Shares of salad restaurant chain Sweetgreen (SG +2.08%) soared on Friday after the company released financial results for its second quarter of 2024. As of 10 a.m. ET, Sweetgreen stock was up a whopping 25%.
Growing popularity and improving profit margins
In Q2, Sweetgreen generated revenue of $185 million. This 21% year-over-year increase is the result of same-store-sales growth of 9% and of new restaurants in the system -- four net new locations opened during Q2 alone.
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Key Data Points
CEO and co-founder Jonathan Neman credited new menu items with Sweetgreen's growing popularity, saying, "Sweetgreen's expanding menu is hitting the mark with customers."
Hitting the mark with customers is leading to better profit margins as well. Sweetgreen did still have a Q2 net loss of $14.5 million. But this negative 8% profit margin was far improved from its negative 18% profit margin in the prior-year period. And this explains some of the excitement from investors today.
What's next for Sweetgreen?
Sweetgreen's management did modestly increase its full-year financial guidance in light of Q2 results. For example, it believes it could generate revenue of up to $680 million this year; before, it believed that $675 million was the most it could muster. That's good.
However, on the bottom line, there's still work to do. To be clear, Sweetgreen should be commended for Q2 results -- many of its operating expenses, including labor, decreased as a percentage of revenue compared to the prior-year period. That's crucial. If the company can keep opening new locations while keeping expenses (particularly corporate expenses) in check, then perhaps the business can turn the corner on profitability in the near future.
Sweetgreen's Q2 financials represent a big step forward, which is exciting. But it still has plenty of work to do, giving investors something to watch.
