Sweetgreen Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 8, 2025

Key Takeaways

  • Q1 financial performance: Sweetgreen reported $166.3 million in sales, a 3.1% same-store sales decline, but delivered a 17.9% restaurant-level profit margin and slight adjusted EBITDA profitability, all above its outlook.
  • Softening consumer demand: April sales trends were weak in key markets such as New York, Boston and Los Angeles, reflecting a broader consumer slowdown and volatile macro environment.
  • Rising tariff pressures: Tariffs are expected to add roughly 75 basis points to Q2 supply costs, about 10% to new-store build-out expenses, and impact Infinite Kitchen unit costs, though mitigation plans are underway.
  • Expansion and new formats: The company opened five restaurants in Q1, reiterated guidance for 40 net new stores (including 20 Infinite Kitchens) in 2025, and highlighted Infinite Kitchen and Suite Lane’s efficiency gains and Suite Lane’s 20% comp growth.
  • SG Rewards loyalty launch: The revamped points-based program is enrolling about 20,000 new digital customers per week, positioned to drive visit frequency and deepen guest engagement.
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Earnings Conference Call
Sweetgreen Q1 2025
00:00 / 00:00

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Operator

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sweetgreen Incorporated First 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.

Operator

We respectfully ask that you keep your questions to one. Press 1 again. Thank you. I would now like to turn the call over to Rebecca Nunu. Please go ahead.

Rebecca Nounou
Rebecca Nounou
IR at 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 webcasted live and recorded for replay. The earnings release is available on the Investor Relations section of Sweetgreen's website at investor.sweetgreen.com.

Rebecca Nounou
Rebecca Nounou
IR at Sweetgreen

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 the 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 Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Thank you, Rebecca, and good afternoon, everyone. Sweetgreen is redefining fast food, proving possible to operate with financial discipline without compromising on the quality of our menu or the seamless experience that defines our brand. As we scale, we're building a more resilient business and leaning into what's working. Our real estate playbook reflected by the strength of new markets and recent restaurant openings. Our Infinite Kitchens and Suite Lane formats are unlocking operational efficiencies while enhancing the guest experience.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

We're also advancing menu innovation while refining our core, ensuring every ingredient is prepared, soft and seasoned to create meals that keep guests returning again and again. Our first quarter results reflect the progress we've made despite the quarter being significantly impacted by several external headwinds. These include the holiday timing shift, the LA wildfires and their lingering impacts as well as adverse weather impacts across several regions. For the first quarter, we reported sales of $166,300,000 and a same store sales decline of 3.1%. These results are toward the higher end of our guidance range.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

By staying focused on what we can control, we delivered a restaurant level profit margin of 17.9% and achieved slight adjusted EBITDA profitability, both above our provided outlook. Looking ahead, the macro environment remains uncertain and volatile. April sales trends were soft, which we believe is reflective of a broader consumer slowdown. This has been particularly true in our largest markets such as New York, Boston and Los Angeles. However, we're confident in our ability to deliver long term value for our guests, our team members, and our shareholders.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

I'm proud of the strides we've made, but no true operational excellence requires relentless attention to detail, especially now. That's why our team is committed to optimizing every process, no matter how small, to drive continuous improvement. We continue to see significant opportunities to optimize operations, broaden our customer base, grow guest frequency, and expand our footprint. With these focus areas in mind, our three strategic pillars for 2025 are, one, revolutionizing fast food through menu and technology innovation Two, strengthening guest connection and operational excellence. And lastly, number three, strategically expanding and evolving our footprint.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

These pillars are designed to increase traffic and expand restaurant level margin. Let me share what we delivered in the first quarter. We opened five new restaurants, Fishtown in Philadelphia, Westfield and Canton in the New York Metro Area, Carytown in Richmond, and Hilldale in Milwaukee. As I shared on our last call, our 2024 class of new restaurants is tracking towards two year metrics in year one and delivered a Q1 margin of 18.3%. Notably, 40% of this class is located in legacy markets and 60% in new markets, underscoring the broad based strength of our performance.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

This reaffirms our confidence in the effectiveness of our real estate strategy and the significant long term growth opportunity that lies ahead. We continue to be pleased with the financial and operational performance of our Infinite Kitchen format, which is delivering strong results across key metrics. These locations are showing meaningful margin leverage compared to restaurants of similar age and volume, driven by improved efficiency and operational consistency. Additionally, our class of Infinite Kitchens continues to drive higher native digital sales due to their high throughput and consistency, which leads to a better guest experience. We believe the Infinite Kitchen together with our revamped loyalty program can accelerate our industry leading digital presence.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Not only do we see strong performance in our Infinite Kitchens, we are also seeing strong performance of our Suite Lane in Schaumburg, Illinois. In the first quarter, comparable sales grew more than 20% year over year. Schaumburg's AUV and restaurant level margin is above the fleet average and with minimal incremental cost. Schaumburg is a clear proof point from the strong cash on cash return potential of the Suite Lane format. This year's pipeline includes two new Suite Lane locations, one Classic and our first with an Infinite Kitchen, with more planned for 2026.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

We are reiterating our 2025 new unit guidance and continue to have high conviction in our long term roadmap of 15% to 20% annual unit growth. In 2025, we plan to enter three new markets: Sacramento, Phoenix and Cincinnati and open at least 40 new restaurants, including 20 with the Infinite Kitchen. Additionally, we're planning two relocations that will be upgraded with the Infinite Kitchen and expect to complete one to three Infinite Kitchen retrofits of existing restaurants. As we scale, innovation across every touch point, physical and digital, becomes even more critical. In today's environment, staying top of mind requires a steady cadence of newness.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Our 2025 calendar is designed to do just that, increase visit frequency, attract new customers, and build deeper loyalty among our base. Let me take a moment to share one of the most exciting things we've rolled out recently, ripple fries. After an initial test in our LA market, we launched ripple fries nationwide on March 4. Ripple fries are sweet greens take on this classic item, fresh cut daily in our restaurants, air fried in avocado oil, and served with a choice of our house made pickled ketchup or garlic aioli. Made with just five simple ingredients, Ripple fries are a category defining side that's both craveable and aligned with our commitment to clean, elevated food.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Ripple Fries drove same store sales improvement in March. They have become our most attached side item across channels, helping to lift overall ticket averages and broaden the meal experience. Notably, the strength has been consistent across all markets. Our innovation pipeline continues to be a key driver of traffic. For us, menu innovation goes beyond the food.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

It's about keeping the brand dynamic and culturally relevant. One of our most mouthwatering culinary launches planned for this year is our collaboration with Coke Korean Steakhouse. They are the first and only Michelin starred Korean steakhouse in The US. Together, we are introducing Sweetgreen's first ever Korean barbecue inspired menu featuring our new KBBQ glazed steak, cucumber kimchi, and an apple kimchi sauce, bringing an entirely new flavor profile to our guests. This limited time menu launches nationwide next Tuesday on May thirteenth.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Collaborations like this is one way Sweetgreen is redefining fast food, showcasing our culinary creativity, high quality ingredients, and cultural relevance. When we deliver bold culinary led menu moments, we see clear signals. New customers show up, lapsed customers return, and existing guests engage more deeply. That's why the work we're doing now across both limited time offers and strategic brand collaborations is so important. And there's more menu innovation to come.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

With seasonal menus planned for the summer and fall, we are poised to sustain momentum through high traffic periods. We're also focused on elevating our core menu by perfecting how each ingredient is prepared, sauced, and seasoned, ensuring every ingredient and bowl is a craveable repeatable winner. A lot of this starts with our protein, how they are marinated, cooked, held, and portioned. Our job now is to keep delivering on that promise, staying nimble, listening closely to our guests, and executing with the kind of discipline that builds lasting brand love. Another important milestone for us has been the nationwide launch of our reimagined loyalty program, SG rewards, at the April.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

SG rewards is a points based program where customers earn 10 points for every eligible dollar spent with the ability to redeem points for free menu items, unlock surprise offers, and gain access to member exclusive experiences. This updated program is designed to be more engaging and rewarding for a broader range of customers based directly on their feedback. In just the first few weeks of the launch of Rewards, we've already seen strong adoption and excitement from our community. Since launch, we've added 20,000 new digital customers a week. As part of the perks SU rewards members can expect, they will get an early first taste of our new KBDQ menu on May 12 when ordering through the Sweetgreen app or website.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

I wanna thank our team members who are doing an incredible job engaging with guests and helping them discover the benefit of our reimagined loyalty program. In a challenging industry environment where consumers are making more intentional choices with every dollar, SG rewards is designed to meet the moment by delivering meaningful value. As we look ahead, we've strategically shifted internal capital to focus more heavily on menu innovation and targeted media investments. Coupled with enhanced personalized CRM and our reimagined loyalty program, we believe these efforts will work together to accelerate transaction growth and strengthen guest loyalty. Turning to our team and operations.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Our AI powered workforce management system is now live in the majority of our restaurants with just two markets remaining. We are on track for full implementation by the end of the second quarter. This system gives team members an optional user friendly mobile platform to manage their schedules, aligning their availability with restaurant needs. Average weekly hours are up nearly 10%, and absentee rates have declined by nearly 50%. For our head coaches, the platform enables smarter, more proactive workforce planning and frees up valuable time to focus on team development, the guest experience, and restaurant performance.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

We've continued to see progress on the turnover front for both coaches and the broader team with turnover nearing 90%. More than half of our first quarter leadership roles were filled from within, a clear testament to our growing bench strength and sustained investment in our people. While we've made meaningful strides, we still have opportunities to raise the bar on operational execution across many of our locations. Inconsistencies in service, speed, and portioning highlight the need for sharper discipline, tighter systems integration, and a greater focus on the details that drive day to day excellence. That's why I'm excited to welcome officer.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Jason is a seasoned operations leader with more than two decades of experience at some of the most iconic brands in our industry, including Pizza Hut and Chipotle. At Pizza Hut, he served as CEO and board member of American West Restaurant Group, the third largest franchisee in The US, where he led transformational improvements in performance, instilling operational discipline, and elevating execution across hundreds of locations. At Chipotle, he played a key role in scaling operations during a period of rapid growth with a focus on driving consistency, improving throughput, and enhancing the guest experience. Jason is a highly methodical, hands on leader who brings a sharp eye for detail, a deep commitment to standards, and a passion for unlocking operational excellence at scale. I'm confident he'll help us drive greater consistency and accountability across the fleet.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

I'm thrilled to welcome Jason to our leadership team and to partner with him closely on this next chapter. Before I turn the call over to Mitch, I want to take a moment to acknowledge the industry dynamic we're operating in and the declining consumer sentiment. We believe we are uniquely positioned to succeed even in a more challenging industry backdrop. This confidence stems from the strength of our guest loyalty, our disciplined financial approach, and our unwavering commitment to transparent, high integrity sourcing. As our menu has evolved to include more warming, heartier offerings, such as our protein plates and premium additions like steak, we've seen a positive shift in the brand's value perception at dinner.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

However, we also recognize the opportunity to introduce compelling mid and lower priced items that increase guest frequency, particularly in the current environment. Given our customization model, we're well positioned to act quickly through limited time and evergreen menu items. We're excited about what's ahead and confident in our ability to deliver value in a way that deepens connection with our guests without compromising on the quality or integrity they've come to expect from Sweetgreen. As we look ahead, we're confident that our culinary innovation pipeline, focus on elevating the guest experience, recent loyalty program launch, and focused investments in marketing and media will drive sales and strengthen the brand. We remain focused on what we can control, delivering consistently great experiences, improving operational execution, and investing in our people and processes.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Sweetgreen has always been more than just a place to eat. We're a community, a movement, and a brand built on purpose, with farm to flavor at the heart of how we connect people to real food. And now I'll turn the call over to Mitch, who will take you through our financials in more detail.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Thank you, Jonathan, and good afternoon, everyone. Total revenue for the quarter was $166,300,000 up from $157,900,000 in the first quarter of twenty twenty four. Same store sales for the first quarter declined 3.1 compared to the prior year period. This reflects a 3.4% benefit from menu price increases and a negative 6.5% impact from traffic and mix. Same store sales grew in more than half of our markets, led by the Upper Midwest, Texas and Colorado, all of which comped double digits.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Our average unit volume in the first quarter was $2,900,000 We opened five restaurants ending the first quarter with two fifty one restaurants. Restaurant level profit margin for the quarter was 17.9% compared to eighteen point one percent a year ago. Restaurant level profit for the first quarter was $29,700,000 up 4% year over year. For a reconciliation of restaurant level profit and restaurant level margin comparable GAAP figures, please refer to the earnings release. Food, beverage and packaging costs were 26.5% of revenue for the quarter, a more than 100 basis point improvement from the prior year period, primarily due to distribution savings from continued market densification and ingredient consolidation as well as favorable contract pricing on key ingredients.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Labor and related expenses were 28.9% of revenue for the first quarter, in line with the prior year period. Occupancy and related expenses were 9.4% of revenue, slightly higher than the prior year period. Operating support center costs in the first quarter increased slightly versus the prior year period on a dollar basis. As a percentage of revenue, year over year operating support center costs for the first quarter decreased slightly to 16.7% from 17.1%. Net loss for the quarter was $25,000,000 as compared to a loss of $26,100,000 in the prior year period.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

The decrease in net loss is primarily due to a $1,200,000 increase in our restaurant level profit, partially offset by an increase in depreciation and amortization expense, primarily associated with an increase in new restaurants. Adjusted EBITDA, which excludes stock based compensation and certain other adjustments, was $300,000 for the first quarter. Our balance sheet remains strong with a cash balance of $184,000,000 Now I'd like to provide an update for our shareholders on the potential impact of tariffs across three key areas of our business. First, supply chain second, the restaurant build out costs and third, the Infinite Kitchen. From a supply chain perspective, our exposure remains relatively contained.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

The vast majority of our core ingredients are domestically sourced. At this time, our exposure to tariffs is about 75 basis points for the second quarter of twenty twenty five. Most of this impact comes from just a few items, primarily our packaging, which is currently sourced from China. Six Months ago, we began a project to move packaging out of China, and we anticipate this to be completed during the second half of twenty twenty five. We expect the tariff impact to be reduced in the second half of the year to approximately 40 basis points.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

This does not reflect the impact of any further mitigation initiatives. As we plan for the build out of our 2025 real estate pipeline, we anticipate tariffs will have an approximate 10% impact on our 1,400,000.0 to $1,500,000 per unit build out costs. Importantly, this impact is not expected until late in 2025 as we have pre purchased a number of key components. Our team continues to diversify our supply base, avoid cost pass throughs and is focused on securing multiyear pricing agreements with key partners to further mitigate the tariff impact. On the Infinite Kitchen, as Jonathan mentioned, we're extremely encouraged by their performance.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

These restaurants continue to outperform expectations in both efficiency and guest satisfaction. As we scale the Infinite Kitchen, which costs approximately 4 and 50,000 to $550,000 per unit, we are closely monitoring the impact of tariffs on our cost structure. Currently, roughly 15% of each unit's cost is tied to components sourced from China. We have 10 IKs on hand that were not impacted by tariffs. While the current tariff rate on Chinese goods will impact the Infinite Kitchen, it remains accretive to our return on capital due to the long term labor savings, consistency and improvements in throughput.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

We remain committed to the expansion of the Infinite Kitchen and reiterate our 2025 new unit and IK guidance. Now turning to fiscal year '20 '20 '5. As we look out on the next three quarters, we are highly cognizant that this is a dynamic environment. As you have heard from others across our industry and seen in recent data, consumer sentiment has fallen sharply. After returning to positive comp sales performance in March, we saw a mid single digit decline in the same store sales during April, coinciding with the tariff announcements.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Historically, April has always shown a ramp in performance as seasonal patterns kick in. This is the first time we haven't seen that lift. We believe this is noteworthy and reflective of the volatile external environment and the softening consumer sentiment marked by more deliberate purchasing behavior and lower frequency across discretionary categories. Our outlook assumes that the current trends continue and layers in the positive impact of upcoming menu initiatives as well as continued ramp in our new loyalty program. As we considered our fiscal year guidance, we assume no further deterioration in macroeconomic conditions.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

As always, our forecast is based on the information available to us today, and we recognize that uncertainty in the macro environment remains elevated. For fiscal year twenty twenty five, we anticipate the following: at least 40 net new restaurant openings, revenue ranging from $740,000,000 to $760,000,000 same store sales growth approximately flat restaurant level margin of approximately 19.5% adjusted EBITDA of approximately $30,000,000 On the development front, 20 of our 40 restaurants will feature the Infinite Kitchen. In terms of pipeline timing, 30 of our 40 planned new restaurants will open in the second half of the year. We do not anticipate any price increases for the remainder of the year. While the external environment may create some short term volatility, particularly around traffic and frequency, we believe we have strong levers to navigate the smoke.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Specifically, we see meaningful opportunities to lean into our loyalty program and our seasonal offerings. We have a number of traffic driving initiatives that have yet to launch, including our collaboration with Coach Steakhouse next week. As the year progresses and comps get easier in the second half of the year, we believe there is a clear path to accelerate momentum. We remain extremely confident in our strategies and the underlying health of our business. We have built a strong business, a differentiated brand and a flexible omnichannel platform that allows us to adapt and drive sustainable growth.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

As we move through 2025, we remain disciplined in how we deploy capital and leverage our G and A. We are focused on high return opportunities and committed to building a resilient, durable business, one that can scale efficiently, serve with purpose and create long term value for our shareholders, guests and team members. And now I'll turn the call back to the operator to start Q and A.

Operator

Our first question comes from the line of Jon Tower with Citigroup. Please go ahead.

Jon Tower
Jon Tower
Analyst at Citigroup

There we go. Thanks. I guess maybe starting I appreciate all the color you offered in tariffs and in terms of across the business in IK and I think that's certainly a point of a question that I'm getting a lot from investors. So I just want to clarify and make sure that I understand. It looks like all in based on the range for build out costs and including an Infinite Kitchen, it'll be roughly 32% to 37% higher than what you guys had originally targeted stores previously for build out costs with these tariffs in place?

Jon Tower
Jon Tower
Analyst at Citigroup

And that's kind of the current situation that you know for tariffs coming in from China that's not assuming any changes at the moment for what's going to happen going forward?

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Hi, John. It's Mitch. I think what I would say is the build out cost for an NRO with no tariffs is approximately $1,500,000. And as of now, we see that tariff running about a 10% of that type of number. So call it a hundred and $50,000 per unit.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

And on the Infinite Kitchen, call an average cost of $500,000 per IK, the tariff is approximately a hundred thousand dollars. So you would see a total tariff impact of about 2.5 $250,000 on a $2,000,000 build out. So just a little bit over 10%. And I should point out in this dynamic world, that's as of the tariffs as of last night.

Jon Tower
Jon Tower
Analyst at Citigroup

Okay. And just in in term go ahead. Sorry.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So, John, just one thing to add. We mentioned on on the call that, you know, we've prebought materials for the majority of our pipeline this year. So a lot of that impact, including some I some Infinite Kitchens on hand.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So that is not impacting the entire pipeline this year. We really start to see the impact on the build out in q four, and we do have a a a good a good number of IKs on hand and working to working to diversify the supply base there. The the other thing I'd say is, you know, over the years, we've talked, to you all about the work we're doing to optimize the overall build out cost. So this is all on a kinda apples to apples basis. We've all obviously, I've been working working really hard on new formats and just general cost optimization.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So, you know, our our hope is to mitigate as much of this as possible, but this is just kind of if if we took the impact as a, you know, as a straight apples to apples.

Jon Tower
Jon Tower
Analyst at Citigroup

Got it. And and maybe just one follow-up, John. You mentioned in the the prepared remarks the idea of perhaps adding more mid to lower priced items to the menu, either evergreen or LTO options for value. Like, one, where are you in that process? And then two, you know, how do you plan on communicating that to guests?

Jon Tower
Jon Tower
Analyst at Citigroup

You know, you're not necessarily a traditional marketer nor would I expect you to be out there blasting the airwaves with a value pitch per se. So is this something we should expect more through the rewards program or more through, you know, point of purchase? Like, how do you plan on getting that message out to folks who might not be aware that, you know, now there is something that's more approachable?

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So so I think what I what I'd start with is, you know, if you look back over the past five years in the high environment, we've actually taken less price than most of the industry. What we have done is in in an effort to broaden our TAM and broaden our consumer, we did introduce these, you know, these hardier, warmer options, things like protein plates and steak. And the beautiful news about that is they really did work in unlocking a lot of those TAM markets. You can see that in the strength of those new markets and the comp in the emerging markets. But as we did that, some of the price value perception, if you look at our menu, you now have this higher category price price things, great value for dinner, but we've we've noticed some price gaps on the menu kind of in the middle or lower tier.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So we see a couple ways that we can do that. One is through our seasonal menu. Our seasonal menu, allows us to flex into different price points. We do see, some opportunities to potentially introduce some things in the core. We would not present present them as necessarily as a value menu to your point.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

It would just be, you know, kind of finding things, you know, kind of anchoring more of the menu in the middle mid to lower price tiers. And, of course, loyalty becomes a really big lever for us to be more surgical and personalized around how we can create the right customer journeys, the right promo, and, you know, the the right next best action to to drive the long term value of our customers. So we have a lot of levers at hand. And I think given we mentioned on the call, given the way our menu is constructed, we have the ability to move pretty quickly in terms of coming up with new menu items and and coming up with things that both the consumers love. We can execute seamlessly and can kinda meet our our our margin profile.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So, you know, the world changed pretty quickly here in in in April, but have a have a lot of tools, tools at our disposal.

Jon Tower
Jon Tower
Analyst at Citigroup

Great. Thanks for taking the questions.

Operator

Our next question comes from the line of Sarah Senatore with Bank of America. Please go ahead.

Sara Senatore
Sara Senatore
Analyst at Bank of America

Thank you. Maybe actually, quick question about any, differences you might be seeing in terms of geography. I'm just thinking about, you know, your exposure to DC because April has been quite mixed, think, for for different restaurants. And so trying to understand why some might be feeling the impact of, you know, lower consumer confidence while others are actually seeing an acceleration. So I I didn't know if if there was a maybe just your your geographic exposure. And then I do have a quick follow-up.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Hi, Sarah. Thanks for the question. Yeah. I would point out two areas in our geography that are probably noteworthy. One that we mentioned on the last call, Los Angeles, which we said was about 15% of our volume continues to be severely impacted in the aftermath of the LA fires.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

In our modeling, we see some lingering impacts of this continuing on for quite a while. And, as you pointed out correctly, sometime around, the April, we did see a change in our DC volume. So, you know, the company began in Washington DC. It's kind of one of the markets that were identified with. We have a number of stores there, but I should point out they're generally older, smaller stores in the DC market, but there clearly was a change in the DC performance around the April.

Sara Senatore
Sara Senatore
Analyst at Bank of America

Okay. Thank you. Very helpful. And then the follow-up is is about the breadth of your your reach. You know, this I'm super excited about the Coat collaboration, but that strikes me as a a little bit of a New York institution.

Sara Senatore
Sara Senatore
Analyst at Bank of America

How do you think about that in terms of, you know, appealing, I think, as John mentioned, you know, broader broadening TAM, and and kind of the the things that you do from a culinary perspective? Thanks.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Yeah. So we're very excited about this collaboration. I think, you know, it's beyond just the collaboration. It's really about the bold flavors that we're bringing to market. You know, we we, we're excited for everyone to taste it.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

It it's a totally different flavor profile. It really leans on both the sourcing and scratch cooking, but brings in these these Korean flavors and leverages our new steak offering with the with the twist. So, you know, in terms of, the the actual collaborator, know, what what we the reason we do this is it gives us a lot of culinary credibility, and it actually the partnership with the chef helps us build truly delicious items. So it's a part of our storytelling. There's a lot huge experiential element as part of it, and we know it's a core part of how we built this brand and I think something that consumers expect.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So what we've learned is it's not just if you've heard of it. It's a lot of for us, it's a huge way a huge way to drive discovery for these these great chefs, that you may or may not know. So very excited about bringing this new flavor and excited to share more with you on the next call.

Sara Senatore
Sara Senatore
Analyst at Bank of America

Thank you.

Operator

Our next question comes from the line of Sharon Zackfia with William Blair. Please go ahead. I'm sorry. Our next question comes from the line of Andrew Charles with TD Cowen. Please go ahead.

Zach Ogden
VP - Equity Research at TD Cowen

Thank you. This is Zach Ogden on for Andrew. Just given April's mid single digit decline in same store sales, could you just walk us through the cadence of sales you expect for the rest of 2025 to get to flat for the full year?

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Thank you. What I would say about April, you know, as, other people have noticed, April has generally been a month when our business has accelerated. That's probably been the pattern that's been in the business since inception. As the weather warms up, our business picks up. This April, that did not materialize.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

There's actually a significant change in the history and in the historical patterns of the business, largely coincided with the tariff announcement and some of the external uncertainty. What we see is the second quarter being challenging both from a comp perspective led by April as well as the fact that the launch of our loyalty program, as we've disclosed, will create some headwinds around our revenue number, as we launch that program. During the back half of the year, particularly q three and four, we see business picking up for a number of reasons. One, we have slightly easier comps during that period. Two, the return of our summer seasonals and fall seasonals.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

These have been crowd favorites for a number of years that were not on the menu in 2024, and we think they'll have a massive impact beginning around July 25. In addition to which, we have our loyalty program, which, as I said, will be a headwind in Q2 but becoming a pretty big tailwind as we go through Q3 in the back half of the year. I should point out, as I was kind of alluded to at the beginning, there's a degree of synergy between the launch of seasonals and loyalty program, where they can feed each other to help drive frequency and attract new customers. So we think we have a pretty solid lineup of activity, actually starting next week with the Code collaboration, but really accelerating in July.

Zach Ogden
VP - Equity Research at TD Cowen

Got it. Thank you. And then just on the Infinite Kitchens, if the tariffs do persist, would that change your aptitude at all to retrofit stores to IKs going forward?

Mitch Reback
Mitch Reback
CFO at Sweetgreen

No. No. I really would not, at this point in time, change our deployment strategy around the Infinite Kitchen. When you do the math on the Infinite Kitchen and you take a kind of typical AUV store at $3,000,000 and eight points of savings, you get around $240,000 annually. If the cost moved up from 500,000 to $600,000 you find the return on capital remains wildly accretive, and that's the current labor rates.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

When you look out over the next ten years, we see labor continuing to increase and those returns increasing. So I would say the current tariff structure would not change the IK deployment strategy at all.

Zach Ogden
VP - Equity Research at TD Cowen

Great. Thank you.

Operator

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

Sharon Zackfia
Partner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C

Hi. Can you hear me?

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Yes.

Sharon Zackfia
Partner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C

Okay. Thanks. I don't know what happened before. I I guess I wanted to ask about the, the markets that you've called out, which were you talked about LA, but you also mentioned New York and Boston. Is there anything in those markets where you think your perceived value has somehow, kind of declined in the recent environment?

Sharon Zackfia
Partner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C

Is there anything you could point out operationally that maybe is causing those markets to gap differently than some of the other markets that you're operating in?

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Thanks for the question, Sharon. So I think there's a few things here. First, I'd say if you you think about the Sweetgreen model over our history, the seasonal menu was a core part of the model. We would change our menu about five times a year, and it's part of what drove the habituation, the frequency. You know, it would it it's what would limit the fatigue and just keep you hooked, you know, you know, season after season.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

With the removal of that, we've seen some weakness in the frequency of specifically in those core markets where those seasonals did especially well. So we're encouraged about bringing them back, bringing them back in a really big way, and we think that will help us with the frequency challenges we have. The second is loyalty. You know, we we we made a transition from our Sweet Pass Plus loyalty program, which really had a, you know, pretty small member base to a much broad a much broader based loyalty program. And, you know, we're we're acquiring about 20,000 new loyalty members a week.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

This is, you know, pretty much more more than each week than the whole SuitePass plus membership base. So it's a huge opportunity here, to kinda lean into that to continue to drive frequency. And then the last thing I'd say is that there's definitely some operational opportunities we have specifically in a lot of those core legacy markets, specifically in our in the urban environment on our off premise channels. So really highly focused on getting portioning and accuracy and speed right on those digital make lines. As you know, digital is a huge, huge part of the business, and we see an opportunity to really elevate the standards across those lines.

Sharon Zackfia
Partner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C

Okay. Thank you.

Operator

Our next question comes from the line of Logan Rich with RBC Capital Markets. Please go ahead.

Logan Reich
Logan Reich
Analyst at RBC Capital Markets

Hey, guys. Good evening. Thanks for taking my question.

Logan Reich
Logan Reich
Analyst at RBC Capital Markets

to ask about price and and how the launch went relative to expectations and and maybe anything you're able to share on on mix in terms of number of transactions or, contribution to come. Any color there would be much appreciated.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Sure. So, very early, but very encouraged by Fry's. You know, we've had great customer feedback, great social awareness, a lot of fantastic trial, and it's our it's by far our most attached side. So very encouraged continuing to to work to perfect them and and get the word out. But overall, I think it's it's something that, we're really proud of and customers love and should continue to help drive comp and ticket.

Operator

Our next question comes from the line of Brian Mulat with Piper Sandler. Please go ahead.

Brian Mullan
Brian Mullan
Director & Senior Research Analyst at Piper Sandler Companies

Thank you. I just want to ask about the marketplace sales channel. That's been growing faster than the in store and the own digital really for several quarters now. Can you just speak to what's behind that, particularly throughout last year and start this year? Just any color you could add would would be great.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Yeah. So, we continue to see strength on marketplace. I think there's a there's a few things. One, I think our product travels well, and people people love the fact that, you know, it's it it just works in an off premise environment. Two, we've we continue to optimize our relationships with the marketplaces and how we market and how we're presented on those marketplaces.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

And I think a lot of our consumers are there. Lastly, I think not having a loyalty program gave a lot less reason to transact natively. And with the loyalty program, that should help us there. But overall, you know, good partners with them, happy to see continued growth, higher average checks, and we'll continue to leverage them as a partner.

Brian Mullan
Brian Mullan
Director & Senior Research Analyst at Piper Sandler Companies

Thank you.

Operator

Our next question comes from the line of Brian Bittner with Oppenheimer. Please go ahead.

Brian Bittner
Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.

Hey, thank you. Just with all this talk, a lot of focus here on April sales trends on this call, just another question there. You said down mid singles and a change in how April has behaved historically. So I understand your caution, but is there any of this that is explained by your own toughening comparisons that happened into 2Q from 1Q? Is any of April just mathematically driven?

Brian Bittner
Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.

Or are you seeing underlying weakness that's making you more cautious on the near term and on 2Q?

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Brian. I think that the more challenging comp period for the business will come, actually in the next week as we launch a successful launch of steak gets lapped. So Coke will lap over the launch of steak a year ago. I think the April caution and, results and the caution on the second quarter largely come from what we saw in April where we had a period of limited menu and marketing activity, but that kind of lapped the same type of situation last April. It really reflects much more of an external environment and kind of our take on consumer sentiment.

Brian Bittner
Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.

Okay. And then just real quick on your guidance for the year for adjusted EBITDA now approximately $30,000,000 I'm just trying to bridge to that guidance in my own model when I use the midpoint of your revenue and your restaurant margin guidance. The bridge from there is about flat G and A year over year versus last year on an adjusted basis. Is that the right math there? Is that how you're thinking about G and A as it relates to that $30,000,000 of adjusted EBITDA?

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Yeah. I would point out and say that, really since the time we went public, the company continues to focus on gaining leverage in our G and A, and we continue to focus on that and accelerate that in this environment and to make changes where we can adjust the G and A down without impacting our strategies or our development. And we will continue to really relentlessly pursue that in this environment.

Brian Bittner
Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.

Okay. Thank you, Mitch.

Operator

Our next question comes from the line of Christine Cho with Goldman Sachs. Please go ahead.

Christine Cho
Christine Cho
Analyst at Goldman Sachs

Thank you for taking the question. So I was wondering if there were any updates to how you're thinking about capital allocation and investment priorities in light of the tougher macro environment and other external factors. I think, John, you mentioned a 15% to 20% unit growth. Is that still a good anchor for the next few years? And what are some of the factors and triggers that could potentially shift that trajectory? Thank you.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

Hey, Christine. Thanks for the question. I think what we said is that we were gonna anticipate having 15% algorithm and accelerating it up to 20% over time. That is still the correct algorithm. And while you're correct that the external environment right now is certainly more challenging and changed somewhat abruptly around the April.

Mitch Reback
Mitch Reback
CFO at Sweetgreen

We continue to have very strong return on capital on our new stores and especially strong return on capitals with our Infinite Kitchen. As long as our return on capital remains at these levels, we don't see any change in our development.

Christine Cho
Christine Cho
Analyst at Goldman Sachs

Thank you. Just one other question. Any metrics that you can share on kind of the launch of the SG rewards to date and how you plan to leverage the data you obtained from from that program to inform kind of your meta innovation, marketing, and other parts of the business? Thank you.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Yes. Overall, very encouraged. Like I said, we're requiring about 20,000, 20,000 new digital customers on those SEO rewards program per week. Much of that conversion is happening in store, so we're we're now getting, access to customer data at the on on our analog in store channel as well as our digital channels. And we're starting to see some promising, I'd say, some promising opportunities around the customer journeys and how we can drive the incremental visit.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

You know, we have a we have a very, very good team that's able to segment customers and do all kinds of different challenges and promos and see what works and lean on those ones. And especially in this environment, I see a huge opportunity. It also gives us, you know, really rich data in terms of menu development, and we have a few exciting things planned on how we can leverage the digital environment to create more of a community, and we'll we'll be sharing more on that in future calls.

Christine Cho
Christine Cho
Analyst at Goldman Sachs

Thank you.

Operator

Our next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.

Brian Harbour
Brian Harbour
Analyst at Morgan Stanley

Yes. Thanks. Good afternoon. I guess, you're going through another COO transition here, right? Could you just comment on if you think any of the priorities there will will change or if it's more of a continuation of what you're doing?

Brian Harbour
Brian Harbour
Analyst at Morgan Stanley

Is there anything that you thought was sort of, you know, behind timing or or or needs to be shifted? What will, what could evolve on sort of operations priorities?

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Absolutely. So we're really excited for Jason to join us, and he brings a wealth of experience specifically in restaurants. The focus areas for us really are in terms of tightening up our standards, to deliver consistently the quality food that customers expect. We also see a big opportunity I mentioned earlier on our on our digital make lines and making sure we're delivering accurately and with the right portion size. We see a big opportunity there.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

And then the last thing I'll say is with the growth plans we have ahead, we wanna make sure our our people flywheel is unlocked. Today, we're seeing about 50% of head coaches being promoted internally. We would like to take that number up over time. We see our internal promotes being more successful. So the other thing is how we can build better leadership capability and have a pipeline of future leaders.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

So, you know, it's operations. It's really, it's all the little details to deliver, whether it's the right tools, the right systems, and most importantly, the right culture and leadership in each and every store. And we're very confident in the wealth of leadership and experience that Jason will bring as well as the rest of our ops leadership team to continue to deliver on the Sweetgreen promise.

Brian Harbour
Brian Harbour
Analyst at Morgan Stanley

Okay. Thanks, Dennis.

Operator

And our final question comes from the line of Rahul Pradhupada with JPMorgan. Please go ahead.

Rahul Krotthapalli
Rahul Krotthapalli
Vice President - Equity Research at JP Morgan

Hi, guys. Jonathan, a lot has been discussed in terms of how advertising costs could get very low on a per transaction basis. I think especially as agencies given to AI models and, like, large brands and the consumer and Internet industry are catching up on this. You have you have been leading the space in business transformation in multiple areas of of your operations, whatnot. Curious how you think about this area, on advertising and marketing spend.

Rahul Krotthapalli
Rahul Krotthapalli
Vice President - Equity Research at JP Morgan

This is going to be a big focus going forward for your sales and traffic driver.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

Raul, thanks for the question. I do think it's a huge opportunity. We've been leveraging AI across the business in a number of use cases, whether it be workforce management, talent selection, and, you know, customer service, etcetera. And I think there's a lot of opportunities to leverage AI in terms of our, in terms of loyalty and customer acquisition as well. So we're exploring and testing a bunch of things today.

Jonathan Neman
Jonathan Neman
Co-Founder and CEO at Sweetgreen

We're hopeful that it it it can help us in terms of our cost per acquisition of customers and our retention, but I'd say it's still early days. But a number of tests and pilots that the team is all over right now.

Rahul Krotthapalli
Rahul Krotthapalli
Vice President - Equity Research at JP Morgan

Thank you.

Executives
Analysts
    • Jon Tower
      Analyst at Citigroup
    • Sara Senatore
      Analyst at Bank of America
    • Zach Ogden
      VP - Equity Research at TD Cowen
    • Sharon Zackfia
      Partner & Head of Consumer Equity Research & Analyst - Restaurants, Lifestyle & Leisure Brands at William Blair & Company, L.L.C
    • Logan Reich
      Analyst at RBC Capital Markets
    • Brian Mullan
      Director & Senior Research Analyst at Piper Sandler Companies
    • Brian Bittner
      Senior Equity Analyst - Restaurants at Oppenheimer & Co. Inc.
    • Christine Cho
      Analyst at Goldman Sachs
    • Brian Harbour
      Analyst at Morgan Stanley
    • Rahul Krotthapalli
      Vice President - Equity Research at JP Morgan
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