Sweetgreen, Inc. (SG) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for joining us and welcome to the Sweetgreen, Inc. Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to [ Anthony Wiginton ], VP of Finance and Investor Relations. Please go ahead.

Thank you and good afternoon everyone. Speaking on today's call will be Jonathan Neman, Co-Founder and Chief Executive Officer, as well as [ Jamie McConnell ], Chief Financial Officer. Both will be available for questions during the Q&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 would 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 will turn the call over to Jonathan to kick things off.

Thank you, [ Anthony ], and good afternoon, everyone. I want to start by thanking our teams for staying focused, resilient, and disciplined through what continues to be a challenging operating environment. Be safe. Before discussing our results, I want to take a moment to address two separate public health matters affecting the fresh produce and restaurant industries. The safety of our guests and team members is always our highest priority. The Cyclospora outbreak has been attributed to iceberg lettuce, which we do not use anywhere on our menu. We continue to monitor the situation closely and have no indication from our suppliers or public health authorities that Sweetgreen is connected to that outbreak. As [ Jamie ] will discuss shortly, the impact of this outbreak, including a range of recovery assumptions, is reflected in our updated outlook. In a separate and unrelated matter, a voluntary recall involving jalapeños was issued yesterday. As an added precaution, we proactively removed and discarded all jalapeños from the supplier in the affected areas. Jalapeños are used in only two of our 15 dressings and nowhere else on our menu, representing a very small portion of our sales mix. Because the communication was issued only yesterday, it is too early to reasonably estimate potential impact and therefore it is not reflected in our outlook. We will continue to uphold our high standards through rigorous food safety systems, operating procedures, and team training. Outside of the recent events, our results are not where they need to be. However, we know exactly where our opportunities are, ensuring every restaurant is consistently rush-ready during peak periods, increasing top-of-funnel awareness to bring more guests into the brand, and moving with greater speed to capture the margin opportunities we see across the business. That said, we did see progress during the quarter, with comparable transaction trends improving sequentially each month, including flat transaction comps in June. This progress gives us confidence that our actions are beginning to have an impact and that we will get back to positive, sustainable transaction growth. Turning to our results for the second quarter. Revenue was $192.7 million. Comparable restaurant sales declined by 6.2%. Restaurant-level profit margin was 13.1% and adjusted EBITDA was a loss of $0.2 million. We ended the quarter with 287 restaurants. We've made deliberate choices about what to prioritize now and what to sequence later, so we can strengthen the core, grow transactions, rebuild AUVs, and improve restaurant-level cash flow. We're executing that plan with urgency and discipline across our five strategic priorities, which include operational excellence, food quality and menu innovation, brand relevance, personalized experiences, and disciplined profitable investment. Let me walk you through how this is showing up across the business. Starting with operational excellence, which begins with consistently delivering a great guest experience in every restaurant during every visit. Throughput is our top priority and we think about it as a flywheel. It starts with strong, stable leadership, which drives staffing, deployment, and training decisions that put the right people in the right place at all in service of being rush-ready before peak. We've recently seen this flywheel work and we're doubling down on it. Over the past year, we've elevated our field leadership, improving head coach stability, and driving greater accountability and execution. New York and Seattle show what this looks like in practice. New regional general managers raised the bar on throughput and hospitality, and both markets returned to positive transaction comps in the second quarter. With strong leaders, clear priorities, and consistent routines, the business responds. Our restaurant scorecard and rush-ready before peak discipline give teams and field leaders real-time visibility into what matters: sales, throughput, guest satisfaction, food quality, and people. And in June, we introduced a more structured process around throughput at our highest volume restaurants with weekly accountability built in and saw immediate improvement in both throughput and transactions. At these restaurants, frontline peak entrees prepared per hour rose from the low 50s in May to the low 60s in June, and on our busiest days, our best restaurants surpass 250 entrees an hour, which shows the opportunity ahead as we scale this process. Additionally, we've redesigned our training programs for head coaches, kitchen leads, and core team members with a sharper focus on hospitality, throughput, and food quality. Rollout begins now and this is expected to further strengthen our teams, reduce turnover, and deepen our bench of leaders. Together, we believe we have the leadership and tools that get us back to sustainable transaction growth and a stronger, more profitable business. Moving to food quality and menu innovation. Real food made from scratch with high-quality ingredients remains at the center of everything we do. It drives our mission of building healthier communities by connecting people to real food that tastes great and makes you feel great. With wraps, wraps drove a couple hundred basis points of comparable sales uplift, including about 500 basis points improvement in transactions, and demonstrated how we can bring our food philosophy to new formats and occasions. While overall comps didn't perform quite as strongly as our market test indicated, wraps have maintained approximately 20% incidence, exceeding our expectations. We intentionally introduced wraps at a more accessible entry price, giving guests a compelling value option while staying true to the quality and ingredients that define Sweetgreen. More importantly, wraps drove an increase in frequency, with more than half of guests who ordered a wrap returning within 30 days, outperforming even our harvest bowl, which has historically been our most popular and highest retention menu item. Beyond wraps, we are building a more consistent menu calendar with a regular cadence of seasonal offerings, collaborations, and partnerships designed to give customers new reasons to visit and keep Sweetgreen top of mind all year long. We recently announced our collaboration with Fishwife, bringing together two culturally relevant brands that share an appreciation for high-quality ingredients, bold flavors, and modern food culture. This fall, we'll welcome back our seasonal Brussels sprouts, along with a collaboration featuring a highly regarded chef that we're excited to unveil in the coming months. At the same time, we are just as focused on strengthening our core menu. One recent example is our enhanced hot honey chicken plate, featuring golden quinoa and Napa cabbage slaw, which has delivered higher reorder rates since its relaunch. We believe plates represent a meaningful opportunity to broaden our dinner business, and we have an exciting pipeline of menu innovation over the coming quarters and into 2027. Strengthening the core also means ensuring guests get the quality, portions, and experience they expect at a compelling price. We have not taken a price increase in over a year, and since 2019, our price increases have trailed broader restaurant industry inflation by more than 13 percentage points and grocery inflation by more than 7 percentage points. Wraps have further expanded our range of accessible entry points without compromising the quality or generous portions customers expect from Sweetgreen. This is translated into improving trends in our lower income and Gen Z customer cohorts. Finally, we recently launched a redesigned Create Your Own test that includes a protein in the base price, along with greater transparency around premium add-ons. The experience is easier to navigate and makes it simpler for customers to understand the value that Sweetgreen delivers. We expect to have more to share on the test results next quarter. Together, this work is focused on making Sweetgreen more craveable, accessible, and relevant across more occasions. This leads directly to our next priority, brand relevance. Sweetgreen has always been shaped by meaningful relationships with farmers, chefs, and communities. Our opportunity is not to reinvent the brand, but to make what is already distinctive about Sweetgreen more visible to more people. Our latest brand health research shows that Sweetgreen resonates strongly with guests who are familiar with us. We continue to stand out for high-quality ingredients, food that makes you feel good, trust, and cultural relevance. We're also seeing frequency and reactivation growth among existing and lapsed guests. This shows up the most in our digital business, specifically our pickup channel, where comps were positive and accelerated each month of the quarter. However, we are not yet reaching enough potential guests. Building broader awareness and consideration is an important opportunity to introduce more people to Sweetgreen, drive trial, and support transaction-led growth. We are evolving our media mix, placing greater emphasis on upper and middle funnel channels and more consistent, ongoing storytelling. Going forward, we also see an opportunity to build stronger local marketing capabilities around our restaurants and pursue culturally relevant partnerships that give more people new ways to discover and engage with Sweetgreen. The launch of wraps demonstrated the potential of this approach. Wraps generated our high social engagement to date, supported by over 1,000 micro-influencers who brought the launch into local communities and relevant cultural conversations at scale. We have an opportunity to build on that engagement, broaden awareness, and convert more of that interest into trial. Our summer menu turned Sweetgreen's distinctive ingredients into storytelling, and this year that included Alice Waters' Peach and Goat Cheese Salad, developed with Alice herself. She taught us that behind every extraordinary meal is an extraordinary farmer, introducing us to Frog Hollow Farm, whose peaches we've served every summer since. This is the model we intend to build upon. Distinctive food supported by authentic storytelling, a consistent content cadence, culturally relevant partnerships that break through the noise, and local activation that connects attention back to our restaurants. Together, these efforts are designed to expand awareness and consideration, attract new guests, and support durable transaction-led growth. Personalized experiences supported the building momentum we experienced in the second quarter in our own digital business. In April, SG Rewards reached its one-year anniversary. During the first year, we learned a lot about how our guests engage with the program and what they value most. We put those learnings into action in June by making points easier to use and expanding the ways members can be rewarded. New redemption options include $3 off an entree and a wrap reward available at a lower point threshold than a full entree. We are encouraged by the early response with a meaningful percentage of active loyalty customers choosing these new redemption options. This reinforces that greater choice and more accessible awards are resonating with our members. SG Rewards also gives us a deeper understanding of what our guests love and enables us to make each interaction more relevant, from how they discover our menu to the offers and communications they receive. Over time, we believe greater personalization will help increase frequency, deepen loyalty, and strengthen our relationships with guests. We recently launched an AI-enabled personalization engine into test in our CRM channel to understand the lift that we can expect from personalization. Shifting to our final pillar, disciplined profitable investment. We believe Sweetgreen has significant room to grow, but we must earn the right to accelerate that growth. That starts with strengthening our existing restaurants by rebuilding AUVs, improving flow-through, and driving greater discipline across labor and cost of sales. Our new Chief Development Officer, [ Sleeman's ], is also refining our prototype design and construction costs, market selection, and new unit economics. During the second quarter, we opened four new restaurants, including two Infinite Kitchens, and closed two, resulting in two net new openings. In July, we entered Tennessee with the opening of our Nashville restaurant in the Gulch. It is a strong example of how we want to enter new markets with the right site, a locally relevant launch, and meaningful community partnerships. We remain confident in Sweetgreen's long-term growth opportunity and are building the operating discipline and development capabilities required to capture it profitably. In closing, let me leave you with this. We are not satisfied with where we are today, but we have made the hard choices to center the organization on our core, and we are beginning to see encouraging signs that the work is taking hold. We know that when we consistently deliver what Sweetgreen does best, real craveable food made from scratch and served with genuine hospitality, quality, the customer and the business respond. That's how we build a stronger, more resilient Sweetgreen and lay the foundation for profitable new restaurant growth and long-term value creation. We believe we have the right plan and clear priorities to return to transaction-led comps, get back to $3 million AUVs, and expand margins over time. I want to thank our teams again for their focus, resilience, and heart. With that, I will turn the call over to [ Jamie ] to take you through our financial results and outlook.

Thank you, Jonathan, and good afternoon everyone. For the second quarter, total revenue was $192.7 million, an increase of approximately 4% year-over-year. Comparable restaurant sales declined 6.2%, driven by a 2% decline in transactions and a 4.2% decline in product mix. We had no year-over-year menu price increase. The product mix headwind primarily reflected targeted promotional activity to re-engage guests, wraps at a more accessible entry price, and the comparison against higher side attachments following last year's Ripple Fries launch, which was discontinued in the third quarter of 2025. These headwinds were partially offset by continued strength in catering. While we are disappointed with our overall results, we saw meaningful sequential improvement throughout the quarter. Comparable transactions improved from down 11.2% in the first quarter to down approximately 3% in both April and May before reaching roughly flat in June, supported by the successful national launch of wraps and early progress against our operational priorities. This improvement provided encouraging evidence that our sweet growth transformation plan was beginning to take hold. Beginning in mid-July, heightened consumer concern related to the recent Cyclospora headlines disrupted that momentum, and the impact to July comparable sales was about 600 basis points. We are taking targeted actions to reinforce consumer confidence and re-engage guests. While the timing of a full recovery is difficult to predict, we are confident in our ability to rebuild momentum. Against this backdrop, our priorities remain unchanged. As John discussed, we are focused on strengthening restaurant execution and throughput, increasing brand awareness to attract new guests, and testing our redesigned Create Your Own experience. These initiatives are central to restoring sustainable transaction growth and rebuilding restaurant-level profitability over time. Turning to restaurant-level profitability. Restaurant-level profit was $25.2 million, representing a margin of 13.1% compared with 18.9% in the prior year. Food, beverage, and packaging costs were 29.8% of revenue, an increase of approximately 210 basis points year-over-year. The increase primarily reflected higher ingredient usage, portion investments, and targeted promotional activity. These were partially offset by supply chain savings. We have improved visibility into the drivers of ingredient usage and are taking actions across the entire flow of food from ordering and receiving inventory through preparation and point-of-sale accuracy. We are enhancing our recommended ordering tool to better align sales forecasts with restaurant needs and strengthening our outlier management process to share learnings and reinforce best practices across our teams. These actions will improve consistency and simplify execution while maintaining our high-quality ingredients and culinary standards. And we expect to begin realizing some of these efficiencies in the second half of the year. We are now testing the enhanced recommending ordering tool in select restaurants, and the results will help us refine the tools before scaling it across the system. We continue to see approximately 150 basis points of cost of sales opportunity from reducing waste and improving ingredient usage while ensuring restaurants have the ingredients they need. Labor and related expenses were 29.2% of revenue, an increase of approximately 170 basis points year-over-year, primarily due to sales deleverage and wage inflation. Our recently completed labor study identified opportunities to align staffing more closely with demand. We are now preparing to test restaurant-specific scheduling and deployment models that shift labor toward peak periods and better reflect each restaurant's sales volume and format. These tests will help us evaluate the impact on throughput, the guest experience, and labor productivity before scaling the approach more broadly. We expect to have more to share on the results in the coming quarters. Other restaurant operating expenses were 18.5% of revenue, an increase of approximately 150 basis points year-over-year, primarily due to sales deleverage and to a lesser expense higher utility costs. G&A expense in the quarter was $29.7 million, a decrease of $4.8 million year-over-year. The improvement was primarily driven by lower stock-based compensation and reduced salaries and benefits. Underlying support center costs excluding stock-based compensation and certain one-time expenses was $24.2 million, a decrease of $2 million year-over-year. We are maintaining discipline in support center spending while continuing to invest in the capabilities that matter most to the transformation. Depreciation expense in the quarter was $18.8 million, or 9.7% of revenue, flat year-over-year as a percentage of revenue. Adjusted EBITDA was a loss of $200,000 compared with a profit of $6.4 million in the prior year. The decline was primarily attributable to lower restaurant-level profit. We ended the quarter with $142.6 million in cash. During the quarter, we opened two net new restaurants and ended the quarter with 287 restaurants, of which 35 restaurants are powered by the Infinite Kitchen. Now turning to our fiscal 2026 outlook. We are updating our full-year guidance to reflect the impact of the Cyclospora outbreak in a range of potential recovery outcomes. While it is difficult to predict the expected recovery, our full-year comparable sales guidance assumes a continued impact of 600 to 700 basis points to the third quarter, with the low end assuming a partial recovery in the fourth quarter and the high end assuming a return to the pre-disruption trend by the start of the fourth quarter. Based on these assumptions, we now expect full-year comparable restaurant sales to decline between 8% and 7%, restaurant-level profit margin to range from 10.5% to 11%, and adjusted EBITDA to range from a loss of $27 million to $23 million. Within the guidance, the estimated impact of disruption is between 200 to 300 basis points of comparable sales, 100 to 150 basis points to restaurant-level margin, and $7 million to $10 million in EBITDA. We remain focused on what we can control by rebuilding sales momentum, executing our operational priorities, and managing costs and capital with discipline. The progress we saw during the second quarter and into early July reinforces our confidence in the underlying direction of the business. We will continue to move with urgency as we position Sweetgreen for more consistent and profitable growth over time. With that, I'll turn the call over to the operator to begin Q&A.

[Operator Instructions] Your first question comes from the line of Sara Senatore with Bank of America. Please go ahead.

This is [ Aisling ] on for Sara. My question is really on wraps, and it sounds like wraps are resonating with guests, but they appear to be contributing to some outsized mix pressure. How are you thinking about this trade-off? Are they driving the kind of incremental traffic and repeat behavior you wanted, or is the lower price point creating more of a check headwind that you initially anticipated?

Overall we're really pleased with wraps. We launched wraps and we've seen almost a 20% incidence and it's held steady. I think what's even more encouraging is the frequency of wraps. The wraps customers are seeing about a 5-point increase in frequency and wraps are seeing the highest return rate on anything else on the menu, even more so than the harvest bowl. So I think the last thing I'll say about that is it is helping us resonate with younger consumers as well. We saw a lot of growth with our Gen Z consumers. So overall, I'd say wraps are working. It's helping reposition Sweetgreen as a more affordable option, a more craveable option. And the real opportunity for us now is to leverage wraps around driving new customer acquisitions from a top-of-funnel perspective. So I think we'll see a long tail of wraps on continuing to compound. We do have a lot of new news coming with wraps, including next week, a new wrap that we are launching and more plans for continued innovation wraps. So overall, I think we're pleased with them. Customers most importantly are loving them. The feedback's great. And a lot of the concerns and worries we had about wraps in terms of throughput, we were able to iron out. And so within four weeks of launch, we were able to return our speed of service and we're even able to accelerate throughput on the other side of that. So overall, I'd say it was a win and the goal now is to continue to build on it and use them to acquire more customers.

Your next question is from the line of [ Margaret May Binge Talk ] with Wolfe Research. Please go ahead.

I just wanted to ask on the Create Your Own pricing test, where does it stand today? And I mean, given some of the positive momentum that you guys have seen from wraps and that lower price point, I guess, how are you thinking about how the two can kind of go together to, you know, improve value perception towards that half of the year?

We launched our pilot of our new CYO pricing test. It's been about a month or so. We started in our Indianapolis market, slowly scaled out into our D.C. DMV market, and just this week have expanded it to Southern California and Orange County. So far we're seeing customers are happy with it. I think it's a much simpler way to order CYO without the price shock. And so it's too early to say what we're going to see around frequency or transaction lift, but so far we're pretty encouraged about what we're seeing in the customer feedback and the overall enhanced value perception. So we'll come back with more on that. Our goal is to continue to watch the test and as long as all goes well, complete the rollout by the end of the year.

Your next question is from the line of Sharon Zackfia with William Blair. Please go ahead.

It was encouraging to hear about the flat transactions in June. Obviously that came with some promotional activity. I'm curious kind of what your full price or, you know, non-discounted transaction growth might have been like in the month of June. And I guess what I'm trying to get at is kind of that return to profitable growth that you alluded to, Jonathan. Thank you.

Our discounts represented about 200 points of the mix. And so, like you said, we're really happy with the momentum that we saw throughout the quarter and that continued into Q3. And what we have done with promotions is we're seeing what's working and we're seeing what is not. So that percentage of mix has gone down into June. And what we are doing is targeting those promotions around lapsed guests. So it used to be for all loyalty members, you were getting a craving of the month, but we were not seeing the incremental transaction. So we've since pivoted and are only focused on our lapsed guests.

Okay, yes, just to build on it, we've definitely weaned off the promotional activity throughout the quarter and into July. And, you know, before Cyclospora hit, we were seeing really nice momentum in the first 10 days of July with positive comps and transactions. And that was without the promo running. So a lot of momentum as we worked through the quarter, obviously external events have changed things quite a bit, but we expect to continue to drive growth without much promotional activity and really shifting more of our focus to acquiring new customers from a top-of-funnel perspective and using, as [ Jamie ] said, using loyalty and CRM and promos in a very, very targeted way.

Your next question is from the line of Brian Mullan with Piper Sandler. Please go ahead.

Just a question on development. What's the current thinking for how you might want to approach store growth next year? Not looking for precise guidance, but just trying to get a sense with the new Chief Development Officer, would there be some sort of pause while he does a full assessment, or would you think that you would continue to at least open some stores? Any elaboration on that would be great.

Sure. So we will continue to open stores at a, I'd say, a pretty conservative pace, similar or slower to what we've done this year, really focused on the real estate profiles where we know Sweetgreen works and resonates. So really aiming for really, you know, kind of home run sites that build our brand and meet our return thresholds. And during this time, as we're building the core business back, spending a lot of time really perfecting the prototype, the cost of it, the overall experience. So we are ready with that as we look to accelerate once the business recovers. So call it a slow down to speed up phase.

Your next question is from the line of [ Rahul Crow ] with J.P. Morgan. Please go ahead.

Jonathan, how should we think about retelling the brand story to resonate with potential future customers and capture a broader audience and drive wider awareness? I mean, attracting new customers into the system is oftentimes a bigger challenge than increasing frequency and has been an opportunity for the brand for some time. Can you elaborate on the specific initiatives? How are you planning to accomplish this?