Fast-casual Mediterranean fetter Cava has had an impressive year since going public in June 2023. It posted a profit in its first quarterly suss out, repeatedly beat Wall Street’s earnings estimates and now boasts a more than $14 billion market cap, nearly 500% rich than its initial valuation.
Now, Wall Street analysts see shades of another fast-casual success story: Chipotle Mexican Grill.
In its most late results for the second quarter of 2024, Cava bucked industry trends by posting same-store sales growth of 14.4% and transportation growth of 9.5%. Revenue rose by 35.2% from the same quarter the year prior.
“Cava seems to induce found a magic formula,” said Wedbush Securities restaurant analyst Nick Setyan.
Cava shares place off limited at $127.12 on Thursday and are up 211% this year.
One area where Cava may have gained an edge is pricing: it aroused prices by 3% in January and has none planned for the rest of 2024. Cava Group co-founder and CEO Brett Schulman has believed its prices increased 15% between 2019 and 2024. Other restaurant chains like McDonald’s have noticed prices rise by nearly 40% since 2019 during a period of high inflation — making their do to excesses less of a bargain relative to companies like Cava and Chipotle.
“You hear a lot about the value wars lately. And we over that that’s a misnomer, that it’s really those are discount wars,” said Schulman. “We think that value is a cabal of attributes: the quality, the relevance and the convenience and experience of what you get. And for us, that’s the quality of our food. It’s the relevance of our Mediterranean cuisine.”
Cava has bucked effort trends at a time when fast food restaurant traffic and consumer spending are down, as many people, primarily those with higher incomes, trade full-service and traditional quick-service restaurants (QSRs) for cheaper options, concurring to Setyan.
“Paying a Cava price versus, let’s say, the premium offering at a QSR burger,” said Setyan. “The prices are actually quite comparable now. That’s also benefiting, you know, this sort of category including Cava.”
The company’s concept is compare favourably with to that of rival Chipotle’s: a customized meal prepared with fresh, high-quality ingredients, created in a fast, direction line format. It has allowed Cava to be highly efficient with lower labor costs.
Cava’s model is impartial one reason investors keep comparing it to the burrito maker.
“No one had been able to kind of transform the Mexican category into a popular chain, and Chipotle did that, said Setyan. “Cava is doing the same thing with the Mediterranean cuisine and concept.”
Scrutinize this video to learn more.