to our new protein portion sizes. We are focused on elevating the quality and freshness of every item we serve by reducing hold times and improving consistency. To support this, we’re thoughtfully evolving our menu strategy to balance innovation with operational excellence.

Looking ahead, we have two more seasonal menus slated in 2025 and are planning at least eight seasonal or LTO moments in 2026. We remain focused on strengthening our value proposition and driving frequency through both menu innovation and our reimagined loyalty program, which launched at the start of the second quarter. The transition to Etsy Rewards created around a two fifty basis point headwind to our second quarter same store sales. This was driven by two factors: first, deferred revenue recognition tied to the structure of the new program And second, a falloff in revenue from a small but highly important cohort of former SuitePath Plus members following the discontinuation of the subscription program. We believe these impacts from the loyalty program are temporary.

Active membership in the program is growing, and ninety day frequency trends have steadily improved. We’re also seeing early signs of frequency recovery in our former SweetPass plus cohort as a result of our personalized CRM offers. While we recognize that broadening benefits across a larger base of customers has brought some near term headwind, we’re confident this trade off will deliver positive results starting in the fourth quarter. In the last one hundred days, we made two significant hires to our executive team. On September 2, we will welcome Zipporah Allen as our new chief commercial officer.

Zipporah brings deep experience in brand building and customer engagement, having led digital at Taco Bell and marketing at Strava. She will play a critical role in sharpening our brand positioning and menu, driving demand, and strengthening the overall guest experience. In May, Jason Cochran joined us as chief operating officer, and his positive impact is being felt all across the organization. As Jason has spent time in the field, he’s been inspired by the strength of our team and the culture we’ve built. At the same time, he sees clear opportunities to raise the bar.

The fundamentals like sourcing, cooking, and throughput are there, but they’re not always delivered with the consistency our guests expect or deserve. Today, about one third of our restaurants are consistently operating at or above standard, while the remaining two thirds represent a meaningful opportunity for improvement. Jason’s assessment is grounded in a set of six operational metrics related to p and l, people, customer health, and throughput that allow us to objectively measure restaurant performance and identify where support and focus are most needed. He has launched Project One Best Way, a system wide effort to elevate operational excellence by implementing clear operating standards, performance based leadership, accountability, and measured execution. Project One Best Way isn’t about reinventing our operation.

It’s about applying the standard of excellence with operational process, building on what’s already working and ensuring every restaurant delivers to our highest standard. We expect to see substantial improvement over the coming quarters. Customer satisfaction has improved, especially around accuracy, food quality, and portioning, thanks to focused actions we’ve taken to drive consistency and reinforce value. This momentum reflects the resilience and determination of our teams to deliver the best guest experience along with the clarity, urgency, and operational discipline Jason has brought to the organization. His leadership is already making an impact, and we’re confident in his ability to drive lasting change across the fleet.

We remain highly encouraged by the financial and operational performance of the Infinite Kitchen, which continues to outpace comparable restaurants in both age and volume. These units are delivering significant labor savings driven by greater efficiency, throughput capacity, and consistent execution. Our current cohort is also seeing elevated native digital sales, reflecting the model’s ability to deliver fast, high quality food at scale. While this quarter doesn’t reflect the standard we set for ourselves, we’re energized by the early traction we’re seeing from the return of our summer seasonals to the momentum and loyalty. At Sweetgreen, everything starts with

: the guests.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: We’re relentlessly focused on delivering a superior experience through every touch point with a focus on reinvesting efficiencies from g and a and other areas to make investments in protein portions, delivering value through loyalty, and investing in our team to create faster, more hospitable experiences. This will create a flywheel of increased traffic and frequency as we continue to delight and deliver increased value to our guests. Thank you for believing in Sweetgreen.

Mitch Reback, Chief Financial Officer, Sweetgreen: Thank you, Jonathan, and good afternoon, everyone. Total revenue for the quarter was $185,600,000 up from $184,600,000 in the 2024. Same store sales for the quarter declined 7.6% compared to the prior year period. This reflects a 2.5% benefit from menu price increases and a negative 10.1% impact from traffic and mix. Our average unit volume in the second quarter was $2,800,000 We opened nine restaurants, four of which were Infinite Kitchens, ending the second quarter with two sixty restaurants.

Notably, Forest Hills in Queens, New York opened as one of the strongest in the company history. Our 2024 class of new restaurant continues to track towards the Tier two metrics in year one, delivering a second quarter margin well above the fleet average. Notably, 40% of this class is located in legacy markets and 60% in new markets. This reaffirms our confidence in the effectiveness of our real estate strategy and the significant long term growth opportunity that lies ahead. We are taking important steps to sharpen our portfolio in New York City.

In July, we closed two restaurants, Bleecker and Astor Place. These were older, smaller footprint locations, and we strategically redirected volume to three newer, larger restaurants nearby. In just a few weeks, those receiving locations have seen same store sales increase by 15% to 20%, an early sign that we’ve successfully recapturing demand. While we’ve done relatively little to our footprint in New York City since the pandemic, we’re now actively reinvesting in the market. This summer, we opened Forest Hills, Park Slope, and 20 Third And Park with the Lower East Side expected this fall.

We’re also relocating Union Square, which opened in 2015, and Nomad, our first New York City location, which opened in 2013. We are relocating them to improved locations, and both will contain infinite kitchens. As leases mature on a small number of older locations, we see opportunities to consolidate volume into newer units, particularly in established urban markets where the footprint no longer aligns with our strategy. We expect this disciplined approach will strengthen AUVs, same store sales and margins as we scale towards 1,000 domestic locations. For 2025, we anticipate opening at least 40 new restaurants and plan to enter four new markets, Arkansas, Sacramento, Phoenix, and Cincinnati.

We continue to expect at least 20 new restaurants will have the Infinite Kitchen with an additional two relocations that will be upgraded with the Infinite Kitchen. This year’s pipeline also includes two new Suite Lane locations, one Classic and our first with an Infinite Kitchen. Restaurant level profit margin for the quarter was 18.9% compared to 22.5% a year ago, primarily driven by sales deleverage and some tariff impact. Restaurant level profit for the second quarter was $35,100,000 down 15% year over year. For a reconciliation of restaurant level profit and restaurant level margin to comparable GAAP figures, please refer to the earnings release.

Food, beverage and packaging costs were 27.7% of revenue for the quarter, roughly 70 basis points above the prior year period, primarily driven by a 40 basis point increase due to tariffs and duties on packaging. This is a level we expect to persist in the near term. Labor related expenses were 27.5% of revenue for the second quarter, a 60 basis point increase year over year. This year over year increase is attributable to deleverage from the change in sales volume and wage rate increases. Offsetting these pressures is improvements in our labor optimization.

Occupancy and related expenses were 8.9% of revenue, 80 basis points higher than the prior year period. Operating support center costs in the second second quarter decreased versus the prior year period on a dollar basis. As a percent of revenue, year over year operating support center costs for the second quarter decreased to 14.1% from 15.2%. In the third quarter, we restructured parts of our team and eliminated 10% of open and existing roles. Net loss for the quarter was $23,200,000 as compared to a loss of $14,500,000 in the prior year period.

The increase in net loss is primarily due to a $6,400,000 decrease in our restaurant level profit and a $5,300,000 impairment charge due to the closure of two restaurants and three other restaurants that we will continue to operate. Adjusted EBITDA, which excludes stock based compensation and certain other adjustments, was $6,400,000 for the second quarter compared to $12,400,000 in the prior year period. We ended the quarter with a cash balance of $168,000,000 Now turning to our fiscal year twenty twenty five outlook. For the fiscal year twenty twenty five, we are anticipating the following: at least 40 net new restaurant openings, revenue ranging from $700,000,000 to $715,000,000 negative same store sales of 6% to 4%, restaurant level margin of approximately 17.5, and adjusted EBITDA between 10,000,000 and 15,000,000 On the development front, half of the 2025 pipeline is opening in the fourth quarter. We do not anticipate any price increases for the rest of the year.

Q2 was a challenging quarter shaped by a combination of internal and external headwinds. Several pressures converged at once, but the actions we’ve taken are already beginning to show positive results. We brought back fan favorite seasonals and chef collaborations, introduced more moderate price points to strengthen value perception, made strategic adjustments to our New York City footprint, and we are making improvements in our operations. On the loyalty front, we’re seeing steady weekly improvement in guest frequency since the April relaunch, an encouraging sign. While we’re not yet where we want to be, we’re confident that these actions position Sweetgreen to emerge stronger, more focused, and better aligned with what our guests and investors expect from us.

And now I’ll turn the call back to the operator to start Q

Lacey, Conference Operator: Your first question comes from the line of Sharon Zackfia with William Blair. You may go ahead.

Sharon Zackfia, Analyst, William Blair: Hi, good afternoon. I guess maybe two questions. First, there there was a lot in in the prepared commentary that kind of indicated reasons for hope, if you will. And I’m wondering if you are actually seeing comps improve, you know, so far in the third quarter. And then secondarily, Jonathan, you had you had a lot there about operations, and it sounds like the bulk of units are not kind of hitting the standards where you want them to be.

I I guess at at this point, what is the the the biggest issue? Is it is it accuracy? Is it portioning? Is it speed? And is there incremental labor that you need to invest to kinda get to where you want to be at those units?

Thank you.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Thank you, Sharon. So on your first question, the answer is yes. We see some encouraging signs, so far in q three. We have seen a modest improvement in same store sales, and I think a lot of that has been due to the the rollout of the seasonal menu as well as the loyalty program. So, that’s one in terms of comp.

And and, you know, despite despite, you know, what we see as a really, really rough quarter, I am very confident in the plan ahead. As to your second question, absolutely believe that us delivering an excellent guest experience is how we’re gonna win. And for us, that means a few things. One, it’s a focus on people and culture. I’ve said many times the head coach is our our general manager is the most important role inside of our restaurants.

A huge focus on hiring, training, and developing the best head coaches. Today, some or, you know, some kind of early indicators of that success is our head coach stability is it’s higher than it’s ever been. It’s continued to increase. Head coaches in in role for over a year, our stability, metric is up to 57%. So some early indications of that working.

We’re also seeing team member turnover at historic low. We should end the year, in somewhere in the eighty eighty ish percent range. So huge, huge focus on people and culture, and we believe that that is gonna be the number one driver of delivering an excellent guest experience. With that, a huge focus on internal development because we know when we develop leaders internally, not only do they deliver better guest experiences, it creates a great culture, and it creates that people flywheel. Second, I wanna talk about project one best way and Jason, Jason Cochran, our new COO.

So we’re very encouraged. He’s been here just ninety days, but already has impacted himself. And we’ve launched what we call project one best way. Really, two major two major focuses there. One is throughput.

And for us, the reason throughput is so important is it’s not just about the speed of service. But in order to deliver fast throughput, it means you have to be fully staffed, trained, properly deployed, food prepped, and energized to deliver for our guests. So we have goals of increasing our throughput for every, you know, 10% increase in our peak throughput. We see about a 1% comp lift, and we know there’s a lot of room for us to increase our speed of service. Second is around elevating food standards.

For us, there’s a couple things underneath that. One, we talked about portioning. We made a strategic decision to reinvest in the guest experience and increase our chicken tofu portions by 25%. I’m really giving back to the guests. We’ve found many offsets, to to fund that through g and a and working on other productivity efficiencies within the restaurant to offset that investment, but already it’s being felt.

I mentioned in the prepared remarks that we’re seeing, about a 30% lift in the, satisfaction around portioning, and we haven’t even spoken about it yet. This is the first time we’ve talked to our customers about it. And then lastly, it’s it’s really about, how we elevate our food standards. We’ve take we’ve looked really closely at our hold times, our freshness standards, and how do we make sure in all of our recipes and making sure that we’re delivering our best. We buy the best food from great farmers, and the idea is we need to make sure we are delivering on that on that promise.

And the stores that we are doing this are doing fantastically well. We see them comping. So when you have that all working and you’re delivering an excellent guest experience, we’re seeing comps and transactions grow. So that you know, if I could leave with one thing, our main main focus is on executing brilliantly with a focus on people, throughput, and quality food standards.

Sharon Zackfia, Analyst, William Blair: Thank you.

Lacey, Conference Operator: Your next question comes from the line of Jon Tower with Citi. You may go ahead.

Jon Tower, Analyst, Citi: Thanks for taking the questions. Maybe just a couple real quick hopefully. Mitch, I think you touched on something earlier in the commentary, prepared remarks regarding labor. And I’m just curious if you could follow-up on it because your labor cost per store week were down pretty nicely year over year. Obviously, you delevered on sales being down.

But I’m just hoping you could flesh out what’s going on there and if we can expect that to continue going forward this year and into next year and what those driving forces are.

Mitch Reback, Chief Financial Officer, Sweetgreen: Thank you, John. We’re real happy with the improvements we’ve seen in labor. Our workforce management is working really, really well. And as you commented, our productivity in the second quarter actually held with where we were last year despite some of the challenges in sales. We’re seeing the lowest level of turnover the business has seen since COVID, and some of the hiring we’ve done has really driven up our retention at the team member level.

And our head coach stability is probably at an all time high, So we’re just very encouraged by the systems we’ve put in place, the processes, the hiring, and the head coach stability. And we anticipate further gains as we kinda look out on the future, but, really pleased with the progress we’ve been able to make and think it would only improve as we get to our sales flywheel a little bit faster.

Jon Tower, Analyst, Citi: Got it. Okay. And you had spoke to, in Manhattan, closing down a few stores and hopefully consolidating some of the sales into other stores in the market. But, you know, as you look across the rest of your store base, are there other kind of troubled markets or maybe markets where you feel like there’s a few more stores that perhaps need in that, yeah, you know, bottom two thirds of the underperforming store base in terms of, you know, the operations that you feel like might be on that that chopping block for closure?

Mitch Reback, Chief Financial Officer, Sweetgreen: John, let me qualify that a little bit. I don’t think the store closure was related to problems in the market. I think the store closures were related to the fact that the stores were coming up on ten years, and most of our leases are ten years. And in this particular instance, the stores are approximately 1,500 square feet. So we had newer, larger locations that were, when I did it, probably within a five minute walk of these stores.

So it was more a function of moving the volume to newer stores that would have a better customer experience and a better team member experience and closing the older smaller footprint stores. I would say as we look out, there remains opportunity to do that, particularly in the urban centers that were opened up around ten years ago, but you’re probably on balance talking, you know, if I had to guess, a handful of stores, not a dramatic change in the footprint. And we’re very pleased with what we’re seeing right now as I think was in the prepared remarks, the volume is transferring to the three nearby stores. So instead of having five stores, we now have three very strong stores.

Jon Tower, Analyst, Citi: Great. Thanks for taking the questions.

Lacey, Conference Operator: Your next question comes from the line of Andrew Charles with TD Cowen. You may go ahead.

Andrew Charles, Analyst, TD Cowen: Great. Thank you very much. John, despite the strong performance of new stores and the guidance for 40 openings in ’25 that was maintained, why not consider a slowdown in development to focus more intensely on the same store sales turnaround and to help better preserve cash?

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Thank you, Andrew. So first, I’d like to say we we have very strong conviction in the long term TAM of the company of at least a thousand stores and our algo of at least, you know, 15% to 20. We’re we’re continuing to build the 2026 pipeline and are really being super disciplined around the stores, you know, taking the learnings from the past few years, how we choose real estate, making sure we’re operationally prepared to run them, and also have a huge focus on build out costs. So as we, we believe as we’re able to continue to drive down build out costs, we’ll be able to, we’ll be able to continue to drive our return on capital. All to say, gonna be super disciplined.

We’ll come back more on what our pipeline is for 2026, but the focus is only on doing stores that that meet our threshold, and, hopefully, we’re we can actually improve our unit economics as we continue to grow.

Brian Bittner, Analyst, Oppenheimer: Okay. Then, Mitch, as

Andrew Charles, Analyst, TD Cowen: a follow-up, you know, can you help contextualize what’s driving the restaurant level margin guidance down by 200 basis points? You know, is this more of a function of sales deleverage or would you attribute more to the portioning investment or perhaps something else?

Mitch Reback, Chief Financial Officer, Sweetgreen: No. Andrew, I think you caught it. It would be largely sales deleverage. The portioning impact is roughly 120 basis points, and we are continuing to look for offsets to that both in the restaurant level margin area as well as G and A, and there were 40 basis points for tariffs.

Brian Bittner, Analyst, Oppenheimer: Thank you.

Lacey, Conference Operator: Your next question comes from the line of Sarah Senatore with Bank of America. You may go ahead.

Rebecca Nunu, Investor Relations, Sweetgreen: Thank you. I guess maybe I just wanted to go back to maybe the 2Q trends. I know you’re making investments in portion. It looks like some of the margin compression was actually from higher restaurant level advertising spend, but but you didn’t see it in in transaction growth. And I guess I’m I’m trying to understand, you know, do you think that the the issue was that people didn’t recognize the portion investments and the the marketing perhaps didn’t work?

You know, it it typically, I would have expected maybe a a little bit of a sequential improvement, but actually, you know, trends got worse on a a stack basis, you know, even after you had some of these idiosyncratic headwinds in the first quarter. So if you could maybe talk about what maybe what didn’t work if you think about the traffic driving initiatives you had in place versus your expectations? And then I do have one more follow-up, please.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Sure. Thank you, Sarah. So, first of all, the the protein increase was made in July, so it was not something that we saw in q two. And from since July with both the protein portioning, loyalty, and frequency continuing to increase as well as the rollout of our seasonal menu, we we have started to see sequential improvement.

Rebecca Nunu, Investor Relations, Sweetgreen: Okay. But the advertising piece, that was present in the quarter. Right? Yeah.

Mitch Reback, Chief Financial Officer, Sweetgreen: Sarah, I wanted to a comment on the advertising. The total advertising in the company was up marginally in the quarter. The amount of advertising through the four wall margin went up a lot more as the allocation between g and a and four wall switched this quarter as more of the advertising was geared towards local stores versus national brand.

Rebecca Nunu, Investor Relations, Sweetgreen: Okay. And I guess, on that point, you know, do you rethink how you allocate national versus local? Again, just, you know, it doesn’t seem like you have a lot of payoff from that, whether it was by channel or or dollar amount. Yeah. I’d say, you know, I

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: mentioned in the prepared remarks, we have a new, new, head of marketing joining in September, and, you know, we’re really continue to look at our marketing mix. I think one of the shifts that you know, one of the things we’re seeing is much more much greater ROI on social, kind of influencer led marketing. And so you’ll see us continue to lean in there more, but, you know, we’ll come back with more on that in future calls.

Rebecca Nunu, Investor Relations, Sweetgreen: Okay. Thanks. Then, sorry, just a quick follow-up. Last year and I apologize. I joined late on the call last year among last quarter, you talked about sort of maybe pressure on white collar workers, how the central business was doing, you know, perhaps more pressure than than, farther out in the suburbs.

Do those dynamics, persist? I’m trying to reconcile those with maybe some of what we’ve heard from from your peers.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Yeah. I’d say, our trend is probably similar to what you’ve seen across the industry where we’ve seen most of the pressure in the urban Northeast environment, similar you know, again, very similar to others. And we do see, you know, kinda like you said, on, you know, on consumer spending for many of our consumers has persisted longer than we expected.

Rebecca Nunu, Investor Relations, Sweetgreen: Thanks.

Lacey, Conference Operator: Your next question comes from the line of Rahul Krotupalli with JPMorgan. You may go ahead.

Rahul Krotupalli, Analyst, JPMorgan: Yes. Thanks for all the detail in the prepared remarks. The question is on marketing strategy outside the loyalty program. I understand, like, you have a new executive coming on board, but is there a thought process to rethink the strategy, or the approach to broaden the brand appeal? Were you able to see and dissect what is landing or resonating with the target demographic?

And then also, like, get them into the store before getting on the app. And and I have a follow-up. Thank you.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Yeah. Raul, we we we are continuously looking at our marketing strategy. One of the things, you know, and I mentioned on calls before is moving away from our seasonal menu is something that we really missed, and and our customers have told us that. We’ve seen, again, huge engagement on our seasonal menu. And we think one of the best ways for us to drive acquisition acquisition and frequency of our guests is newness on our menu.

But we’ve learned a lot about what kind of newness works and how we can what we can put on our menu that we can consistently execute. So that’s where you’ll see us do two more, seasonal menus this year with the two fall beats. We have a great lineup, so newness and great menu items work. The coat, you know, we we did see really great reaction with our coat, KBBQ as well. And as I mentioned on the prepared remarks, we’re expecting at least eight moments next year.

Again, leaning into what people love about us. We will continue to, you know, broaden, you know, from salads and kind of continue to introduce other warm bowls as well, which have resonated, really well. But if I could take it really back you know, the number one thing we can do is create excellent guest experiences in our restaurants. Our number one driver or best marketing is word-of-mouth and creating great experiences. You did mention, an opportunity around getting people to eat more in stores.

We do see that as an opportunity, you know, like most restaurants when you eat dine in, it is probably the best experience as the food is, you know, made fresh right in front of you. So the loyalty program is one way of continuing to do that and driving more customers to try our product in store before they become a digital customer. So that is another focus area for us.

Rahul Krotupalli, Analyst, JPMorgan: Thank you. And the follow-up is on the loyalty headwind. You guys discussed a two fifty bps headwind in second quarter. How did this trend as we moved across the quarter on exit rate of it? And what are we currently seeing on the headwind today, given, like, some of the reversals should have been happening as people are coming back?

Thank you.

Mitch Reback, Chief Financial Officer, Sweetgreen: Hey, Raul. Yeah. We did talk about the loyalty headwind coming in two big areas. One was the deferred revenue, and the second one was a decline in frequency from SweetPass plus, that small group of customers that were high frequency. What we really find is the deferred revenue piece, which was negative in the, second quarter when we started the program, will turn more neutral as we get to the back half of the third quarter and will be accretive thereafter.

And that is largely just a timing and accounting issue with starting up the program and pretty much as we expected. So that piece will dissipate. And we’re finding with our frequency with our former Sweetcast Plus members as we continue to reengage them, we continue to see them and have them as customers, and their frequency appears to be moving up. So as we look out over the following quarters, we believe that the loyalty impact will move from a headwind in the business to a tailwind, certainly, as we get closer to year end.

Rahul Krotupalli, Analyst, JPMorgan: Thank you.

Lacey, Conference Operator: Your next question comes from the line of Brian Bittner with Oppenheimer. You may go ahead.

Brian Bittner, Analyst, Oppenheimer: Thank you. I just I think the primary question on investors’ minds is ultimately, do you believe the sales weakness that you’ve witnessed this year has anything to do with degradation in the price value perception of Sweetgreen? I realize there’s a lot of external headwinds, but it does sound like you’re pivoting towards trying to put more value on the menu. You’re creating bigger portion sizes, etcetera. So I do think it’s worth further unpacking whether your data and your insights suggests that this is a dynamic that is a headwind to demand trends that you’re trying to improve.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: So I think it’s pretty obvious that the the consumer is not in a great place overall. But for us, when we think about, you know, when we think about price, it’s really around price value. And we know that when we deliver on our product and we tell our story the right way that the price value is there. So what I’d say is, you know, yes, we we would like to continue to introduce you know, give more value to the guest, larger proteins, you know, larger portions on protein sizes, a better experience in stores. But the number one thing is gonna be just delivering great guest experiences, which again starts with an amazing team and leaders in our stores, a great culture, us driving throughput, and elevating our food standards.

That’s really gonna be, you know, how we how we continue to drive our price value. And then things like our seasonal menu, again, reinforce our positioning. What we do, you know, the product we serve is, you know, superior to much of our competition, both from how we source it and how we make it in store. It’s mostly you know, it’s almost entirely made from scratch, it’s a very high quality product that not only tastes good but makes you feel good. And I think our opportunity is just executing more consistently, so we can deliver on that promise.

So all to say, we don’t see it as a large price value issue. We see it more as executing to our standards.

Brian Bittner, Analyst, Oppenheimer: Okay. Thanks for that. And and, Mitch, I appreciate the EBITDA will change for ’25 kind of marking the market just for the current environment. But how are you positioning the model for 2026? Because I think consensus had been modeling a pretty dramatic step up in EBITDA generation in ’26 relative to ’25.

And look, I know you’re not giving ’26 guidance, but any guardrails you can put on consensus for next year would probably be helpful.

Mitch Reback, Chief Financial Officer, Sweetgreen: Thanks for the question. Let me first begin by saying what you commented on that. We generally give our 2026 guidance on the, I believe, February earnings call for year end. So we’ll have a lot more to say at that point in time. Let me just speak for a minute about 2025, which may help, shape the thoughts on 2026.

We think a lot of what we’re seeing in 2025 in our business today has temporary headwinds as the business kind of adjust its loyalty program, comps over certainly the second quarter where we had our fastest comp growth in 2024 in q two with the launch of stake, all coinciding with really a very significant change in the external environment, which happened kind of suddenly around the April. What we believe happens to the business, you know, kind of looking out is that the company grows through these things and that these headwinds prove to be more temporary in the business, and many of them, like loyalty, convert to tailwinds. And I think echoing what John said, as we get our operational standards to really, really drive them and improve the execution at the store level, return our menu to more of our seasonal core, we’re convinced that we will see the business kind of get back to the trajectory we were on.

Brian Bittner, Analyst, Oppenheimer: Okay. Thank you.

Lacey, Conference Operator: Your next question comes from the line of Logan Rich with RBC Capital Markets. You may go ahead.

: Hey. Good afternoon. Thanks for taking my question. Was curious what the, sort of average cost would be for those relocations. I don’t know if you’re able to provide any sort of estimate, or or color on what we should be putting in our models for for those relocations.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: The are you talking about the two relocations in New York?

: Yeah. And sort of the other handful of stores that Mitch alluded to that are in other urban centers.

Mitch Reback, Chief Financial Officer, Sweetgreen: And I’m trying to love it. I wanna be sure I understand. The average cost of them?

: Yeah. For the for closures and the reopening.

Mitch Reback, Chief Financial Officer, Sweetgreen: You know, I I think what I would typically say is there was no cost to the, call it, receiving or beneficiary store. They just continued to carry on as they were previously operating. The closure cost for these stores is directly related to whether there was any outstanding leases on them or if they were at the terminal value at the end of their ten year lease. So it’s what long way of saying, it really depends upon the rent structure and the fixed asset, but generally, no real cost to the movement of the store.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Yeah. And just to just to add, if you’re if you’re referring to the the stores that we’re relocating, those are stores where the lease is up, and the the new stores will be just, you know, the cost of any store in that market. We don’t we don’t guide to the exact, you know, cost per store, but both of those stores will be Infinite Kitchen stores, and they they should be within the average of what those stores usually cost.

: Got it. Okay. That’s helpful. And then, I guess, just on the same store sales in q two, just any way you can sort of slice that out between maybe income cohorts, urban versus suburban? Any way you can provide some additional color on where the weakness is coming from or if it’s more just broad based across the entire portfolio.

Mitch Reback, Chief Financial Officer, Sweetgreen: Yeah, Logan. I think what we could tell you is that what we found was, as it were in the prepared remarks, about two fifty basis point impact from the loyalty changeover and certainly a more pronounced impact in the Northeast as other people have stated, and largely that coming through the macro environment and customer concerns that we saw.

: Got it. Super helpful. Thanks guys.

Lacey, Conference Operator: Your next question comes from the line of Brian Harper with Morgan Stanley. I

Rebecca Nunu, Investor Relations, Sweetgreen0: wanted to come back to just the operations question. You mentioned that sort of people and training manager stability is is key to it. It sounds like that’s actually pretty good though. Right? So I guess the question is, what do you think is is sort of lacking, currently?

And then, you know, in the these two thirds of of stores that are sort of below standard, I guess, I’m curious as to whether does that include a lot of new stores? Do you think to some extent there’s, a lack of consistency in the newer stores you’ve opened? Or, you know, is that not the case perhaps?

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Yeah. So in terms of in terms of your first question, yes, we’ve seen improvements in terms of our stability and and and turnover, you’ve seen in some of our productivity. But there’s been a lack of clear standards, and a real focus on the two things I mentioned, which is throughput and food quality. And so as we really double down on those things under new leadership, you know, we believe that the people component is going to be a leading indicator for what we should see, with the performance of those stores. That’s typically what we’ve seen as stores get stable to you know, once, you know, a head coach, for example, hits a year, the store begins to perform better.

So we we feel you know, we believe strongly that as we continue to stabilize our people and drive more internal promotion, that we’ll continue to see better experiences in our stores, which will lead to transaction growth. As it relates to the the second part of your question around the two thirds, yes. Obviously, many of those are newer stores that are still ramping. So some of that is is is normal and expected, but our goal is to tighten the variance between our best and worst stores significantly by the end of the year, and we have action plans in place to get that done. If I could just mention one other thing is, you know, no one’s asked about RippleFries, but I do think I I I it’s important to bring it up.

You know, ripple fries is something that we’ve learned consumers love, and we had a great reaction from. But as we as we studied what it was doing to the restaurant operation and the distraction for our teams, we realized that it became a complexifier for us delivering on our core. So one of the other big changes we’ve made is starting next week, we will be just in discontinuing RippleFries in order to focus on our core. And in stores where we have tested this, we’ve seen huge improvements in customer satisfaction because, again, teams can really focus on the core products, making sure, you know, all of our hot food, whether it be our chicken or, you know, our cooked vegetables, etcetera, are we’re cutting our hold times. And as we cut our hold times, the product quality improves.

So just you know, the focus is really focusing in our core and delivering on that with a focus on what we can control within our four walls.

Lacey, Conference Operator: Your next question comes from the line of Brian Mullen with Piper Sandler. You may go ahead.

Rebecca Nunu, Investor Relations, Sweetgreen1: Hey, thanks. Just to follow-up on a prior price value question. Can you just talk about the Monday LTOs you ran in June, what you saw from a consumer behavior perspective? I’m wondering if you feel like this price point this price point to be a traffic driver or motivator for your guests, but I’m also wondering if it causes any kind of trade down from those digital guests that are getting the offer. Any color would be great.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Yeah. It was a it was a overall, I’d say very successful. There was really strong reception for them. I think it was a combination of price and newness. So it’s something we’re gonna continue to double down on.

You’ll should see more of them coming. Maybe not always at that price point, but really the focus on bringing more newness to guests. You gotta you know, I think one of the interesting things about the Suite remodel is it’s a very high frequent habitual model. So offering ways to offer figuring out ways to offer newness to our frequent guests without complexifying our operations is something that can drive frequency. And we did see this newness and these Monday drops drive frequency for our guests and, again, very high, very high mix.

So it’s something we’re gonna continue to push on, and it can be a good way for us to offer a value lever for our guests as well.

Rebecca Nunu, Investor Relations, Sweetgreen1: Okay. Thank you. And then a question about menu innovation. Just talk about the opportunity you might see on on beverages or desserts or handhelds over time, and and you might have answered this with the ripple fry commentary. But I was curious if you could test anything at the same time you have project one best way going on, or or would you wanna kinda pause on all new innovation for a bit as you focus on the operations?

Yeah.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Yeah. Great question. So we do believe that menu innovation is gonna be very important for us. And under Jason’s leadership, we’ve re rebuilt our stage gate process. So how we how we test things and understand both the consumer consumer reaction to it, but also what are the second order effects to the rest of the operation.

So if anything, we’re actually increasing our, you know, top of the funnel menu innovation, but being much more thoughtful in how we test and truly understand it. As it relates to house made beverage, we actually are live in, I believe, you know, by this this September, we’ll be, in in three markets, on a house made beverage test. It’s for house made beverages. They’re doing really, really well. We’re very encouraged by it, and it is something that we will, continue to roll out over the balance of this year and through 2026.

As it relates to, other sorts of menu innovation and things like wraps, again, those are things that we we will continue to test. We will get it, we will do we will follow our stage gate process. We do see a huge customer, desire for us to continue to expand our menu, but the focus on is to make sure whatever we put in our menu, we can execute really, really well and continue to execute the rest of the menu, really learning from a lot of the innovation we’ve done. So we’ve gotten much clearer on what our what the ops sandbox is for us. What can we execute, and how can we equip our teams with the right tools and training to execute whatever we do.

So expect a lot more menu innovation, but expect a much tighter stage gating process for us to make sure that not only does it work from a consumer perspective, but we can continue to deliver excellent guest experiences within our four walls. Thank you.

Lacey, Conference Operator: Your next question comes from the line of Christine Cho with Goldman Sachs. You may go ahead.

Rebecca Nunu, Investor Relations, Sweetgreen2: Great. Thank you for taking my question. So in the last call, I think you mentioned about 20,000 new loyalty members joining each week as of May. I was wondering if there are any updates you can share on kind of customer acquisition and how it’s faring versus your prior expectation? And more importantly, how do you plan to kind of convert those sign ups into more sustained increases in guest frequency?

Are there any specific customer cohorts that are responding more positively to the revamped loyalty program? Thank you.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Thank you for the question. So, yes, we, we’ve continued to see, around 20,000 new members joining. So it’s been strong. Like most restaurants, one of our one of our best acquisition drivers is in the store. So we continue to push that in store and convert in store customers into loyalty.

One of the, one of the big improvements that we will be rolling out, very in you know, later this year will be the ability to scan and pay in store. So today, it’s two. It’s you know, you have to scan and then pay. We will be moving into a scan pay single transaction, which again will help our throughput, but also gives another reason for our guests to sign up for loyalty and get through our lines quicker. And we’ve been very encouraged, as I mentioned, earlier, and I think Mitch spoke about as well, around the loyalty program and the increases in frequency.

We continue to test and learn all sorts of different canvases and journeys and are getting more and more personalized on what is what are the different types of offers we can, leverage for different cohorts in order to drive frequency. So we’ve learned a ton, and we’re, you know, you know, doubling down on the things that are working and do expect loyalty to create this digital flywheel for us as we continue to perfect it.

Rebecca Nunu, Investor Relations, Sweetgreen: Thank you.

Lacey, Conference Operator: Your next question comes from the line of Jeffrey Bernstein with Barclays. You may go ahead.

Rebecca Nunu, Investor Relations, Sweetgreen3: Great. Thank you very much. My first question is just on the restaurant margin. I know you mentioned earlier kind of the back half reduction that’s implied based on your guidance. I know it’s in large part due to deleverage.

I’m just wondering as you think about it over the next few years, your confidence in that reacceleration back towards the 20%? Or maybe past margins you’ve maybe over earned a little bit and it would be wise to maybe reinvest more in the operations and the execution you’re talking about, how you think about the balance of getting back to the higher margin versus investing for the long term? And then I had one follow-up.

Mitch Reback, Chief Financial Officer, Sweetgreen: Thank you very much. No, I would say we see the margin expanding over the next several years and continuing to grow. We think a lot of that’s going to come from improved operations, as John’s been talking about during the call, as well as the reacceleration in the growth in sales that we see happening as we get past some of these near term headwinds. So as we look out on the business, we think we still remain with a lot of opportunity for margin expansion in our core operations, And that will also happen be accelerated by the deployment of the Infinite Kitchen. So just in even the classic stores, we think that the margin trajectory remains pretty good.

Rebecca Nunu, Investor Relations, Sweetgreen3: Understood. And then just following up on a comment you guys made earlier about the new units that you’re opening and kind of stepping up the scrutiny in terms of these new units to increase the likelihood of success and being a lot more diligent and careful. Just wondering if there’s any current learnings that help drive that decision or maybe change your decisions in terms of new units and whether they’re new versus existing markets. I got the impression that you were maybe implying that for next year, it could potentially fall to sub 15%, 20% if this added scrutiny leads to a few less potential sites? Thank you.

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Well, one of the things that we’re really there’s a couple of things that we’re really focused on there. One is, the actual store design and experience. We’ve made we’ve done a lot of work over the past year and are going to be opening stores with updated designs and flows for both our classic restaurants as well as our Infinite Kitchen restaurants. These the idea with with these designs is to create not only a better customer experience, but a better experience and easier flow for our team members, which should lead to both better food quality as well as better labor deployment given some of the adjacencies put in. So we’re very excited about those.

And then there’s been a huge focus on build out costs. We think that there’s an opportunity to really drive build out cost down. Some of that is gonna be through these new prototypes as well as, as well as attacking our our size of store. One of the lessons has been, you know, smaller you know, kind of keeping our stores on the smaller side. Actually, they do better.

It creates a better environment. The teams teams are happier, and the stores are less expensive to build. So a huge focus on targeting stores, you know, in bit smaller square foot, with lower cost to to really focus on expanding the return on capital of our investments.

Rebecca Nunu, Investor Relations, Sweetgreen3: Got it. But the idea of getting back to or being married to that 15 to 20%, you don’t see a problem in being able to achieve that next year even with this greater scrutiny?

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: You know, we’re still building the pipeline. So, you know, I do believe that can be that is a long term algorithm. We have a very robust pipeline, but we’re looking at it very carefully and making sure that every single store is vetted, and we may we can deliver on our return on capital. So we’ll be coming back more on that, in future quarters. Thank you.

Lacey, Conference Operator: Your final question comes from the line of Chris Carroll with KeyBanc. You may go ahead.

Rebecca Nunu, Investor Relations, Sweetgreen4: Hi. Thanks for taking my questions. So could you talk maybe a bit more about what you’re seeing in IK stores relative to your classic stores, particularly from a sales perspective? And if there is a meaningful delta between the performance of IK versus classic, is there anything there that informs your thought process and strategy here moving forward?

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: Sure. As we mentioned in the prepared remarks, we are seeing higher AUVs for the Infinite Kitchen stores. We do see, we also see better customer satisfaction scores. You have better accuracy, faster throughput. And as we’ve mentioned previously, we’ve continued to see our team members be more engaged, and stay with us longer and much lower turnover in those stores.

So overall, we’re very encouraged about those. You know, the focus with the IK stores is really making is putting them in the, you know, the shop selection of where we put it, making sure we put it in stores that have the volume where the return on capital makes sense. But overall, we’re we’re very encouraged. And as I mentioned on the previous question, some new updated designs with featuring the the Infinite Kitchen that we think are gonna create an even better, store experience. So stay tuned for some more on that as those begin to open.

Rebecca Nunu, Investor Relations, Sweetgreen4: Got it. Thanks. And then just following up on Jeff’s question, what’s your latest thinking about development from a market perspective? I mean, just in light of the changes that you’re making in the New York market specifically, how are you thinking about those opportunities for further growth in your core legacy markets versus newer sweet green markets?

Jonathan Neiman, Co-Founder and Chief Executive Officer, Sweetgreen: We continue to see opportunities in our core legacy as well as new markets. You know, new markets have done really well for us over the past few years. One of the, I think, changes in some of the markets that we had opened years ago is we have now we have delivery in the business. So now, you know, a lot of those stores share delivery races, and so we’re much more careful about the dilution of stores in existing markets. So looking kind of for net new white space, but there is plenty of white space for us in all of our legacy markets.

And some of that may not be all in the downtown core, but kind of expanding out from the core. And that’s where we’ve seen a lot of success. So going from Boston to the suburbs of Boston, for example, has been very successful for us. Similar to you know, similar in the Bay Area, you know, very successful in The Bay and extremely successful as we’ve worked our way down the Peninsula and the East Bay. So really leveraging the brand we built in these core urban markets and kind of expanding out from those still within those markets but out into the suburbs.

Rebecca Nunu, Investor Relations, Sweetgreen4: Got it. Thank you.

Lacey, Conference Operator: Thank you for joining. This concludes today’s conference call. You may now disconnect.

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