Cava (CAVA +0.90%) has attracted considerable attention since its June 2023 IPO. The restaurant chain has developed a following for its fast-casual approach with serving Mediterranean food, a food type that has become increasingly popular for its flavors and health benefits.
Cava also continues a rapid expansion, with numerous restaurants in new markets under development. However, like many other restaurant chains, Cava has suffered from slowing sales growth as customers eat out less. Thus, investors need to watch for two specific metrics that could influence the stock's direction moving forward.
Image source: Cava Group.
1. Same-restaurant sales
On the surface, the company seems to be prospering. In the first nine months of fiscal 2025 (ended Oct. 5), revenue of $905 million rose 23% compared to the same period in fiscal 2024. Indeed, yearly growth in the third quarter had slowed to 20%, but that may be the least of Cava's problems. The much more pressing concern is the slowdown in same-restaurant sales, which measures yearly sales increases at restaurants open for 365 days or more.
In Q3, same-restaurant sales growth was 1.9% over the last year. Still, as recently as Q1, same-restaurant sales growth stood at 11% annually, amounting to a dramatic slowdown.
Other restaurants like Chipotle have experienced the same trend, so this is not unique to Cava. However, rising costs have discouraged consumers from eating out. Without an obvious solution to this problem, the stock has fallen by over 50% this year, and its elevated 47 P/E ratio may further discourage investors from buying amid this slowdown.
NYSE: CAVA
Key Data Points
2. Dependence on continued expansion
Nonetheless, the one silver lining for its growth is that Cava still appears focused on its rapid expansion plan.
As of the end of the third quarter of fiscal 2025, it operated 415 restaurants across the U.S. This amounts to an 18% increase in the number of restaurants compared to last year.
Additionally, it remains committed to its goal of having 1,000 locations by 2032. This should bode well for long-term investors who feel concerned about consumers eating out less, but only if it maintains the current pace of expansion.
Moving forward with Cava stock
In order to understand Cava stock in 2026 and beyond, investors need to watch same-restaurant sales numbers and restaurant additions.
Indeed, the slowdown in same-restaurant sales bodes poorly for Cava. Nonetheless, economies move in cycles, and the fact that sales are still rising is positive, even if the pace has slowed. Moreover, investors should watch restaurant openings to see if Cava can maintain its pace of expansion in 2026. That move could position Cava to prosper once the economy improves.
Thus, if Cava maintains its expansion pace and same-restaurant sales recover, particularly sooner rather than later, that should be good forward-looking news for Cava and its shareholders.
