Shares in Sweetgreen Inc. went down following the release of its third quarter financial results in which it narrowed its nets loss and increased revenue.
The Jefferson Park healthy food restaurant chain saw its stock price decrease by nearly 6% from the close on Nov. 7 of $42.20 and the close the following day of $39.69. The 11 million shares traded on Nov. 8 represents the second highest trading volume seen over the last year.
The company reported after the market closed on Nov. 7 a net loss of $21 million (-18 cents a share) for the quarter ending on Sept. 29, an improvement over the net loss of $25 million (-22 cents) in the same period of the previous year. Revenue, meanwhile, went up by 13% from the third quarter of the prior year to $173 million.
The decrease in net loss was primarily due to a $5.8 million increase in its restaurant-level profit, partially offset by an increase in depreciation and amortization expense primarily associated with an increase in restaurants, as well as an increase in general and administrative expenses.
The company attributed the spike in revenue to a jump of $12.4 million in incremental revenue associated with 31 net new restaurant openings during or after the third quarter of last year.
Missing analyst expectations
Media reports, however, had Sweetgreen missing analyst expectations for both revenue and earnings.
For instance, according to LSEG Data and Analytics, analysts had forecast earnings of -13 cents a share, as compared to the -18 cents a share that Sweetgreen reported. Financial media website Investopedia said in a story from Nov. 8 that “analysts surveyed by Visible Alpha were looking for a loss of 15 cents per share” while Bloomberg said in a story from Nov. 7 that analysts had projected a net loss of 14 cents a share.
Sweetgreen co-founder and Chief Executive Jonathan Neman said he was pleased with the quarterly results.
The company “remains committed to elevating its brand, its sourcing approach and its culinary strength,” Neman said during a conference call with analysts to discuss third quarter results.
“We will continue to deploy technology innovation to drive efficiencies in our financial model while enhancing experiences for both our teams and guests,” Neman added. “We believe this commitment will enable us to sustain substantial growth, positioning us to lead and expand the category for years to come.”
Neman said a big part of that growth will come from the Infinite Kitchen, Sweetgreen’s automated kitchen system that it began using more than a year ago with a store in Naperville, Illinois. It also has an automated kitchen in Huntington Beach.
“We began the third quarter with two Infinite Kitchens and as of today we operate 10, three of which were opened in the past two and a half weeks,” Neman said on the call.
One of the other restaurants with an Infinite Kitchen system is in Newport Beach.
“For fiscal year 2025, we expect to open at least 40 new restaurants, approximately half of which will be Infinite Kitchens,” Neman stated. “This means that by the end of 2025, we expect to have nearly triple the number of Infinite Kitchens in our fleet.”
The first retrofit restaurant with an Infinite Kitchen system opened in mid-July at Penn Plaza in New York City. Sweetgreen is currently retrofitting two other locations – one on Wall Street in New York and one in Willis Tower in Chicago. Both of those projects will be completed during the fourth quarter.
“We are delivering a reimagined experience that meets the needs of today’s digitally connected consumer,” Neman said.
