Despite being one of the fastest-growing restaurant concepts around, Cava Group's (CAVA 1.48%) stock has failed to gain any traction this year. This was evident once again after its stock slipped despite another strong showing from the fast-casual Mediterranean-themed restaurant operator when it reported its fiscal first-quarter results. The stock is now down around 14% in 2025, as of this writing.
Let's dig into the company's fiscal Q1 results to see if investors should buy the dip in the stock.
Same-store sales continued to rocket higher
Cava's string of double-digit same-store sales growth continued in its fiscal Q1, which ended April 20. Its same-restaurant sales climbed 10.8%, with a 7.5% increase in guest traffic and a 3.3% rise in price and mix. That was just ahead of the 10.3% increase that analysts had projected, as compiled by StreetAccount. It also continued its strong streak of recent same-store sales results over the past four quarters.
| Metric | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 |
|---|---|---|---|---|
| Same-store sales growth | 14.4% | 18.1% | 21.2% | 10.8% |
| Traffic | 9.5% | 12.9% | 15.6% | 7.5% |
| Price and mix | 4.9% | 5.2% | 5.6% | 3.3% |
Data source: Cava Group earnings press releases.
The introduction of grilled steak last summer was the catalyst for the company's strong same-store sales growth, and it said this past quarter that it was continuing to see customers add higher-priced items to its orders, such as pita chips and house-made juices. It called out strength across geographies and income brackets as well, noting that the company was benefiting from customers trading up from fast food as well as trading down from casual-dining restaurants.
Its summer menu introductions this year will include chef-curated bowls and Hot Harissa Pita Chips, and it's testing new menu items such as chicken shawarma in select markets. It's also looking to help drive growth by adding a tiered structure to its loyalty program that will tailor benefits and look to increase customer engagement.
Cava's overall revenue for the quarter climbed 28% year over year to $328.5 million. It opened 15 new locations in the quarter, bringing its total to 382 restaurants, an 18% year-over-year increase. It is now operating in 26 states after entering Indiana with plans to enter the new markets of Detroit and Pittsburgh later this year. Overall, it plans to open between 64 and 68 new locations in 2025.
Image source: Getty Images.
Its restaurant-level margins (RLMs) stayed steady at 25.1% in the quarter versus 25.2% a year ago. RLMs measure the profitability of restaurants before corporate costs and are an important metric in the industry. Cava's RLMs were just below the 26.2% that Chipotle Mexican Grill produced in Q1, showing how strong the company's operating performance is compared to one of the leaders in the industry.
On the profitability front, Cava's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 35% year over year to $44.9 million.
The company produced $38.6 million in operating cash flow in the quarter and free cash flow of $2.7 million. This demonstrates that Cava is able to expand its locations while living within its means, not taking any undue risks.
Looking ahead, the company raised its 2025 adjusted EBITDA outlook, taking it from between $150 million and $157 million to a new range of $152 million to $159 million. Meanwhile, it maintained its forecast for same-store sales to increase by 6% to 8% with RLMs ranging from 24.8% to 25.2%.
It implemented an approximate 1.7% price increase in early January and has no plans for additional increases. It said its exposure to tariffs is limited as the majority of its ingredients are domestically sourced or covered under existing contracts.
Is it time to buy the dip?
Trading at a forward price-to-earnings (P/E) ratio of nearly 174 and a price-to-sales ratio of 9.4 based on 2025 analyst estimates, Cava stock is not cheap. And right now, valuation is the biggest risk to the stock, especially if consumer spending begins to slow.
CAVA PE Ratio (Forward) data by YCharts
However, with fewer than 400 locations and its same-store sales booming, the company has a huge expansion opportunity in front of it. It's looking to reach at least 1,000 restaurants by 2032, which is nearly triple the number of locations it has today.
Overall, Cava has all the ingredients of a highly successful emerging restaurant stock, with strong same-store sales, robust RLMs, attractive average unit volumes, and a long runway for expansion. As such, long-term investors can look to take a position in this strong story.
