Cava Group Inc (CAVA)

Cava Group Inc – Q1 2025 Financial Analysis

Report Date: 2025-05-05
Period Covered: Sixteen weeks ended April 2025 (First Fiscal Quarter)

Executive Summary

• Net revenue up 28.1% year-over-year to $331.8M (Q1 2024: $259.0M)
• Net income rose 83.8% to $25.7M (Q1 2024: $14.0M)
• Adjusted EBITDA increased 34.6% to $44.9M (Q1 2024: $33.3M)
• Revolving credit facility borrowings remain at $0; letters of credit increased from $0.7M to $0.9M
• Operating lease liabilities total $412.5M ($44.6M current, $367.9M non-current)

Profit & Loss Analysis

Drivers of Growth:

• Opened 15 net new restaurants in the quarter (ending 382 vs. 367 at start).
• Same-store sales growth of 10.8% driven by higher guest traffic, pricing, and product mix.
• CPG revenue up 23.1% to $3.3M from $2.7M on retail expansion and efficiencies.

Expense Dynamics:

• Food & beverage cost rose due to mix shift, grilled steak launch and new units
• Labor expense increased with unit growth and wage investments; leverage from higher sales offset some impact
• Depreciation & amortization up on asset base expansion
• Pre-opening costs rose in line with new unit pipeline

Debt & Capital Structure

• 2022 Credit Facility: $741M available capacity; $0 drawn; $0.9M letters of credit outstanding
• Company remains covenant-compliant with net leverage well below thresholds
• Capital expenditures of $35.9M invested in new restaurants and technology platforms

Pros & Cons

Pros:

• Strong same-store sales and unit growth driving double-digit revenue gains
• Robust profitability expansion: margin improvement at restaurant level and corporate level
• Pristine debt position allows financial flexibility

Cons:

• Rising labor, commodity, occupancy costs could pressure margins if sales momentum slows
• High lease obligations carry operating leverage risk under weaker demand
• Competitive restaurant environment and supply chain volatility

Outlook

Management reaffirms expansion of 70–100 new restaurants in fiscal 2025, targeting 450+ locations. Continued focus on digital channels, catering, and CPG distribution should support revenue growth. Maintaining tight cost controls and optimizing unit-level performance will be critical to safeguarding margins in a dynamic cost environment.

• Revenue Mix:
  • Company-owned restaurants: $328.48M (99.0% of total)
  • Consumer packaged goods (CPG): $3.34M (1.0% of total)
• Restaurant-level Profit: $82.3M (restaurant revenue less restaurant operating expenses excluding depreciation & amortization)
• Adjusted EBITDA: $44.9M (13.5% of revenue)
• Adjusted Net Income: $25.7M (7.7% of revenue)
• Same-store sales growth: 10.8%
• Net new restaurants opened: 15 (382 end of period vs. 367 start)
• Operating lease liabilities: $412.5M total ($44.6M current, $367.9M non-current)

Cava Group is on a strong growth trajectory, leveraging unit expansion and same-store sales increases to drive revenue and profit. The company’s net-zero borrowings under its credit line highlight financial discipline, while hefty lease liabilities underscore fixed-cost leverage. Margin enhancement is evident from improving restaurant-level profit and corporate EBITDA. Future challenges include managing inflationary pressures in labor and food costs, and ensuring new units ramp efficiently. Strategic focus on digital channels, catering and CPG will diversify revenue streams, but execution against a competitive fast-casual landscape will be key. Overall, Cava’s robust operating cash flow and balance sheet flexibility position it well for sustainable expansion, provided it maintains cost discipline and executes on growth initiatives.