Sweetgreen Q2 Earnings Call Highlights

Key Points

• Second-quarter performance weakened: Revenue rose about 4% to $192.7 million, but comparable restaurant sales fell 6.2% and restaurant-level margin declined to 13.1% from 18.9% a year earlier. Adjusted EBITDA swung to a $200,000 loss.
• Wraps improved customer frequency and contributed roughly 200 basis points of comparable-sales growth, but their lower price pressured product mix and average check. Operational improvements also helped comparable transactions reach approximately flat in June before a mid-July Cyclospora-related disruption.
• Sweetgreen cut its 2026 outlook to an 8%–7% comparable-sales decline, a 10.5%–11% restaurant-level profit margin and a $27 million–$23 million adjusted EBITDA loss, reflecting an expected 600–700 basis-point sales impact in the third quarter.

Sweetgreen NYSE: SG reported second-quarter 2026 revenue of $192.7 million, up approximately 4% from a year earlier, while comparable restaurant sales declined 6.2%. The company said transaction trends improved sequentially during the quarter, reaching roughly flat comparable transactions in June, but momentum was disrupted in mid-July by consumer concerns surrounding a Cyclospora outbreak attributed to iceberg lettuce.

Chief Executive Officer Jonathan Neman said Sweetgreen does not use iceberg lettuce and has received no indication from suppliers or public health authorities that it is connected to the outbreak. Still, the company incorporated the expected impact of the headlines and a range of recovery scenarios into its revised full-year outlook.

Sweetgreen also said it proactively removed jalapenos from an affected supplier following a separate voluntary recall announced the day before the call. Jalapenos are used only in two of its 15 dressings and represent a small part of sales, Neman said. The company has not included any potential effect from that matter in its outlook because it was too early to estimate.

Quarterly Sales and Profitability

Comparable sales were pressured by a 2% decline in transactions and a 4.2% decline in product mix. Sweetgreen did not take a year-over-year menu price increase. Chief Financial Officer Jamie McConnell said the mix headwind reflected targeted promotions aimed at reengaging customers, the lower entry price of its wraps, and a comparison with higher side-item attachment following the prior-year introduction of Ripple Fries, which were discontinued in the third quarter of 2025.

The company’s comparable transaction trend improved from an 11.2% decline in the first quarter to declines of about 3% in April and May, before reaching approximately flat in June. McConnell said wraps and early operational improvements supported that progress.

Restaurant-level profit was $25.2 million, or 13.1% of revenue, compared with an 18.9% margin a year earlier. Food, beverage and packaging costs rose about 210 basis points as a percentage of revenue, primarily due to higher ingredient usage, investments in portions and promotions. Labor and related expenses increased about 170 basis points, largely from sales deleverage and wage inflation.

Adjusted EBITDA was a loss of $200,000, compared with adjusted EBITDA of $6.4 million in the prior-year quarter. Sweetgreen ended the quarter with $142.6 million in cash and 287 restaurants, including 35 locations powered by its Infinite Kitchen technology.

Wraps Drive Frequency but Pressure Check Mix

Management highlighted the national launch of wraps as a major element of its sales strategy. Neman said wraps maintained approximately 20% incidence, exceeding the company’s expectations, and generated about 200 basis points of comparable-sales uplift, including roughly 500 basis points of transaction improvement.

More than half of guests who ordered a wrap returned within 30 days, according to the company. Neman said wrap customers showed about a five-point increase in frequency, and wraps achieved the strongest return rate among Sweetgreen menu items, exceeding that of the Harvest Bowl.

However, the accessible price point created a check and product-mix headwind. McConnell said the gap between the transaction contribution of wraps and their reported comparable-sales contribution was “all primarily related to the lower check.” She added that wraps are priced with margins comparable to other menu items.

The company expects product mix to remain a low-single-digit headwind in the second half of 2026 as it reduces promotional activity and laps the prior-year Ripple Fries comparison. Management said it has been targeting promotions more narrowly toward lapsed guests rather than broadly extending offers to all loyalty members.

Operational, Marketing and Menu Initiatives

Neman said Sweetgreen is prioritizing restaurant throughput, with an emphasis on ensuring locations are “Rush Ready Before Peak” periods. At its highest-volume restaurants, frontline peak entrees prepared per hour increased from the low 50s in May to the low 60s in June after the company introduced more structured weekly throughput accountability. On its busiest days, its best restaurants exceeded 250 entrees per hour, he said.

New regional general managers in New York and Seattle helped those markets return to positive transaction comparisons during the second quarter, according to Neman. The company is also redesigning training for head coaches, kitchen leads and team members, while testing restaurant-specific scheduling and deployment models intended to better align labor with peak demand.

On the menu, Sweetgreen plans to continue wrap innovation, launch seasonal Brussels sprouts in the fall and introduce a collaboration with a chef later this year. Management also said it sees an opportunity to expand dinner occasions through protein-forward plates. Neman cited the relaunched Hot Honey Chicken Plate, which he said produced a 30% improvement in its 30-day reorder rate.

Sweetgreen is testing a redesigned Create Your Own ordering and pricing experience that includes a protein in the base price and offers greater transparency around premium add-ons. The test began in Indianapolis, expanded to the Washington, D.C., market, and recently reached Southern California and Orange County. Neman said customer feedback has been encouraging, though it remains too early to assess transaction or frequency effects.

Updated 2026 Outlook

Sweetgreen lowered its full-year outlook to reflect the Cyclospora-related disruption. The company now expects:

• Comparable restaurant sales to decline between 8% and 7% for full-year 2026.
• Restaurant-level profit margin of 10.5% to 11%.
• Adjusted EBITDA loss of $27 million to $23 million.

The outlook assumes a 600- to 700-basis-point comparable-sales impact in the third quarter from the disruption. The low end assumes a partial recovery in the fourth quarter, while the high end assumes a return to the pre-disruption trend at the start of the fourth quarter. Sweetgreen estimated that the disruption will reduce full-year comparable sales by 200 to 300 basis points, restaurant-level margin by 100 to 150 basis points, and adjusted EBITDA by $7 million to $10 million.

Looking ahead, Neman said Sweetgreen intends to maintain a conservative restaurant development pace, similar to or slower than its pace this year, while refining restaurant prototypes, construction costs, market selection and unit economics. The company opened four restaurants and closed two during the second quarter, and it entered Tennessee in July with an opening in Nashville’s Gulch neighborhood.

About Sweetgreen (NYSE:SG)

Sweetgreen, Inc is a fast-casual restaurant chain specializing in salads, grain bowls and warm bowls that emphasize fresh, locally sourced ingredients. Since its founding in 2007 by Jonathan Neman, Nicolas Jammet and Nathaniel Ru, Sweetgreen has focused on sustainable agriculture, working with regional farmers across the United States to provide seasonal produce and promote environmentally responsible sourcing practices. The company's menu features a variety of plant-forward options, including custom-build salads, chef-curated bowls and limited-time offerings that reflect changing harvests.

Sweetgreen operates a technology-driven service model that combines in-store experiences with digital ordering through its mobile app and website.

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